DUNNE & CO. PRESIDENT MICHAEL DUNNE TALKS CHINA ON BLOOMBERG TV
JANUARY 12, 2010
SPEAKERS: MICHAEL DUNNE, PRESIDENT, DUNNE & COMPANY
BERNARD LO, BLOOMBERG NEWS
replica hublot watches (This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)
18:36
BERNARD LO, BLOOMBERG NEWS: Michael Dunne, President of Dunne & Company, an investment advisory company specializing in the Asian car market, joins us on the program.
Michael, a belated Happy New Year. It's Bernie in Hong Kong with you on the show today. It looks still dark there. What's going on in China? The momentum is there. Late in the year we were hearing about 60%, 70%, 80% year-on-year growth in sales. Is that going to come screeching to a halt this year?
MICHAEL DUNNE, PRESIDENT, DUNNE & COMPANY: The thing to watch, Bernie, is tightening. In 2008, the government wanted to tighten the economy. Car sales slowed dramatically. In 2009 they opened the taps again, and we've had just sensational growth.
Now how much growth last year? They added the equivalent of two Korea markets in 2009. Now that growth came primarily from the inland markets - places like Shanshi, Sichuan, and Hunan.
When I talk to automakers, they're still optimistic, but they're wary of government tightening. Watch that space.
LO: How bad is it going to get? We are speaking as the Chinese just told the banks okay, you're not pulling back the lending. We're concerned that it's completely getting splayed out of control. You're not going to lend as much as you used to.
Fifty basis points on the reserve ratio and the car market - it seems like they're probably a few steps removed. Is there going to be an immediate impact, or does it take some time to filter down to the guy kicking the tires in the showroom in Beijing?
DUNNE: No immediate impact. I'll tell you why. The government does want to develop a car culture. And the minister in charge of the industry just yesterday came out and said we will have 15% growth again this year, which is still very strong by any measure.
So don't look for any immediate impact on the car market. But as in 2008, they can turn down the taps. And when that happens, the demand drops very abruptly.
LO: Tell me about the factors that are going to define the market this year, though, Michael. China is an interesting market. People in America have eschewed Hummers. They're not politically correct, they use too much gas. People are looking for hybrids and electric cars. And yet in China, you have not really arrived until you get your hands behind the wheel of an H2. But that theme - is it over? Is it a fad? Is it a short term thing or will it endure?
DUNNE: That was definitely the theme from 2003 to 2008, 2009 even. But what we saw for the first time in 2009 is that most cars were sold in the segment of subcompacts or compact cars. Those are your Corolla's or smaller. People are going to smaller cars with smaller engines. And most of that growth is coming from people with smaller bank accounts.
So that's the clear trend. And Ford yesterday announced that for Asia they've come out with small cars. replica breitling watches Volkswagen is doing the same thing. The direction going forward, in order to sustain this growth, has got to be smaller cars. That's where mass mobilizat
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