GM Set to Widen Lead Over Chinese Carmakers as Lure of Tax Subsidy Wanes

Bloomberg, December 16, 2010

Click here to read the original article at Bloomberg.com

BYD, which makes China’s best-selling F3 sedan with 1-liter and 1.5-liter engines, has sold the most cars among domestic automakers so far this year, according to association figures. Photographer: Nelson Ching/Bloomberg

GM, the best-selling foreign automaker in China, said sales are up 33 percent through November over a year ago and may reach a record 2.3 million. Photographer: Nelson Ching/Bloomberg

Fruit wholesaler Hao Hongfu will wait until next year to buy a car from a General Motors Co. venture in China, even though he could get a 1,545-yuan ($232) tax break for buying another vehicle now.

The upcoming Baojun 630 sedan from SAIC-GM-Wuling Automotive Co. should be more reliable than a Chinese brand, Hao said. He wants another car to complement the Beiqi Foton Motor Co. pickup truck he uses to haul apples, pears and oranges in Shandong province.

“It is a pity to give it up,” Hao, 32, said of the consumption-tax rebate. “But the Baojun looks very nice. I want to try out a foreign product.”

Overseas automakers including GM, Ford Motor Co. andNissan Motor Co. should benefit next year if the Chinese government ends the rebate as expected by Dec. 31, said Bill Russo, a Beijing-based senior adviser at Booz & Co. The subsidy, which cuts the tax from 10 percent of the purchase price to 7.5 percent, applies only to cars with engines of 1.6 liters or smaller, a segment dominated by Chinese models.

Local brands accounted for more than 63 percent of the new models with that size engine last year, according to the China Association of Automobile Manufacturers.

Record Sales

“The game that has been played with incentives is to try to keep consumers, especially first-time consumers, interested in purchasing those locally branded cars,” Russo said. “To phase out the subsidies is more challenging for local companies than for foreign ones.”

Rising incomes also should prompt car shoppers to buy more foreign models in the world’s largest auto market, Russo said. China’s per capita income of $3,744 last year was more than double the 2005 amount, according to the World Bank.

Total vehicles sales may reach a record 20 million next year, he said, an 11 percent increase from the manufacturers association projection of 18 million this year. Total sales are up 34 percent through November over a year earlier, and passenger-car sales are up 35 percent in the same period.

The government hasn’t said whether it will extend the rebate into next year. It was continued this year at the request of the Chinese manufacturers, said Xiong Chuanlin, the association’s vice secretary-general.

Extension Not ‘Appropriate’

“This year, we don’t think it’s appropriate,” Xiong said last week in Beijing. “I doubt the tax cuts will continue.”

The government aims for local automakers, including Geely Holding Group Co. and BYD Co., to account for more than 40 percent of the market for cars, multipurpose vehicles and sport- utility vehicles, according to a stimulus strategy released in March 2009.

They now make up 31 percent, said Gerwin Ho, a Hong Kong- based analyst for Citigroup Inc.

“You have some policy withdrawal and that’s going to slow down the car sales,” Ho said of the overall market.

BYD, which is backed by Warren Buffett, has sold the most cars among domestic automakers this year, according to association figures. Its F3 sedan, China’s best-selling vehicle, comes with a 1-liter or 1.5-liter engine and is priced from 59,800 yuan.

“The tax-cut incentives definitely played a part in its popularity,” Tong Wei, a BYD salesman in Shanghai, said of the F3. “Its sales are likely to dip next year when the subsidies are removed.”

GM, Ford

BYD spokesman Paul Lin didn’t respond to e-mails or calls seeking comment. The company’s stock is down 39 percent this year, compared with a 3.6 percent increase in Hong Kong’s benchmark Hang Seng Index.

GM, Ford and Nissan are among the foreign automakers introducing smaller cars and expanding into China’s interior to compete with domestic companies.

The company, the best-selling foreign automaker in China, said sales are up 33 percent through November over a year ago and may reach a record 2.3 million. It introduced the Baojun last month and said it will go on sale early next year through more than 100 dealers.

GM, which raised $23.1 billion in an initial public offering last month, said the Baojun line is meant to be “affordable,” though it didn’t announce the price. Sales growth the past two years has been “extraordinary” and should be 10-15 percent next year, GM China President Kevin Wale said.

66 Percent Increase

“Anytime an incentive is removed it will have some impact,” he said.

Ford, the second-largest U.S. automaker, expects record sales in China this year after opening as many as 100 dealerships, said Joe Hinrichs, chairman of Ford China. Sales rose 39 percent through October from a year earlier and will benefit next year from an expansion into central, western and northern China, the company said Nov. 25.

The Ford Focus starts at 104,800 yuan. Ford shares have risen 66 percent this year, compared with an 11 percent increase in the Standard & Poor’s 500 Index.

“We are growing the part where the industry is growing the fastest,” Hinrichs said. “We expect another record year for Ford in China next year.”

