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German car market 2023

Based on German’s official passenger car registration, here are some takeaways:

  • 2023 total German market is ~2.84mn cars, up 7.3% yoy from 2022; but in 2019 that number is 3.6mn, so still down 21% from 2019-level (most decline happened during 2020 and 2021)
  • German brands got ~52% market share and the three German companies got ~59% market share

  • Audi (+16%), Mercedes (+14%), and BMW (+11%) brands are all share gainers from 2022
  • Skoda (+17%) and Seat (+19%) brands, owned by VW, are also share gainers
  • Tesla, although with a local factory, only got 2.2% market share in 2023, and is losing shares in German vs 2022; German market is less than 4% of Tesla’s global deliveries
  • Ford got 4.1% market share in 2023, and keeps losing market share. Pressure continued since covid. Ford new registration in German dropped over 30% in 2020 and dropped another 35% in 2021. Its 2023 number is still a bit lower than 2021
  • Two South Korean brands, Hyundai and Kia, are flattish in number of cars, but lost small share as the market grew.
  • Toyota new registration PV dropped 4% yoy, also a share loser in German.

Market share in 2023 by origin of brands

 

China mutual fund size over time

Based on official data. Mutual funds can be several types: equity, debt, money market, QDII (foreign), mixed etc.

Therefore, “equity + mixed” types should represent the domestic rmb equity market mutual fund sizes.

The mutual fund size peaked in 2021 and kept dipping in 2023.

 

Japan’s capital market to thrive (?)

Japanese gov has been pushing for corporate governance reform for years.

It has drawn lots of attention, but how effective is the result? Several things to watch:

1/ new M&A guidelines – aim to spur M&As. But can real deals happen soon? can these deals not only give shareholder returns, but also easy for acquirers to consolidate/get synergies after the deal?

2/ “Doubling Asset-based Incomes Plan” – aim to let more retail investors buy more stocks. Seem to be a good idea and retail investors can pay higher p/e, but will people just buy more US stocks? will people really buy in the improved corporate quality narrative?

3/ investors communication / forums etc. – maybe can make more info available in english first?

It seems harder to move money (in & out of JP to the US) compared with say HK.

Plant meat didn’t work so far

Meat consumption is huge in China. But Beyond Meat didn’t win the market even it has a local factory.

In November’s q3 earnings call, Beyond Meat says it is doing “a review and potential restructuring of our operations in China”.

A local factory in Shanghai can’t solve Beyond Meat’s problems globally.

Why Beyond Meat didn’t work?

1) Price is too high. Retail price could be ~$10 per pound, or 40+% higher. In earnings releases, Beyond Meat in 23q3 sold 7.199 mn pounds of meat through US retail for 30.518 mn, which translates to $4.23 per pound (the price Beyond Meat sells to retailers). And Beyond Meat is mostly making gross profit loss at these prices. Not to mention the high interest rate and inflation pressure that lead to consumer trade-down.

Beyond Meat patties in Walmart – $9.68 / lb

normal beef patties in Walmart – $5.6 – $7 / lb

Products sold in China is actually at similar price in the US (40 rmb, or $5.6 for 2 patties; 60 rmb, or $8.45 for 4 patties, or 1 lb) – expensive compared with other meat options in China.

Pork (main protein) is ~$1.3 / lb in China.

Beef price is ~$4.6 / lb in China.

2) In restaurants (fast-food chains), the products didn’t take off – not welcomed by consumers. McDonald’s discontinued McPlant in mid-2022, which is a Beyond Meat burger. Burger King, the early adopter of vegan burger (from Impossible Burger) now says “it’s not a big part of the current focus.”

3) There are some fundamental issues with the product: e.g. plant- based protein is less likely to be absorbed compared with real meat.

Fed is bullied by the market – why?

Market news nowadays are saying that Fed is bullied by the market.

e.g. FT article: The Fed should resist market bullying

What’s “bullying”? Seems to me that market is leading and Fed is just following the market.

Why is this the case? I got three reasons:

1/ 2024 is election year. Market knows Fed needs to help the economy.

