BEIJING (TheStreet) -- The Chinese export juggernaut appears to be running out of road for the country's automakers.
Demand has been falling for more than a year in emerging market countries that import most of the Geely sedans, Great Wall SUVs, Chery compacts and other vehicles shipped abroad from auto factories in China.
This slowdown could be good news for the Chinese automakers' big-name competitors in emerging markets such as Toyota (TM), Ford (F) and Honda (HMC). But it's another loss of face for Chinese auto companies that are already losing to foreign rivals at home.
Overseas shipments of Chinese passenger cars and commercial vehicles fell to 977,300 units last year after topping a record 1.05 million units in 2012, according to the China Association of Automobile Manufacturers (CAAM). The export slide continued in January, with outbound shipments declining 7% year-on-year to about 68,000 units.
Some analysts have pegged softening overseas demand to the Chinese yuan's steady appreciation against currencies in the automakers' most important foreign markets, none of which are in Europe or North America. The rising yuan has made Chinese cars more expensive in Latin America and Africa, for example, where consumers are particularly sensitive to prices.
Indeed, the yuan's value has climbed about 20% against both the Russia ruble and the Chilean peso over the past year. Russia is the second-largest foreign market, after Algeria, and Chile the third-largest for cars made in China. Other leading destinations include Iran, Peru and Colombia. Chinese vehicles are sold in about 100 countries worldwide.
"Exports weakened as the yuan appreciated," according to a Macquarie Securities analysis released Friday. "We believe the appreciation of the yuan has gradually eroded the competitiveness of Chinese autos in emerging markets, the major export destination for China original-equipment manufacturers."
Building a strong auto industry with popular products on roads globally, including the United States and Europe, has long been a goal of the Chinese government. Emerging markets have been targeted by state-run car companies as a stepping stone to wealthy countries.
China's goal seemed reachable just a year ago, when CAAM reported auto company exports had soared nearly 30 percent in 2012 over the previous year. Ever since that headline-grabbing report, though, monthly export data has underscored a steady reversal.
Passenger vehicle exports alone fell 9.8% last year from 2012, CAAM said, while overseas shipments of commercial vehicles declined 3.5%.
At home, meanwhile, Chinese auto brands have been rolling in the slow lane in the face of foreign-made imports and foreign-brand vehicles built domestically at factories run by Chinese-foreign joint ventures. Key ventures include Shanghai Automotive and General Motors (GM), FAW and Volkswagen, Brilliance and BMW; Changan and Ford, and Dongfeng with Honda.
Domestic brands account for only about 40% of all vehicles sold in China. Most of the country's best-selling cars in 2013 were foreign brands. The market leader was Volkswagen followed by Hyundai, Toyota, Nissan and Buick, according to industry consultant LMC Automotive. The most popular Chinese car brand -- BYD -- ranked No. 10 on the list.
Over the past decade, China's auto market has risen from minor player to the world's largest. Chinese consumers bought about two million vehicles in 2003 and about 22 million last year, up 13.9% from 2012. LMC recently forecast another 13% increase for China's passenger vehicle sales in 2014.
At the time of publication the author had no position in any of the stocks mentioned.
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