Nissan, the best-selling Japanese automaker in China, expects to sell 960,000 cars there this year, spokesman Toshitake Inoshita said. Its March compact, which starts from 69,900 yuan, benefited from the tax cut, so its expiration may damp sales, he said.

Nissan, whose shares are little changed this year, said in September it planned to introduce the Venucia brand to help meet demand for cheaper models. It hasn’t been priced yet.

“The multinational companies, GM being one, are trying to reach down a little lower in the price range,” Russo said. “As people in China get wealthier, they tend to buy more foreign- brand products.”

--Tian Ying, Liza Lin. With assistance from Makiko Kitamura in Tokyo. Editors: Michael Tighe,Bret Okeson.

To contact Bloomberg News staff for this story: Tian Ying in Beijing at +86-10-6649-7571 orytian@bloomberg.net; Liza Lin in Shanghai at +86-21-6104-3047 or llin15@bloomberg.net

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net

Mercato dell'auto: IL DRAGONE DIVORA TUTTI

Quattroroute, December 16, 2010

Click here to view original article at http://quattroruote.it

La Volkswagen Lavida, un modello progettato per la Cina.La concept che anticipa il nuovo Taxi londinese. La società che li produce è stata acquistata dai cinesi.

I dati sulla crescita del mercato dell'auto cinese sono impressionanti: a novembre sono stati vendute 1 milione e 339 mila vetture, con un incremento del 29.3% rispetto allo stesso periodo dell'anno precedente.

Tappe bruciate. Nei primi dieci mesi del 2010 la Cina si è confermata il primo mercato al mondo, con un totale di 12,49 milioni di unità contro le 10,44 degli Usa. Altro che lunga marcia, Pechino brucia le tappe a velocità vertiginose. Basti pensare che nel 2003 in Cina si vendevano appena 4 milioni e mezzo di veicoli l'anno, mentre il bacino reale è stimato intorno ai 20 e 30 milioni di veicoli l'anno. Eppure, nel 2011 assisteremo a una crescita meno esplosiva (ma sempre di crescita si tratta, gli analisti parlano di + 10%) rispetto gli ultimi anni. Ecco perché.

Fine degli incentivi. È quasi scontato, che il governo di Pechino alla fine dell'anno non rinnoverà gli incentivi per l'acquisto di automobili fino a 1.6 litri di cilindrata. A novembre, questa fascia di mercato ha rappresentato più del 70% delle vendite complessive, ovvero 939.400 vetture, un boom provcato dall'imminente scadenza degli sconti. "Si, nel 2011 il mercato cinese rallenterà" spiega Bill Russo, Senior Advisor di Booz & Company e un ruolo da ex vice presidente di Chrysler in Asia, "ma nel tempo la crescità sarà stabile e costante, trainata com'è dall'espansione della classe media".

I "padroni" sono sempre stranieri. General Motors, Volkswagen, Nissan, Ford, tutti in joint-venture con un partner locale (lo impone la legge), continuano a dominare le classifiche di vendita. Ai produttori cinesi, invece, restano solo le briciole: Geely, che ha acquisito la Volvo, a novembre ha venduto 44.155 auto, meno della metà delle 106.457 di Shanghai-GM e delle quasi 100 mila di Shanghai-Volskwagen. E se si considera che sia GM sia VW hanno anche altre joint venture, allora il distacco diventa abissale. Tra gli altri marchi "autoctoni", Chery è in crescita (67.833), mentre BYD, la Casa sui cui il finanziere Warren Buffet ha investito, ha accusato un crollo delle vendite del 18,6%. "I marchi cinesi hanno guadagnato qualche punto rispetto al passato, ma continuano a godere di una pessima considerazione da parte degli stessi consumatori cinesi", aggiunge Russo.

L'auto pulita? Per ora è un flop. Per ora quelle che vanno a ruba tra Pechino e Shanghai sono le bici elettriche, le auto a pile possono attendere. Ibride ed elettriche non interessano affatto ai cittadini della Repubblica Popolare, soprattutto a causa del prezzo troppo elevato. La BYD, stando a fonti di stampa cinese, avrebbe venduto appena 54 esemplari della E6, un modello elettrico, e circa 290 ibride, fra gennaio e ottobre. Si dice anche la Changan abbia sospeso la produzione di un modello ibrido perché non era arrivato nemmeno un ordine. Persino la Toyota Prius annaspa faticosamente. "Il governo cinese punta sulle energie alternative attraverso sussidi e stimoli ad investire - afferma, ancora Russo - ma la sfida più impegnativa per l'auto elettrica è quello del mercato: c'è tanto scetticismo per soluzioni più costose di quelle tradizionali e ancora tecnologicamente incerte".

China demands foreign car makers hand over their tech secret

Posted by MiriCommunity.net, December 7, 2010

Click here to view original posting at MiriCommunity.net

China, who is now the world's largest exporter after overtaking the former no.1 Germany last year ($1.2 trillion Chinese exports vs German $1.1 trillion exports) begins to dominate global industries by industries from apparel to electronics to sex toys (indeed... China exports 70% of the world's adult sex toys).

