So now we see GM cutting prices of vehicles in China.
DETROIT (Reuters) - General Motors Co (GM.N) has cut vehicle prices in China after sales fell last month in the world's largest automotive market.
The No. 1 U.S. car maker's joint venture with SAIC Motor Corp set price reductions of as much as 53,900 yuan ($8,681) on 40 models across its Buick, Chevrolet and Cadillac brands, according to a statement on Tuesday on Shanghai GM's website. Read here.Will other US exporters do the same? Will they do it in other markets? (Europe? Japan?) It has implications for the dollar. Bearish implications.
Matt Franko, chime in here, please.
3 comments:
Mike,
Germany's Volkswagen has been aggressive in China Too:
http://www.reuters.com/article/2015/01/11/volkswagen-china-idUSL6N0UQ07Z20150111
This reduces the real terms again for the US... as GM is a US entity... but instead of 'labor' taking the hit (I doubt these cars are made in USA..) this time it is "capital's" turn to take the hit...
....some here may not be too sympathetic I'm sure ;)
This reduces the owners of GM's terms of trade with China... they are reducing the value of their brands in China...
But as China maintains that fixed exchange rate it rebates it back pretty quickly as they will not let their currency appreciate (not floating...)
Another furlong in the 'race to the bottom' imo...
rsp,
"But as China maintains that fixed exchange rate it rebates it back pretty quickly as they will not let their currency appreciate (not floating...)
Another furlong in the 'race to the bottom' imo..."
Yep, all in the name of "protecting" a currency (in Chinas case and indirectly in the US case).
Amazing what people will do to protect something that doesn't need protecting. If properly understood, it seems to me, floating currencies will take care of them selves. Most efforts to maintain a level of currency value end up destroying real stuff...... sometimes via war and other times via adjusting wages and employment which hurt real people.
Nucking futs if you ask me!
Pretty dire economic transition in China right now and the private credit collapse is extraordinary. I think the refusal of China to allow their currency to adjust, to protect indebted companies, will go down as one of the great mistakes in the history of central banking and even economics. They are allowing real economic harm to everyone to protect a few hundred companies from bankruptcy on their USD denominated debt.
The seriousness of the slowdown is apparent especially in some of the unofficial statistics on discretionary consumer goods and commodities are downright awful, from cocoa to milk power.
Autos are complicated, China manufactures quite a bit of their own parts now, in order for GM and the others to open in China, their government required they produce parts and transfer technology to China. They actually produce and export more than they import from the US. I had been watching the rail car shipments of auto parts and auto mobiles in the United States and it was odd because the car companies kept reporting higher and higher volumes while it was NOT reflected in freight. The answer was simple: The higher volumes were showing up as inter-modal ever since the the Obama administration re-design of the industry. They required that car companies move their production offshore to the new China factories and shutter the US operations. hence.. the big rise in intermodal containers and falling auto-mobile related rail cars. So lower prices in China, might actually translate to lower priced imports for the US too?
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