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2 China's optimistic auto makers
look overseas By Olivia Chung
HONG KONG - Like many other manufacturing
industries in the country, China's automobile
sector has become overproductive after years of
rapid expansion, prompting the government to begin
raising the threshold for further market access.
In the face of tougher government
regulations and intensified competition in the
domestic market with the influx of foreign rivals,
China's auto makers are stepping up efforts to
boost exports of
their products, particularly
to the United States, the world's largest market.
But industry analyst doubt that China can
become a significant car exporter in the next
decade, because of lack of research and
development, maintenance, and after-sale services.
Hunan Changfeng Motor Co is showing models
at the ongoing North American International Auto
Show in Detroit, the biggest such show in the US,
one year after Geely Automobile Holdings became
the first Chinese auto maker to display a brand
there.
The moves serve as a signal that
China's car makers are eager to access the world's
biggest auto market and say it is just a question
of when and how. However, Chinese auto makers and
industry analysts have differing opinions on when
China will be able to export cars to the US in
quantity.
In this regard, car makers are
very optimistic.
Changfeng, 16% owned by
Mitsubishi Motors Corp, Japan's sixth-largest
vehicle maker by production, and 50.4% owned by
the Chinese government, has expressed its hope of
beginning to sell cars in the US within two years.
Geely also said at last year's Detroit auto show
that it intended to sell one of its brands in the
US in 2008.
But industry analysts at home
and abroad have poured cold water on this
ambition, saying it might take a decade for
Chinese auto makers to make their dream of
exporting cars in quantity to the US come true.
Intensifying competition in the domestic
market is one of the major reasons for home-grown
car makers to emphasize exports.
According
to statistics released by the China Association of
Automobile Manufacturers (CAAM) last week, China's
overall sales of motor vehicles of all kinds
totaled 7.2 million units last year, up 25.1% from
2005. Passenger car sales grew to 3.8 million
units.
This enables the Middle Kingdom to
overtake Japan to become the world's
second-largest automobile market after the US last
year as new car purchases surged 37%.
Japan's overall sales of all vehicles in
2006 totaled 5.7 million units, a slight decline
from a year before. US vehicle sales totaled 16.5
million units last year, also down a bit from the
previous year, according to research firm Autodata
Inc.
But the best-selling vehicles in
China are foreign brands made by joint ventures.
Last year, Shanghai GM won the sales
crown, with sales of passenger cars reaching
413,367 units, an increase of 23% year on year.
Shanghai Volkswagen and FAW Volkswagen followed
with sales of 352,000 and 350,000 units
respectively. Beijing Hyundai sold 290,000
passenger cars, while the sales of Guangzhou
Honda, Japanese car maker Honda Motor's joint
venture with Guangzhou Automobile Corp, climbed by
13% to 260,000 units, according to CAAM.
Chery Automobile Co, the Anhui-based maker
of the small-engine QQ brand, led the home-grown
makers with sales of 305,236 units. On the whole,
domestic car makers took a market share of 30%
last year, which was significantly up from its 25%
share in 2005. This suggests that quality and
reliability remain major concerns for Chinese car
buyers, in which domestic makers still lag behind
their foreign rivals.
After China's entry
to the World Trade Organization in December 2001,
foreign car makers began to rush into China to get
a slice of the world's fastest-growing industry.
To tap into the booming market, nearly all Chinese
regions have also boost investment in auto
manufacturing. As a result, the industry has
become overproductive in recent years, forcing car
makers to cut prices to keep their market share.
According to China Daily, there are more
than 100 auto makers across the country, with
dozens of them producing fewer than 10,000 units a
year. Figures from the National Development and
Reform Commission (NDRC), the country's top
economic-planning body, China's auto-production
capacity has already reached 8 million units,
which would grow to 10 million in 2008 and 20
million by 2010 if all producers complete their
expansion plans, which would far exceed domestic
demand.
To prevent overproduction, the
NDRC last month said in a notice that car makers
applying to build new plants must have sold
four-fifths or more of their approved production
capacity in the previous
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