As Sabuhi Gard covers in a piece of news analysis this week, China-related stocks and funds are flying thanks to Beijing’s announcement of a big stimulus package.
However, there is one industry with ties to the world’s second largest economy which is very much not joining in the party – the car manufacturers.
On 30 September, Stellantis (STLAM:BIT) – one of the biggest European car producers comprising Fiat, Citroen, Peugeot and Vauxhall as well as Chrysler – and UK luxury car brand Aston Martin Lagonda (AML) both pegged profit warnings, in part, on China.
Several other major players including BMW (BMW:ETR), Volkswagen (VOW:ETR) and Volvo Car (VOLCAR-B:STO) also warned about Chinese trading last month.
Part of this is down to pressure on Chinese households’ ability to spend, although that hasn’t stopped luxury goods firms like Burberry (BRBY) and other sectors reliant on Chinese demand, like miners, from making gains in the last week or so in anticipation of better times ahead.
The other problem facing carmakers in the West is the level of domestic competition they face in China.
There are no Chinese brands with the prestige to challenge the likes of Burberry, Chanel, Hermes (RMS:EPA) or Louis Vuitton, but there is a large and thriving domestic automotive industry with BYD (002594:SHE) notably outstripping Tesla (TSLA:NASDAQ) as the top seller of electric vehicles globally in the fourth quarter of 2023.
The major automotive players in the West have struggled with the EV transition, with a key stumbling block in terms of mass adoption of electric vehicles being their price tag (as well as range anxiety).
In China, manufacturers have been able to undercut their Western counterparts to offer more affordable EV options and, as a result, Chinese EV adoption is notably greater – moving above 50% of total vehicles sold in July 2024 according to data from the China Passenger Car Association. The US and Europe are still way off this level.
Our three-part series on portfolio management and construction concludes this week with Martin Gamble looking at how to respond to different milestones. As we said at the outset, the My Portfolio section is now intended to be very much a forum for you to discuss your own experiences and a big thank you to those who have already got in touch.
We’ll be reaching out to some of you shortly to discuss your portfolios and how you manage them and, on the basis of these articles, we plan to follow up with our observations on what you’ve had to say.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
magazine