But one of the most important industries China fails to lead is the automotive export industry.

Cars produced in China cannot match their American and Japanese counterparts in quality. Chinese cars, estimated to be 5-10 yearsbehind in technologies, simply cannot compete in global car exports.

The Chinese government feels that this is very embarrassing. It wants to change this...

Therefore, China has enacted a 10 year automotive advancement plan to make China the top car exporter in the world.

Chinese automakers have bought out car technologies from Volvo, Saab and have them transferred to Beijing.

In one case, an employee at Ford was found to forward 4,000 documents containing Ford car tech secrets to Beijing in 2006, on another case, two employees of General Motors (GM) was found to have forwarded thousand pages of GM car tech secrets to Beijing in 2005.

Those tech secrets was distributed to major Chinese automakers, to enhance their car factory production process and technical integration.

Obtaining those tech secrets indeed pays well, within just a few years, China overtakes Japan to become the world's largest car manufacturer in 2009 (13.79 million cars produced in China vs 7.93 million in Japan vs 5.7 million in the USA in 2009)

But the achievement is only in quantitative side, the qualitative parts remain weak. The world is still doubtful on the quality of China-produced cars. Chinese cars remain cater only to domestic needs, not exports.

This is reflected in the stats, that Asia's four largest car exporters are Japan, South Korea, Thailand and India in that respective rank, with India exporting 1.5 million cars in 2009. China trailed badly with only 380,000 cars exported.

China is upset by this, it wants to be a leading car exporter. So....

China demands foreign automakers divulge car tech secrets in exchange for market access

China now has the world's largest car market share after overtaking the US last year (13.5 million cars sold in China vs 10.4 million for the US in 2009) Many of the world's largest auto makers deem China as their most important and most profitable market, in wake of the global financial crisis, an indispensable market. While the US and European consumers retreat as result of the crisis, in China people are lining up to buy cars.

The Chinese government decided to utilize that advantage.

China's Ministry of Industry and Information mulls plans that could force foreign auto makers to hand over cutting-edge auto technologies to Chinese companies in exchange for access to the nation's huge market.

Under the ministry's proposed plan, foreign auto makers must form joint ventures with Chinese companies if the foreigners decide to sell cars in China, with the car production process also to be done in China. Given the size of China's market and the costs involved in importing those components, most foreign companies would indeed feel it necessary to produce those components in China.

The plan would cap foreign ownership in the ventures at 49%, giving majority ownership and effective control to the Chinese partners, the foreign executives say.

It doesn't matter who the foreign automakers seek to partner with, as long as 51% is owned by a local citizen of China (and could be anyone from any ethnic groups / races in China) and the majority owner is a local company based in China.

As the majority stakeholder of the joint venture, it means the Chinese companies might have complete access to the trade secrets and technologies. It essentially means foreign companies will hand over their technology to their Chinese partners.

The plan could allow China to leapfrog Japan, U.S. and other nations in the race to develop advanced auto technologies and make first-world cars for exports.

Automakers reaction

U.S. politician Rep. John Dingell has urged Beijing to stop such policy. The Democratic representative from Michigan sent a letter to China's ambassador to the U.S.

"This violates the sanctity of the intellectual property laws we hold so dear in the United States and amounts, in my estimation, to a violation of China's obligations as a member of the World Trade Organization," the Congressman said in the letter.

"I urge China to reconsider these plans and instead commit to meaningful cooperation with the United States to remedy existing problems in our countries' trade relations," Dingell wrote.

The Journal says Toyota has delayed bringing the Prius - its cutting-edge hybrid car to China until the government clarifies its policy on technology transfer.

The foreign car executives are joining a chorus of companies criticizing China's industrial policies. Business people and government officials say Beijing's so-called indigenous-innovation efforts discriminate against them and are aimed at gaining control of foreign intellectual property.

The plan is “tantamount to China strong-arming foreign auto makers to give up battery, electric-motor, and control technology in exchange for market access,” a senior executive at one unnamed foreign car maker told the Journal. “We don’t like it.”

Inevitability

As part of the country's 12th five-year plan (2011--2015), Beijing has pledged that it will do whatever it takes to help the Chinese car industry take the lead in global market. The Chinese government has allocated $15 billion for this purpose, with the amount of money expected to grow exponentially over years.

"Right now American engineers are competitive with those from Japan, Korea, and Europe," says Bill Russo, a senior adviser at Booz & Co. in Beijing who covers the car industry. "They are generally superior to China's engineers when it comes to auto technologies."

"But the Chinese industries have historically been fast in learning and adapting. With the new policy, five years is all it takes for China to manufacture a world-class car fit for export, and another five years for it to join the world's premium cars exporter league."

Indeed China has a lots of leverage, it is now the world largest market for cars, a market expected to grow 45% this year followed by 30% next year. By 2012, the Chinese car market would double that of USA and 20 times that of India's. Most analysts agreed that no automaker can resist such temptation, and it is only a matter of time before they carved it to the demand.