2/ Market understands data better, and Fed has been saying it’s “data-dependent”; no wonder why market (e.g. hedge funds) is leading with all those high-frequency data. Hedge funds can simply simulate what data Fed is receiving and even have better real-time data than the Fed.

3/ Some market players can “influence” or “control” the data. Sounds absurd. Just an example – what if hedge funds can buy up goods which would cause inflation when needed, or sell them at low prices to cause deflation when needed. As long as they can make huge profits in the market, it can be worth the cost.

Nikkei 250

After a 20-year [1982 to 2002] journey, Nikkei 250 index was back to the starting point.

And it hasn’t yet reached the previous high 34 years ago (1989 level) as of 2023.

What happened?

A lot of things to unpack.

GDP

I am looking at GDP (in local currency terms) first – equity market should be a ratio of GDP.

Japan already enjoyed a robust growth (1972-1982) with GDP almost tripped in 10 years (!), which translates to 11.4% cagr. 

The miracle continued for another decade.

1991 GDP also grew 6.4% yoy vs. 1990; however, GDP growth dropped to 2.5% in 1992 and to 0.0% in 1993.

During the second phase of which ended on 1991, Japan’s GDP still compounded at ~6% cagr (1981 – 1991), although not as high as the last decade. And Nikkei index climbed during this period as well.

What’s wrong then?

The “10-year GDP cagr” would drop continuously from 1991’s 6% to below 1% in 2002. 

Remember, Nikkei index peaked in 1989 (red mark).

While in 1990 and 1991 Japan’s GDP still enjoyed 7.6% and 6.4% growth, 1992 would be 2.5% and 1993 would be 0%.

It was the mid-term / 5-year projection that’s worrisome. And indeed, the 10-year GDP cagr would start to decay, with no reversal in sight.

Nikkei index bottomed in 2003, when the dot-com bubble also came to an end. S&P 500 dropped ~24% in 2002 (after double-digit drop in 2000 and 2001), but grew 26% in 2003.

The index bottomed as the 10-year GDP growth would be bottoming and things won’t go much worse from here.

 

Nikkei index is now (2023) ~4x the 2003 bottom though, what happened?

Nikkei index climbed 4 consecutive years (2003 – 2006), before the Global Financial Crisis hit.

Japan’s 10-year GDP cagr would still be ~0% in 2007, but from 2004 to 2007 it experienced a 4 consecutive year of GDP growth.

Things would look better in 2012, when Japan GDP would be re-entering a growth mode. 10-year GDP cagr would bottom in 2011 at -0.7% and recovered to 0.1% in 2015 and to 1.2% in 2019 before covid.

To make it a full graph.

As mentioned above, although 10-year GDP cagr still has pressure from 2003 onward, actually yearly GDP growth is positive from 2004-2007. Therefore the 3-5 year outlook would actually be reversing in 2003.

US-China direct flights recovery

Recovery Tracker

after China reopened in 2023, flights were set to increase from 16 per week to 24 per week, announced in March 2023.

In Aug 2023, two sides agreed to double capacity of 48 per week, ramping up to 36 per week on Sep 1, and 48 per week on Oct 29.

Flights would further increase to 70 per week starting Nov. 9.

Technical difficulties

US need to avoid Russian airspace, which requires longer distance and thus refueling.

Impact on tourism

e.g. SF: visitors from Mainland would be only ~20% of 2019 level.

“In 2019, 518,000 of San Francisco’s 4.3 million international visitors were from China, according to data provided by SF Travel. Though visitors from Mexico outnumbered them by about 100,000, visitors from China spent the most of any group, accounting for $1.2 billion of the $7.7 billion international tourists spent in the city that year.

This year, visitors from China are expected to number only one-fifth of their 2019 total, and expected to spend just under $450 million. That brings the city’s total international visitor spending down from 2019’s $7.7 billion to an expected $5.9 billion in 2023.”

— SF Chronicle (https://www.sfchronicle.com/sf/article/international-tourism-china-recovery-18188305.php)

 

Other sources:

https://www.regulations.gov/document/DOT-OST-2020-0052-0165