How will auto market be when stock market

　　According to a comment from SOHU, if you collect the news from the front page of the official website of various auto manufacturers, you will clearly see that in both China and the United States, the changes in the stock market are closely correlated to that of auto market. Therefore, in the United States, companies similar to General Motors and General Electric would be called cyclical companies because their performances are strongly connected to the business cycles.

    Of course, you may say almost all industries will be significantly correlated with economic cycles. But the problem is companies like General Motors are more sensitive to the growth and declination of GDP. When economy and GDP are growing rapidly, GM will enlarge this growth while conversely, the sales of GM will be like a roller coaster as fast sliding into the bottom. This high correlation allows investors to recognize that the auto industry is not a sound investment object, which has a great probability of both losing money and making money. China’s market economy is far from perfect like a few developed countries. Meanwhile, high economic growth has masked the slight fluctuation. Therefore, it is difficult to see the cyclical nature of the auto industry. However, one thing is certain that in 2009 our unexpectedly economy growth is also reflected in the auto market. Similarly, the GDP growth of more than 10% in the first quarter of this year also means substantial growth in auto market.

　　Obviously if this rapid growth of GDP continues in the second quarter, overheating could become a reality. If so, the macro-control will be brake the GDP, reflected in the real economy, which means the housing market is to be forced cooling and then a lot of investments into will shift to other products, which of course is the rising prices of various commodities we see today. In order to avoid the vicious CPI inflation caused by sharply rising prices of all kinds of commodities, the government must use all tools to curb speculations. However, these non-market operations will inevitably leads to the pessimistic outlook on the stock market. This economic ripple effect will certainly be reflected in the auto market.

    The auto market overdrafted since 2009 originally has come across a period of adjustment rightly when the stock and housing market are showing a negative wealth effect, which can lead to another low tide in auto market. Of course, in an era when the popularity of China automobile is being promoting, any auto sales slump will seem not so obvious. But to investors, even the decrease of growth itself is likely to be unacceptable. In the first quarter, sales of all luxury brands are generally excellent. However, the second quarter will not be so satisfying. Therefore, to use a variety of financial tools to manage price cuts are inevitable. The sales of non-luxury brands will face huge pressure in the second quarter. How far can those models with increased prices go will be quite questionable when the stock market is below the 2600 points. Few people dare to invest when the assets are shrinking continuously unless inflation is expected to exceed the negative wealth effect, which means consumers are worrying the prices raised by the inflation. However, this is unlikely to happen since the prices of commodities such as iron and steel as well as are all falling the at present.

　　At 2600 points in the stock market, the auto market will be even worse than expected. If the auto market can be finally proved never or only slightly influenced by the stock market, then we can come to the conclusion that the Chinese consumers do not rely on savings to buy cars. However, from the recent feedback of distributors and sales departments, obviously the auto market has been impacted greatly by the stock market influenced. Therefore, we can speculate that before the stock market' return to 3000 points, the auto market will continue getting worse. Most of people have to rely on their savings or investing to buy cars. Due to the fatherly price cuts in housing market by policy, the forthcoming floods with the arrival of summer, the economic uncertainty of the European, and Southeast Asian economic crisis aroused by political instability in Thailand, nothing could save the stock market unless the Chinese macro-control policies are changed. Besides tax cuts, there will be no other policies to save to the auto market. Unless the economy can be further improved, the auto manufacturers can never expect to make many profits this year.

　　(Translator: Yalong/Jessie)

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　　http://msmezhwh.blog.sohu.com/151804582.html