China an Exporter by 2007? by Joseph Szczesny (6/13/2004)
Will too many cars force Chinese automakers to begin selling outside the Middle Kingdom?
Can Caddy Conquer China? by TCC Team (6/13/2004)
The capitalist tool pries open the Bamboo Curtain.
Beijing Motor Show Index by TCC Team (6/9/2004)
Big news from the world's fastest-growing auto market.
Skyscrapers tower over the city, new construction everywhere you look. Traffic clogs the highways, billboards exhorting motorists to buy everything from cellphones to soft drinks. And there are plenty of new name-brand stores for folks like James Wang to shop at.
So when the 27-year-old real estate developer ordered a new Maybach 62 luxury sedan, it might have seemed like the perfect example of the American way of life. Except for the fact that this is
Yet as the Asian nation races to modernize its economy, creating millions of middle and upper-class consumers in the process, the two countries are turning out to have a lot in common. Like a passion for automobiles.
“I like cars more than clothing,” says Wang, who already owns a Porsche 911 and a Subaru WRX STi, and showed up at the Beijing show to pick up the keys to one of the first two Maybachs in China. “I was just waiting for this car to come to
Wall to wall shoppers
While he may be among the most affluent of
And there were plenty of them, an assortment of new brands entering the fast-growing Chinese market this year, while existing marques are flooding the streets with new product designed to maintain share, even as the market grows at a near-exponential pace.
Last year, the market surged to 4.4 million, double the volume of 2001, and displacing
Few seem to doubt that trend will continue, basing their beliefs on sheer numbers. Where in the
By 2020, industry leaders generally agree,
And that, adds GM’s Murtaugh, is kicking off “an unprecedented race among global automakers.”
Frenzy of investment
Since the beginning of this year alone, various foreign auto manufacturers and their Chinese partners have announced plans to invest over $13 billion in
This frenzy of investment is understandable, says Michael Dunne, founder of Automotive Resources Asia and an occasional contributor to TheCarConnection.com. With capacity lagging demand, it’s been a seller’s market. GM earns an average $4000 for every Regal sedan it sells in
But Dunne warns “We’re going to see overkill, just like we have in other industries.”
For now, most car manufacturers echo GM’s Murtaugh, who insists that even with slowing sales and growing production capacity, there will remain more than enough demand within China. GM does export a small number of V-6 engines to its CAMI plant in
But that position may be softening in a hurry.
Honda has been steadily expanding production at its first venture, in
Get the supplier network right, he says, and “
Honda’s second plant will produce the subcompact Jazz model for Europe, replacing a version of the car now built in
Significant numbers of exports could begin by 2007, predicts a new study by the International Metalworkers Federation, Swiss-based umbrella organization for auto unions around the world. “The biggest risk is that all companies will rush like lemmings into the trap of over-capacity,” warned Juergen Peters, president of
The foreign-dominated joint ventures aren’t the only ones looking for markets abroad. The homegrown Chinese maker, Chery, would like to export its little QQ model. But that raises a variety of thorny issues — such as intellectual property rights.
GM has filed a grievance with the Chinese government, attempting to block production of the little car, which the
Newly issued automotive guidelines promise to bar sales by manufacturers who ignore property rights. Yet few observers expect the government to act on the complaint against Chery, which, in the labyrinthine world of Chinese capitalism has significant financial and political ties.
Even if the government did move against the QQ, Chery is ready to spend the dollars it takes to compete more fairly. Well-placed industry sources tell TCC it is hiring Western and Japanese consultants, engineers and designers, as well as suppliers, hoping to bring a vehicle all its own to market. The challenge will be to keep the $1250 price advantage it currently has over the Chevy Spark, which has helped it outsell the GM model by 6-to-1.
“We want to depend on ourselves,” Michael Zhang, a Chery executive, told a TCC contributor.
Right now, the foreign makers and their approved Chinese partners control more than 85 percent of sales. The government has made it clear it wants to shake out the estimated 120 local makers still operating. Even so, companies such as Chery and Geely are ambitious, to say the least. The latter firm is owned by a high-school dropout who has become one of
Geely’s strategy, according to analyst Dunne, lifts a page from Mao Zedong’s play book. The company believes it can leave the huge urban markets in
There are still plenty of challenges facing
Few expect the populous Asian nation to experience the same sort of meltdown that crippled much of