Foreign auto makers battle for market supremacy
 
BEIJING - Foreign businesses have begun to flourish since China's accession to the World Trade Organization (WTO), said Jia Xinguang, chief analyst of the China Automotive Industry Consulting Co. Several foreign auto makers have already secured a significant share of the auto market in China. So far, the biggest beneficiaries have been Volkswagen, General Motors (GM), Toyota, Nissan and Hyundai.

Volkswagen made its way into the market very early, and has taken advantage of its early penetration. Its Santana is the most popular car in China. Volkswagen has consolidated its leading position in China by consistently launching new products to satisfy consumers' varying and changing tastes, increasing investment and adding more outlets to its sales network.

GM, though a latecomer compared with Volkswagen, has rapidly expanded its operations. It is second only to Volkswagen in terms of market share. With an efficient marketing strategy, it has established highly beneficial strategic ties with the Shanghai Automotive Industry Corp (SAIC), one of the largest auto makers in China.  GM also helped SAIC in purchasing Daewoo and acquiring Wuling and Yangtai Vehicle Body, with the ultimate goal of replacing Volkswagen at the top of the market.

It has taken GM only three years to achieve success on a scale similar to that of Volkswagen, which has invested more than 10 years' effort in securing its lead in the market. The battle between Volkswagen and GM will be intense, but regardless of who comes out on top, the real winner will be SAIC, which has joint ventures with both auto makers.

Auto makers from Japan and South Korea are eager to maximize their shares of China's massive auto market and its relatively untapped potential. Fearful of losing footing in the market, they have changed their strategies in the past few years, switching to local production from direct export and showing a willingness to invest directly in the mainland instead of playing it safe at home.

Toyota and Nissan have been the quickest to change strategies. Toyota now has a partnership with First Auto Works (FAW) Group. Nissan, which has experienced difficulties in the Chinese market, has been revitalized after teaming up with Renault. Nissan has injected a significant amount of funds and manpower into cooperation with Dongfeng Motors Corp in Hubei province.

Honda, which has kept a low profile in China, has maintained a strategy of steady progress. It has established an export-oriented production base in the Guangzhou Bonded Zone, in which Honda has a 60 percent stake.

South Korea's Hyundai has made unremitting efforts in its China operation scheme. Its Sonata, produced in Beijing with Beijing Automotive Industry Corp, has raised eyebrows in China with the joint production of a new car in a rather short time.

DaimlerChrysler and Peugeot, despite having entered the market rather early, have enjoyed little success. But their fortunes have begun to change of late.

The future auto market in China will likely be dominated by GM, Volkswagen and Toyota, said Jia, whose prediction is based on current market strength. Jia added that China's market is too big to be monopolized by any one auto maker, regardless of its strength.

The jury is still out on who the biggest winners of the battle of the foreign auto makers will be, but there are many who think joint-venture partners such as SAIC and First Auto Works could be the dark horses that surprise everyone.

(Asia Times Online/Asia Pulse/XIC)