Global carmakers converge on China

People walk through an auto exhibition in Nanjing, in China's Jiangsu province on Saturday. (AFP)
Updated 16 April 2017
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Global carmakers converge on China

SHANGHAI: Global carmakers converge on China for the Shanghai auto show this week, with the industry bracing for a sharp sales slowdown and potential price war as competition stiffens in the world’s biggest car market.

Manufacturers have reaped a windfall as the fast-expanding Chinese middle class hits the road, but clouds loom as Volkswagen, Toyota, GM, and other top nameplates pitch their latest models starting this Wednesday at China’s biggest auto showcase.
Passenger-vehicle sales have nearly quintupled over the past decade and logged another stellar performance in 2016, surging 14.9 percent to a record 24.38 million, according to the China Association of Automobile Manufacturers (CAAM).
But volume was skewed upward in 2016 by a government purchase incentive. As China’s decades-long economic boom loses lift, sales growth will essentially be flat this year and could even shrink in 2018 for the first time in memory, consultancy IHS Markit said last week.
In a boon for consumers, IHS Markit said there is already “a major price war descending on the market,” as manufacturers and dealers slash prices to move growing stock.
“The threat now for international automakers is that if local players begin cutting prices ... there will be a rampant price war across the market as automakers compete to attract new car buyers,” it said.
Such troubles must be kept in perspective: China is still El Dorado for carmakers.
Last year’s sales set a 26th straight annual high-water mark, handily beating the record 17.55 million cars sold in the US, which China zoomed past eight years ago to become the planet’s top market. Sales were boosted by the government’s halving of a 10-percent purchase tax on small-engine cars in late 2015. That tax has been raised to 7.5 percent this year and will be restored to 10 percent in 2018, with an expected dampening effect on sales.
More broadly, analysts say China’s automotive landscape is rapidly maturing as consumer tastes evolve, and success will depend on manufacturers’ capabilities in meeting those tastes.
China now has a crowded field of mostly domestic carmakers, many of which will not survive, said Johan Karlberg, a Shanghai-based partner with global consultancy Roland Berger.
“There is just not room enough for that many players anymore. Many of the smaller ones will simply die a slow, suffocating death,” Karlberg said.
Major carmakers remain bullish but are scrambling to introduce a slew of new models aimed at Chinese consumers during the Shanghai show, which IHS said has taken on “major importance” as the dynamics evolve.
Manufacturers are rushing, in particular, to capitalize on still fast-growing demand for sport utility vehicles (SUVs) and “new energy” cars.
Chinese drivers have latched on to both domestic and foreign-made SUVs as leisure interests grow and rising incomes put a second family car in reach. SUV sales are expected to surpass sedans as early as this year.
Electric vehicle sales have been government-subsidized partly to help reduce China’s notorious air pollution, and the Chinese market is now the world’s biggest and growing quickly.
China market leader Volkswagen, along with giants GM, Ford and a host of electric-car upstarts, all have plans to ramp up their China offerings.
Ford will even try to sell its American-icon pickup trucks while expanding its electric offerings.
“We think it is a huge opportunity for us to continue to build the Ford brand here in China and continue to grow our business in China,” Ford CEO Mark Fields told Bloomberg News.
Analysts say other future drivers lie in China’s seemingly never-ending stock of newly-minted middle-class consumers, particularly in populous and fast-growing lower-tier cities, plus the rapid growth in car-hailing and vehicle-sharing services.
“We still have a pretty good period of growth ahead in the Chinese market. It is THE strategic market for global carmakers,” said Marc Mechai, an automotive analyst with Accenture in Paris.
“But now, it remains to be seen with which vehicles, and how.”


