The big question that carmakers need to ask is what do consumers want in China? In wealthier, more established markets, such as Beijing, buyers demand the latest products, but in other regions, the situation is different, cautioned Michael Dunne, founder of the regional consulting firm, Automotive Resources Asia. "There are two markets here. In the countryside, it's all about price, price, price." And that's where China's homegrown manufacturers may have an advantage. Companies like Geely have some very simple, very basic products to show off, but these are, said Dunne, "affordable cars for the masses." That's not to say Western manufacturers have ignored the opportunities entirely. One of General Motors' six joint ventures teams it with the Chinese partner, Wuling, which produces small and simple pickups and vans starting at just over $3000. -Paul A. Eisenstein
China's new entrepreneurs
Maybach M57 Beijing show |
With his hip-hop haircut and simple T-shirt, James Wang might easily be confused with any of the young Beijing residents who came to Auto China 2004 to look and dream about the day when they could buy their first car. But Wang already owns a Porsche 911, as well as a Subaru WRX STi, and was at the show's press day to pick up the keys for his newest automotive acquisition: a Maybach M62. The 27-year-old real estate entrepreneur paid around US$600,000 for the massive luxury machine, after import duties and other taxes. "I like cars," he explained in near-flawless English, adding "I was just waiting for this car to come to China." Wang is part of a young and incredibly affluent new class of businessmen who are emerging in the new China, and like their counterparts in the West, they are struck with car fever. But he admitted there is still a bit of a social stigma against those who show off too much, so like the 911, the M62 will spend most of its time parked. "I don't drive it that much. I just like to go out to my garage and look at it." -Paul A. Eisenstein
Luxury leaders
Aston in China |
Luxury brands were in abundance at this year's car show, many newly arrived to this auto-crazy nation. But the manufacturers are hoping to make up for lost time. Initially, "We'd like to be in the business in a fairly small way, with three dealers" in China, said Aston Martin's Bill Donnelley, "but we're clearly taking the long view. Right now the top end of the market is only about 300 cars a year, but the long-term potential is tremendous." Aston hopes to start out selling about 25 cars annually in China, starting with the DB9 and Vanquish models.
Beijing show Kid with Jaguar |
It will add the V-8 in 2006. But within five years it believes sales could jump tenfold, making China one of its largest world markets. China is already rivaling Japan for Mercedes-Benz, which expects to see sales surge past 50,000 in the near-term. Mercedes was one of the first luxury brands in the market, and already has about 100,000 S-Class sedans on the road in China. As the result of a new joint venture, it will begin producing E- and C-Class cars in the country next year, but with import tariffs coming down as China joins the WTO, Mercedes also plans to expand its line-up of import models, including the American-made M-Class SUV. -Paul A. Eisenstein
Nissan betting heavily on China
Nissan Teana Beijing show |
Nissan's initial turnaround relied heavily on rebuilding its market in the United States. Going forward, the automaker expects China to play a major role in its global expansion, company officials declared during a preview at the Beijing Motor Show. The automaker used its time slot to launch the new Tian-lai, a feature-rich version of the upscale Japanese Teana sedan. And it revealed plans to bring the Infiniti line of luxury cars to the country, as well. A latecomer to the Chinese market, Nissan is nonetheless optimistic of its opportunities. The automaker recently announced the so-called Nissan Value-Up plan, which would boost its global sales from around 3 million last year to 4.2 million in 2007. "China is expected to be one of the biggest contributors to that increase," stressed Nissan Executive Vice President Toshiyuki Shiga. If the company hits its target, China would account for 500,000 sales annually, making it Nissan's third-largest market, after the U.S. and Japan. Is there really that much of a market, TheCarConnection.com asked Katsumi Nakamura, CEO of Nissan's Chinese joint venture, Dongfeng Motor Co. Ltd? "Even if ten percent of the population would want to buy a car," Nakamura replied, "that would be 130 million people, almost as many as you have in Japan." -Paul A. Eisenstein
Three critical letters
Everywhere one goes in Chinese automotive circles, you hear three letters repeated over and over: "IPR." That's shorthand for intellectual property rights, and it may be the single-biggest issue facing China as it pushes to modernize its economy with Western assistance. Walk down almost any city street and you're confronted with vendors hawking DVDs of the newest Hollywood films. For carmakers, technology, designs, and even logos are copied with seeming impunity.
Cherry QQ Beijing show |
Toyota lost a battle with one alleged pirate, and Honda is heading to court to block another. General Motors is just wrapping up its investigation into the Cherry QQ, an apparent clone of the small Chevrolet Spark. "We're making our case to the government," said Phil Murtaugh, GM's top executive in China. New government rules for the auto industry promise to protect intellectual property rights, the English translation suggesting Chinese firms that illegally steal IPR would be banned from selling their products. But if such a move is in the works, there seemed little fear from the domestic automakers appearing at Auto China 2004. Several controversial products, including the QQ, were given the central position at the main exhibition hall. Oh, and nearly a third cheaper than the Spark, Cherry's little car is outselling the Chevy by about six-to-one in the Chinese market. -Paul A. Eisenstein
VW plans new factories in China
Volkswagen AG will begin work next week on a factory near Shanghai that will focus on exports and have a capacity of up to 300,000 cars per year. Funding for the $240 million plant will reportedly come from the more than $6 million that the automaker plans to invest in China over the next three years. According to various reports, the Lin Gang plant will begin production in two to three years at a production volume of 150,000 units, but that could be stepped up depending on demand. VW intends to increase the portion of China-sourced parts content in its cars to keep prices competitive, and it plans to build two new engine factories in China. According to a Bloomberg report, one of those would be in Dalian, in the northeastern region. Through joint-venture arrangements, Volkswagen already produces several vehicle models at two plants, one just east of Shanghai and the other in Changchun City, also in the northeast.
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