Thursday, August 10, 2006

A Study in Contrasts

The gulf between continents at times seems so wide. Contrast:


General Motors

Sunset Over Detroit

Prospects for Automotive Suppliers

Auto Industry Consolidation: Is There a New Model on the Horizon? (free subscription required)

Ford Steps Up the Pace, Too Late


Automakers See Profits Jump 76% in First Half Year

Auto Parts: The New Kid in Town

Boomtime for India's Auto Parts Industry

A couple of quotes to contemplate:

"... shows that the United States and Germany are close to 100 times as saturated with automobile ownership as China and India. Japan is more than 75 times as saturated and even Thailand is about 7 times as saturated. ...consider that China has four and one-half times as many people of driving age as the U.S. and that India has more than three times as many as we do, you can understand both the limited growth potential of the U.S., Germany and Japan, which together account for a majority of global automotive ownership, and the vast potential of the developing nations, especially China and India. If each of these two expanded to just one-half of Thailand’s penetration, their automobile ownership would more than triple, from 12 million cars at present to 40 million. Yet, as you can see from Exhibit 4, India’s auto production now is half that of South Korea’s and China’s is less than twice Korea’s and less than one-third that of the U.S. As car production grows, so will the indigenous base of component suppliers."
source: Wilbur Ross speech April 18, 2006
"The Indian auto-component industry has grown at a cumulative average growth rate of 21% annually in the past five years, according to the Automotive Component Manufacturers Association (ACMA) of India. An ACMA/McKinsey & Co. study shows India has the potential to grow from US$8.7 billion in 2005 to US$45 billion by 2015."
source: Rediff India Abroad, June 6, 2006
Four comments about this industry:

One positive about China from a North American perspective...Shanghai General Motors ranked first in the automobile industry with profits growing by 21 percent.

There has been a trend by both Indian and Chinese companies to seek invest in North American auto parts businesses. Some of these businesses are so out of favor and cheap, that they may become takeover candidates by foreign interests for strategic purposes or private equity investors.

Third. from the Chinese perspective:
Shanghai General Motors ranked first in the automobile industry with profits growing by 21 percent.

Finally, don't forget that just because you may live in North America, you need not confine all your investment dollars here. Think global.

Currently, my only position in the autos/auto parts sectors is Harman International, which I have described in prior posts:

Harman International-An Auto Parts Growth Story

and Still Big on Small Stocks

Disclaimer: I, my family, and some clients have a current position in Harman International. None of us has a position in any of the other stocks mentioned in this post.


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