Which car makers will pull ahead – MoneyWeek

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Thisdoesnothavehappyimplicationsfortoday’sbigcarmakers。

Rightnow,VolkswagensellsthreeofeverytennewcarsinChina。

Butitisalreadylosingmarketshareasmorecompaniesmoveinfromabroadandasdomesticmanufacturerslearntocompete。

Volkswagenisfarfromaloneinfindingtheglobalenvironmenttricky,saysJohnGriffithsintheFT。

USgiantGeneralMotorscurrentlythetheworld’sbiggestcarmakerisstrugglingtosteman“uncomfortable”dipintolossesasittriestorecoverlostmarketshare,accommodatesoaringsteelcosts,andcopewiththehugepensionandhealthcarecoststhataddmorethan$1,000tothecostofeachGMcar。

ThesameappliestoFord,whichhasjustbeentakenoverastheworld’ssecond-largestcarmakerbyToyota。

Thatsaid,Toyotaislikelytogetsomecomeuppancetoo:intermsofmanufacturingcosts,ChinapresentsarivaltowhichnoneoftheAsianautomotivegroupshaveananswer。

Ontheplusside,themarketoffersmorethangloom。

Inourwealthyandstatus-consciousworld,premiumgoodsarewherethemoneyisbeingmade。

Itshouldthereforecomeasnosurprisethatsalesofexecutiveandluxurycarbrandshavebeengrowingatmorethanthreetimestherateofthenewcarmarketoverall,tomorethanfivemillionunitsayear。

Betterstill,marginsinthismarketaretraditionallymorethandoublethoseinthevolumecarmarket。

Forthemoment,then,BMW,andperhapsGermany’sgreatestautomotive“icon”,Porsche,arecontinuingtolaughallthewaytothebank,saysGriffiths。

BMW’sstrategyofcreatingpremiumversionsofallsortsofcarssports-utilityvehicles,forexampleisreallypayingoff:thisyear’sprofitscouldbethebestever。

Porschelooksevenbetter:theworld’smostprofitablecarmakermadeagrossprofitofe1bnonsalesofe6。

5bnlastyear。

Allthisonanoutputofjust77,000vehicles。

Thebeststocksinadifficultmarket

MorganStanleyanalystStephenGirskyisnotagreatfanoftheautoindustry。

Heexpectstoseecontinuedsoftretaildemand(automakersarehavingtoofferhugeincentivestomakepeoplebuyintheUS),highinventoriesasaresultandrisingcostsasrawmaterialpriceskeepgoingup。

Februarysalesseemtosupporthisanalysis:therewere,ashepointsout,“alarming”retailsharelossesatGMandFord。

Andthe‘Detroit3’endedthemonthwith92days’ofinventory,thehighestFebruarylevelin22years。

Toomanycarschasingtoofewcustomers。

TheautocompanybestplacedtoweathertheautomotivestormmaywellbethemakerofthePriusitself,Toyota。

Whileexpectingthecompanytoseeslowerearningsgrowthinthefirsthalfofthenextfiscalyear,thingsshouldaccelerateagainintofiscal2006,saysKurtSanger,autosanalystatMacquarieSecurities。

Sangerseesthefirm,whichalsomakestheluxuryrangeofLexuscars,selling7。

3%morecarsin2005thanitdidin2004anddoingparticularlywellinAsiaandEurope。

Thisisatrendhethinkscancontinueforthreeyearsorso,giventhatheseesthefirm’ssharesaslookingprettyattractiveona2005p/eof10。

5times。

Finally,takealookatVolkswagen,saysSvenLorenzonwww。

DailyReckoning。

co。

uk。

Itmaybebasedinoneoftheworld’sworsteconomies(Germany),butitisstillEurope’sbiggestcarmakeranddeservesap/eratiohigherthanitscurrenttentimes。

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