China carmakers in great leap forward to luxury

Financial Times, April 23, 2010

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By Patti Waldmeir in Beijing

Published: April 23 2010 19:02 | Last updated: April 23 2010 19:

Near the entrance of the Beijing Auto Show, which opened on Friday, stands a replica of the 1958 “Red Flag” limousine, built by China’s First Auto Works because Mao Zedong insisted that China needed its own luxury brand. Now, 52 years later, the Communist leader’s dream is finally being fulfilled – in ways he could never have imagined.

Everywhere in the show, which runs through next week, is evidence of the ways in which Chinese carmakers are trying to climb the ladder of luxury up to the premium levels previously dominated by companies like Audi and Mercedes. The most striking example of this, of course, was the recent purchase of Volvo of Sweden by Geely, the private Chinese carmaker, for $1.8bn. Beijing Automotive (BAIC) also recently bought Saab technology from GM.

But the Chinese original equipment manufacturers are not just buying in their premium models from overseas, they are also creating luxury at home. Virtually every Chinese company at the show is showing a wide range of own-branded products, from the tiniest urban runabout to sport utility vehicles that are catching on in China at exactly the moment they have fallen out of favour in the west.

China is even remaking the iconic London black cab, which is now made in a joint venture with Geely. The Chinese group on Friday displayed a concept taxi, complete with front rumble seat that folds away to allow back seat passengers to stretch their legs.

“The Chinese get accused of just copying other people’s designs, but this demonstrates their creativity and flair,” says John Russell, chief executive of Manganese Bronze, which makes London taxis with Geely.

Ironically, at exactly the same moment the Chinese carmakers are trying to go upmarket, the foreign carmakers are reaching down the chain to the smaller, cheaper cars that appeal to China’s mass of first-time car buyers.

And from the bottom of the range to the top, foreign car companies are throwing all they have at China: the best technology, the best designs, whatever it takes to woo customers in what is now the world’s largest car market.

They call it the “C” factor: design features that appeal to Chinese consumers. This means everything from slanting headlamps and extra chrome, to extra leg-room for chauffeur-driven vehicles.

“VW has taken an entire pavilion [at the show]. I have never heard of anyone doing that before,” says Bill Russo of Synergistics, a Beijing auto consultancy, and a former head of Chrysler in China. Numerous global debuts took place at the show – rather than at Detroit or Geneva. “The only true global car shows these days are in China,” says Kevin Wale, head of GM in China.

This is still a car show with decidedly Chinese characteristics: it is hard to imagine such low necklines or high skirt slits at any other show. But it also a show infused with a kind of optimism and passion that went out of fashion in the west decades ago, says Simon Loasby, head of design for Volkswagen in China.

Li Shufu, head of Geely, told the Financial Times at the show that Chinese carmakers are at least a decade behind the west in the quality of their technology. But no one is doubting that they are catching up fast.

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