China May Be The Bailout Global Car Industry Seeks

The Straits Times, April 16, 2009

Foreign auto firms are hoping its car-hungry market,
now world's No. 1, can save them from crisis
By Grace Ng, China Correspondent
Visitors at a Beijing car exhibition looking at a Chinese-made Lifan 320 prototype on April 3. The car will be officially launched at the Shanghai Auto Show on Monday. China has rolled out a slew of measures to boost car sales as part of an economic stimulus package. -- PHOTO: ASSOCIATED PRESS
BEIJING: While hecklers taunted General Motors (GM) and Chrysler workers at their booths in the New York Auto Show last week, the employees of the flailing American giants in China can hardly wait for the Shanghai show to start.

'We believe our best years are ahead of us. One look at GM China's line-up (of 37 cars) will convince even the most hardened sceptics,' GM China's president Kevin Wale told reporters recently.

There are, indeed, plenty of sceptics regarding the global auto industry, the slump of which seems symptomatic of the worldwide financial meltdown now.

But not in China. Here, it is more vroom vroom than doom and gloom. On Monday, the Shanghai Auto Show will open with an anticipated record crowd of 600,000, a 20 per cent increase from last year.

National car sales figures for last month, which were released last week, showed China outstripping the United States as the world's largest car market for a third month running.

With 1.08 million sets of wheels sold last month alone, China is now the undisputed No. 1 car market of the world. Will that be enough to steer the global auto industry out of the crisis?

For thousands of car firms globally, China's car-hungry consumers among its 1.3 billion population seem like a silver bullet to help solve their domestic woes.

Auto consultant Jack Sayer called China 'the market with the most potential in the current market downturn', with estimates that sales could cross 10 million this year.

The optimism is driven by the Chinese government's aggressive measures for the sector - a key plank of Beijing's plan to boost domestic consumption.

Sales tax for small cars has been slashed, subsidies introduced for first-time buyers, and 'qiche xiaxiang' (cars to the countryside), a popular official slogan, is promoting sales in the vast rural areas.

Foreign giants are already counting their dollars. Embattled American giant GM, for one, is banking on the growing appetite of affluent Chinese for the prestige factor in imported cars. While its US sales plunged 48 per cent last month, China sales hit a new record of 137,000 vehicles, up nearly 25 per cent from a year ago.

Likewise, Japan's Nissan, anticipating a 20-per-cent growth in next year's China sales, is pumping big money into its joint venture with China's Dongfeng Group this year even as it slashes budgets at home.

But China is not just helping the auto industry with car sales. It is also looking to acquire sinking marquee brands.

MG, that 85-year-old British sports car brand, is now wholly Chinese after being gobbled up by Nanjing Automobile in 2005.

Shanghai Automotive, China's largest carmaker by sales, is targeting GM's Buick - popular among China's chauffeur-driven executives and high-level bureaucrats because of its plush and roomy back seats, but selling badly in the US.

Other Chinese carmakers are also on the prowl: Geely is eyeing Ford's Volvo, while government-linked Beijing West Industries Company recently snapped up some assets from US carmaker Delphi.

The Chinese government is also taking the opportunity to turn the country into a global auto force by pushing for the 130 or so small carmakers to restructure into two or three behemoths which can each produce some 20 million cars a year.

When the dust settles, four automakers - First Automobile Works, Dongfeng, Shanghai Automotive and Chang'an - may be left standing.

That's not all. China is seeking to lead the world in green cars, with new plans to become the world's largest market for electric cars. Among new measures: encouraging the use of clean technology and 50,000 yuan (S$11,000) rebates for green cars.

With such a lucrative pie up for grabs, foreign companies like Hyundai and Toyota are unveiling a slew of hybrid models to compete with domestic companies.

Green cars may well become a big part of the sizzling tenfold growth in China's auto market expected in the next two decades, analysts say. The development of eco-friendly cars could be critical, ameliorating the staggering environmental costs of putting millions of cars on the roads.

Pollution will surge as Chinese motorists drive up demand for diesel and petrol from 110 million tonnes to 500 million tonnes in 2030, in a country that is already the world's biggest source of greenhouse gases, said McKinsey consultants.

Another key concern is the congestion this will create in China's already jam-packed cities, where the infrastructure very often lags behind the huge growth in vehicles.

The challenges remain for China to build up its auto prowess, and experts warn against over-reliance on it as the knight to revive the industry. Independent auto analyst Gao Xin said Chinese carmakers have a long way to go before they can become global players selling some nine million vehicles a year like Toyota or GM.

Added Mr William Russo, the Beijing-based president of auto consultancy Synergistics: 'We cannot expect China alone to save auto makers. But it is clear that China is going to play a big role in the future direction of the auto industry - from defining the rules of the game in its huge home market to driving new technologies.'


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1 comment:

  1. Great article. I totally agree with you Bill. Thank you !!!

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