Taps Coogan – December 1st, 2023

We’ve talked about the rise of Chinese auto exports before but the following chart from the FT via Michael Arouet highlights the trend quite nicely:

China‘s car exports growth won’t suddenly stop, they are just getting started. At the same time German automotive unions and some politicians request four days workweek without pay cut. They live in a world that doesn’t exist anymore. pic.twitter.com/2WfvOMUzrt

— Michael A. Arouet (@MichaelAArouet) November 30, 2023

This is going to have big consequences for several developed market economies, most of all Germany. There are simply too many global auto brands with undifferentiated products, no margins, no chance of surviving a price war, and no ability to finance investments from cash-flow. Add in catastrophically uncompetitive union labor costs and Old Taps expects to see massive consolidation in the auto space in the next decade with multiple global brands going under or getting bought up. It’s been a long time coming and it looks like the rise of Chinese brands is likely to be the straw that breaks the camel’s back.