January 15, 1999
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| January 15, 1999 | atimes.com | |
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| China Fledgling auto industry aims to play in the big league BEIJING - As mergers sweep through the world's auto industry, creating monolithic giants capable of dominating the market, China's own fledgling car manufacturers see a growing need to pull the companies together to have an even chance of competing. Zhang Xiaoyu, deputy director of the State Administration of Machinery Industry (SAMI), acknowledged recently that China's auto companies were still too weak and dispersed. Now, he said, the administration had drawn up a plan to accelerate the integration of the country's auto industry by developing three huge companies and a dozen major manufacturers. At the same time, Shao Qihui, the director of SAMI, said that if China was finally allowed into the World Trade Organization (WTO), it would have only a few years to upgrade its auto industry to tackle competition from international rivals. ''It is imperative that we concentrate resources to develop our own cars in the near future,'' he added. There are now 200 auto companies in China, but their annual output is only 1.6 million vehicles, equal to that of a medium sized auto factory in the west. The three largest, the Shanghai Automotive Industry Corporation, First Automobile Works (FAW) Group and Dongfeng Motor Corporation, each has a production capacity of less than 200,000 vehicles per year. And FAW's annual sales revenue is equal to only 2 percent of that achieved by General Motors in the United States. Despite stringent efforts to use domestically-made parts for foreign cars manufactured in China, more than 75 percent of the technologies used to make new models are imported. And the time cycle for developing a new car is at least twice that of foreign companies. With several large Japanese auto firms on the verge of being taken over by larger companies, a Chinese auto industry expert said that if the country relaxed protection of its national auto industry, local companies, which were less competitive than the Japanese, would be no match for the foreign giants. He estimated that the cost of developing a new car was at least U.S.$150 million. The Chinese Government planned to invest 109.1 billion yuan (U.S.$1.3 billion) in the auto industry in the last five years of the century. But, he noted, if China wanted to develop a new car every six months, it would only have U.S.$130 million of government funds for each one. All auto companies in China are under government control and are burdened with an average debt-to-asset ratio of 80 percent, while a fierce price war is also eating into their profit margins. ''No individual auto car maker in China can currently afford the cost of developing a new vehicle,'' China Qingqi Group Vice-President Zhou Zhongwei said. He said that besides the need to localize the industry, the Chinese government should ask foreign companies setting up joint ventures in China to meet certain criteria for joint research and development activities and for technology transfer. ''We should trade our market potential for technology which we can use in the future to develop a domestic industry,'' he said. Major Chinese auto companies have sent hundreds of talented engineers to foreign car makers to take part in research and development projects to learn new technologies and skills which can be used in China. (Asia Pulse/XIC) | |||||||||
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