Crowds at Beijing auto show signal China’s spendthrift is back

0

BEIJING – Just before executives and car enthusiasts could gather in Geneva for the big motor show in early March, the organizers canceled it. As the coronavirus spread, other shows followed suit: Detroit, Los Angeles, New York, Paris and São Paulo.

So, after a long lull, the first major auto show since the pandemic opened this weekend in Beijing, giving automakers a chance to pitch new models and big ideas for the future. Under the pulsating lights, executives and car fans alike admired new cars from big Western companies like Ford and Volkswagen, and Chinese rivals. Sparkling sport utility vehicles, sedans and other cars were targeting Chinese consumers, who emerged from Covid-19 lockdowns with an urge to spend.

Auto makers are suing people like Ben Cao. Mr Cao, a 33-year-old consultant from Shanghai, and his wife bought a dark blue Porsche Panamera sedan in May to replace their Range Rover Sport, then bought a chalk gray Porsche Cayenne in July to replace their Audi TT Roadster. When theaters reopened this summer with social distancing, they went to see Christopher Nolan’s “Tenet” and “Hight Hundred”, a Chinese war film.

When he went shopping a few days ago at elite jewelry stores for a new ring for his wife, Mr. Cao found that other customers had been there before.

“For a lot of extremely expensive jewelry, they were out of stock,” he said.

The Chinese economy contracted in the first quarter, its first contraction in the modern era, but has now resumed its boom. The factories of the country are again producing goods for the world. Abundant public loans are fueling large construction projects. Chinese authorities are expected to report next month that growth accelerated in the July-September quarter, even as the rest of the world limps.

The pick-up in spending started with the wealthy after the coronavirus shutdowns last spring and has started to spread to middle-class families, but many working poor are still struggling. Retail sales rose 0.5 last month from a year earlier, the first increase this year. Xibei, a nationwide chain of mid-priced restaurants that were mostly empty last spring, said its September 18-24 sales were up 4.5% from the same days last year.

The rich Chinese are ready to buy. Restaurants, hotels and airports are once again crowded. Business hotels in Beijing nearly doubled room rates by eliminating pandemic discounts and filled up anyway. Almost all international travel is still on hold, but major airports in cities like Guangzhou and Chongqing have almost as many domestic travelers as they did last year.

Spending by customers like Mr. Cao has boosted the sales of luxury automakers like Porsche, which even sold electric Porsche Taycans from Germany, and NIO, a Chinese electric car competitor to Tesla. “Life goes on without much impact from the pandemic,” said William Li, founder and CEO of NIO.

A big question, when would China’s middle class join, also seems to have been answered. Sales of large and luxury cars rebounded quickly in April, but compact car sales remained weak through much of the spring and summer despite strong price rebates from automakers. Now, they’ve almost caught up to the pace of last year. Public concerns about catching the virus on public transportation helped car sales in the spring, but sales have remained strong in recent weeks even as those worries faded.

“Cheaper vehicles are coming back,” said Yale Zhang, general manager of Automotive Foresight, a Shanghai-based consulting firm.

Edward Cai, a 26-year-old consultant from Beijing, spent little in the spring. Now he’s going to the movies – he loved a remake of “The Invisible Guest” that had just been released but not “Mulan”, Disney’s China-centric epic. He even splurged on vacation a month ago in southern China.

“Much of my spending was suspended during the outbreak,” he said, “but they are coming back”.

Not all Chinese spenders can say the same. Many low-income workers and recent college graduates have yet to find new jobs after the coronavirus shutdowns or work reduced hours with lower pay. Businesses and consumers in many interior cities are struggling.

“The richer regions are outperforming in all areas,” especially the exporting regions along the coast, while the rest of the country lags behind, said Derek Scissors, chief economist of China Beige economic analysis. Book.

China also has one of the highest levels of income inequality in the world, rivaling countries like Brazil. As a result, prosperous families play a disproportionate role in the Chinese economy.

Consumer studies conducted by multinational corporations suggest these families indulge in what they call “revenge spending” after surviving fear and death from the pandemic.

“You find that life ends so easily, so you want to give something to yourself,” said Jens Puttfarcken, managing director of Porsche China operations.

It helps that China has tamed the coronavirus within its borders. In contrast, European countries are closing bars and restaurants in response to a fall wave of infections. In the United States, layoffs remain widespread and many businesses have closed.

The Beijing Auto Show, held every two years in alternation with the Shanghai Auto Show, has over the years proven to be a good enough focus to focus on the strengths and weaknesses of the Chinese economy. It is increasingly dominated by luxury brands, by vehicles adapted to Chinese tastes and by increasingly sophisticated Chinese manufacturers with the ambition to create global brands.

The show also showcased China’s transformation from a technological backwardness to the world’s largest electric car market, which customers have captured in recent months. Ford unveiled a Chinese version of its new electric Mustang on Saturday. NIO has announced an upgrade to the autonomous driving software on its electric cars to allow them to merge with road traffic and exit on their own.

Polestar, a joint venture of Volvo Cars and its Chinese parent company, Zhejiang Geely, has announced plans to mass-produce electric cars next year in Chengdu, China. Thomas Ingenlath, chief executive of Polestar, said the company is building a brand new plant that it intends to run solely on renewable energy.

Mr. Ingenlath was one of a handful of senior auto executives who traveled to China for the show. Barely released from the hotel where he served two weeks in complete isolation after arriving, he said he was surprised at the differences in daily life between China and Europe due to China’s unusual success in removing the coronavirus.

“In Europe, you would avoid the handshake a lot, even if it is the focus of the handshake – I’m surprised that’s not a problem here,” he said. “People are less worried.

The Chinese economy is still vulnerable.

Other infections could still emerge, especially because the virus was stopped so quickly that few people were lucky enough to develop immunities. China has responded to this risk by keeping certain precautions in place, although others, such as wearing face masks, have become somewhat less common, especially outdoors. University students are prohibited from leaving campuses for almost any reason. China is also preparing a massive campaign this fall to administer flu shots, to minimize the number of people presenting to clinics and hospitals this winter with symptoms that could be mistaken for those of the new coronavirus.

Another fear lies in the financial system. Chinese state-owned banks inundated the economy last spring with huge low-interest loans, adding to long-standing concerns about bad debts. Shares and bonds of the China Evergrande group, one of the country’s largest real estate developers, fell sharply last week amid concerns about how it will handle debts of more than $ 120 billion.

A third concern is the health of small and medium-sized businesses. They lack the political connections often required to obtain loans from the state-run banking system. Another big epidemic this winter could still wipe out many entrepreneurs.

Persistent social distancing rules mean service industries aren’t doing as well as manufacturers. The box office of Chinese theaters fell 57% in August compared to the same month a year ago, although this mainly reflects rules that have reduced the capacity of theaters.

But many of the worries seemed far away at the auto show.

Liu Xiaozhi, a former automotive engineer who now sits on boards of directors, said the country’s success against the coronavirus has allowed consumers to start spending freely again.

“In China,” she said, “it’s actually quite the same as before.”

Claire Fu and Coral Yang contributed to the research.

Leave A Reply

Your email address will not be published.