The Daily Update - Are the Germans unstoppable in China ?

Every 10 seconds in China, the German car giant VW sells a car either though its own brands or one of its two joint ventures, SAIC Volkswagen or FAW-Volkswagen. To put in perspective the importance of China, not just to VW, but the global car industry, in 2017 VW delivered nearly 3.2m cars in China, out of a total of over 24m cars sold globally. The final total was  up nearly 6% year-on-year from 2016. Sales were up 13% in December alone, where the combined 3 companies sold nearly 342,000 cars, dwarfing the UK’s sales of just shy of 209,000 for the whole of 2017.

Not to be outdone, both Mercedes Benz and BMW reported strong growth in China. The Asian nation was the largest and fastest growing for Mercedes, with sales increasing to nearly 600,000 cars, increasing sales by over 25% for the second consecutive year. China was also BMW’s largest and fastest growing market where sales increased 15% to 594,000 cars.

Here in the UK Jaguar Land Rover reported sales to China were up 23% with approximately 147,000 cars sold, however there could be some very dark clouds on the horizon for the UK car industry. President of the Confederation of British Industry (CBI), Paul Drechsler, has warned that the UK motor industry faces ‘extinction’ if the UK leaves the EU customs union after Brexit. "There is a risk that the auto industry in the UK faces extinction if there's no customs union after Brexit’  Drechsler warned, adding ‘Be in no doubt, that is the reality. There’s zero evidence that independent trade deals will provide any economic benefit to the UK that’s material. It’s a myth’. At the moment the UK auto industry employs over 800,000 skilled workers, with approximately 45% of all cars made here shipped to the European Union and the pulling of investment seems to have already started. In 2017, according the Society of Motor Manufacturers and Traders, UK auto sector investment fell by a massive 34%, however this could be the tip of the iceberg. Drechsler warns that slowing investment across all sectors of manufacturing is becoming apparent. ‘Every single day in my job at the CBI, I'm aware of decisions ... about delays, about deferrals’ in investment, Drechsler warns. Further declines in Sterling seem almost inevitable.

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