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China bid for GM brand Hummer triggers skepticism

China 2009 auto sales could hit 11 million: state media
China's auto sales could hit a record 11 million units this year, state press reported Tuesday, as government stimulus measures to encourage buying kick in. The forecast came after figures showed strong growth on purchases for the first five months, the China Daily said, citing the China Passenger Car Association (CPCA). Sales of passenger vehicles - including minivans, sports utility vehicles and multipurpose carriers - hit a monthly record of 812,178 in May, up 54.7 percent year on year, according to CPCA data. That brought total passenger car sales in the first five months to 3.64 million units, up 29.6 percent from the same period last year, the data showed. "The growth in the passenger car segment will probably continue in June to hit a new monthly record," said Rao Da, CPCA's secretary-general, adding sales in the second half are expected to be much better than in the first six months. The association said sales in 2009 will "definitely" break the 10 million mark and could reach 11 million units, according to the China Daily. China's auto sales outstripped the United States to become the world's largest car market for the first time in January, helped by Beijing's incentives to boost domestic consumption. These measures included slashing purchase taxes on cars with engines smaller than 1.6 litres and subsidising alternative energy vehicles. Ailing US auto giant General Motors said last week its sales in China jumped 75 percent year on year in May to a monthly high of 156,000 units, mainly boosted by strong sales of minivans, which enjoy government subsidies. In 2008, sales of vehicles in China rose about eight percent to 9.4 million units - a modest growth rate by Chinese standards as demand was hit by the global downturn.
by Staff Writers
Beijing (AFP) June 9, 2009
The announcement from little-known Chinese company Tengzhong that it wants to buy the Hummer brand from troubled General Motors has led many to question just how plausible the deal really is.

What has perplexed Chinese analysts the most is the company's lack of expertise in either international trade or making automobiles.

"Tengzhong is just a privately owned company that has no experience in the car industry and Hummer is a niche brand that suits a small group of people," said Zhu Junyi, an auto analyst with Shanghai Information Centre, a think tank.

Even China's state-owned media have been quick to point out that Tengzhong, based in southwest China's Sichuan province, specialises in making machinery to build roads and bridges, as well as equipment for the energy industry.

Tengzhong "has no experience in producing passenger vehicles, adding difficulties for the company to manage the brand," Xinhua news agency quoted Zuo Xiaolei, an economist with China Galaxy Securities, as saying.

The headline of a recent commentary printed in the English-language Global Times said "China's Hummer fever should come to a stop."

"The purchase comes at a time when China should be buying fewer Hummers, not more," the commentary said. "The deal deserves criticism more than it does pride."

The low fuel efficiency of the Hummer was one of the main reasons that North American sales of the sports utility vehicle have tanked in recent years.

And although the Hummer is a status symbol in China, the four-wheel-drive modelled after the US military's Humvee has also become a symbol of pollution in a nation already beset with serious environmental problems.

That could be one problem for Tengzhong, which sees the Chinese market as key to its hopes of reinvigorating the Hummer brand.

"The company's strategy is to take the Hummer brand global and that should certainly include the Chinese market," an official with Tengzhong's public relations agency told AFP. The agency asked not to be identified.

Analysts also questioned whether the group based in the city of Chengdu has the know-how to manage an international brand, citing the 2004 purchase by Shanghai Automotive of South Korean car maker Ssangyong.

Ssangyong, which has been under court receivership since February, is expected to cut 36 percent of its workforce, or 2,646 workers, as part of a restructuring plan.

"I don't see how a Chinese car maker can acquire companies like Volvo or Hummer," said John Zeng, a market analyst with Global Insight, recently told AFP.

"It is not realistic either financially speaking or from a management standpoint."

The international experience of most Chinese companies is in their relations with foreign firms in China, not in managing foreign companies overseas, he said.

"The failure of Shanghai Automotive in its purchase of Ssangyong has affected the reputation of other Chinese companies in South Korea," said Jia Xingguang, an analyst at the China National Automobile Industry Consulting and Development Corp.

The final hurdle for the Hummer deal will be gaining approval from Chinese regulators, who state media said may be opposed to the purchase.

But even a red light from the regulators could be in Tengzhong's interests, some analysts said, suggesting the offer for Hummer was little more than a bid for some free publicity.

"Market talk has it that Tengzhong's takeover of the Hummer brand is pure hype," the Shanghai Information Centre's Zhu said.

"The company knows the plan won't get approval from the authorities, but the news can turn it from a little-known company to a household name in China. Even multi million-dollar ads will not be able to achieve a similar effect."

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