In sluggish Russian economy, halal sees growth

Updated 21 July 2019
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In sluggish Russian economy, halal sees growth

  • Ever more producers are catering for the domestic Muslim community, which accounts for around 15 percent of Russia’s population
  • The halal economy, worth more than $2.1 trillion globally, is far from limited to meat

SHCHYOLKOVO, Russia: The manager of a sausage factory near Moscow, Arslan Gizatullin says his halal business has been feeling the pinch — not so much from Russia’s sluggish economy but competitors vying for a piece of a growing Islamic market.
Ever more producers are catering for the domestic Muslim community, which accounts for around 15 percent of Russia’s population and is set to expand, and in some cases are also setting their sights on export.
“In the last few years in general, halal’s become something of a trend in Russia,” said Gizatullin, who has been at the Halal-Ash plant in the city of Shchyolkovo for seven years.
The factory was among the first of its kind when it opened two decades ago, recreating Soviet-style sausages in accordance with Islamic law, among other products.
“Now I go to shop displays and I see sausage from one, two, three producers... I see that competition is growing,” he adds from the factory, which employs 35 people and puts out up to 1.5 tons of produce a day.
The halal economy, worth more than $2.1 trillion globally, is far from limited to meat.
Cosmetics firms and services such as halal hotels have received licenses from the body that oversees Islamic production in Russia, while state-owned Sberbank is looking into creating an Islamic finance entity.
The Center for Halal Standardization and Certification, under the authority of the Russian Council of Muftis, has approved more than 200 companies since it opened in 2007.
The center says that number is growing by five to seven companies a year — from a standing start at the collapse of the anti-religious Soviet Union.
Rushan Abbyasov, the deputy head of the Council of Muftis, told AFP the Russian agriculture ministry was supporting the center in its efforts to increase exports to the Arab world and Muslim-majority ex-Soviet republics.
“We’ve looked at international experience in the Arab world, in Malaysia, and we’ve developed our Russian (halal certification) standard following that model,” Abbyasov said in an interview at Moscow’s central mosque.
“We’re doing it in a way that matches international halal standards as well as the laws of the Russian Federation.”
The mufti pointed to an annual exhibition of halal goods and producers in the Muslim-majority Russian republic of Tatarstan, which this year saw its biggest ever turnout, as an example of the sector’s growth.
Tatar officials told Russian media the halal food market accounted for around 7 billion rubles a year ($110 million) — or just over three percent of the region’s gross agricultural output.
But they said the sector was growing at a rate of between 10 and 15 percent a year.
The certification center said Russia’s overall halal economy was also growing at a rate of 15 percent every year, but declined to give a breakdown of its figures.
Russia’s overall economy is stagnant, with the government predicting growth of only 1.3 percent this year, after 2.3 percent growth in 2018.
Alif, a Moscow-based cosmetics firm, is a new company at the forefront of the move toward exporting halal goods from Russia.
Manager Halima Hosman told AFP that, a year after launching, Alif’s products were being sold in the Muslim-majority Russian republics of Dagestan and Chechnya, as well as ex-Soviet Uzbekistan and Kazakhstan.
“Our priority targets for export now are France, Turkey, Iran, Saudi Arabia,” she said, adding that the company had non-financial support from the halal certification center.
The 28-year-old, who was born into an Orthodox Christian family in southern Moldova but converted to Islam as a teen, said promoting halal products was about more than business.
“It’s a way for people who don’t know about Islam, who aren’t Muslim, to find out about what ‘halal’ actually means,” Hosman added of the alcohol- and animal fats-free cosmetics.
Lilit Gevorgyan, principal economist for Russia and former Soviet states at IHS Markit, said the growth in Russia’s halal economy seemed impressive but was coming from a “very low base.”
Further growth in the sector was likely to be driven more by export than by domestic demand, she said.
This is mainly because household incomes have yet to recover from a 2014 crisis caused by a fall in global oil prices and Western sanctions over Moscow’s annexation of Crimea.
“Halal food is more expensive due to its production costs, and for Russian consumers... every ruble counts,” she said, adding that much of Russia’s Muslim community was non-practicing.
Changing Muslim countries’ perception of Russia will be key if Moscow is serious about increasing halal exports, Gevorgyan added.
“Branding is important,” she said, adding that Russia — as yet — is not seen as a major halal producer.