Car Industry

Fast-paced market, surging aspirations

(China Daily)
Updated: 2011-04-19 15:46

China will launch a 10-year, 100-billion-yuan development plan for energy-saving and new-energy vehicles. [Photo / China Daily]

Notable events since the beginning of last year

Editor's note: Since last year, a number of major events have taken place in China's automobile market. China Daily jounalists Gong Zhengzheng and Han Tianyang give readers a glimpse of the most significant developments.

Record 2010

The Chinese car market has started to lose some steam after torrid growth last year.

Figures from the China Association of Automobile Manufacturers show first quarter sales grew about 8 percent over a year ago to 4.98 million units while vehicle production rose 7.5 percent to 5.9 million units.

Last year the nation's auto production surged 32 percent on sales of 18 million vehicles to retain the crown of the world's top vehicle producer and market, a ranking it first took from the US in 2009.

Analysts said the first single-digit quarterly growth since 2009 shows the market is entering a period of adjustment and a return to rational development after supercharged expansion in the previous two years.

Several incentive policies expired at the end of 2010, including a sales tax rebate and subsidies for rural buyers and trade-in cars.

The tax rebate on vehicles with engines under 1.6 liters gave a huge boost to small car sales - especially minivans - since it was introduced in January 2009.

New energy cars

Government officials recently confirmed that China will launch a 10-year, 100-billion-yuan development plan for energy-saving and new-energy vehicles to make the country a leader in the sector.

Local governments at various levels have are also backing development of hybrid and electric vehicles by providing subsidies for buyers.

As the government takes a strong stand on new-energy vehicles, a range of domestic and foreign carmakers plan to offer their own electric models to Chinese customers.

Volkswagen, BMW, Nissan, Honda and Toyota as well as homegrown brands Chery, Geely, BYD and SAIC are all making plans to make alternative energy cars.

Volkswagen, the biggest-selling brand in China, announced that it will begin building its Golf and Lavida blue-e-motion electric cars at its two joint ventures in the next three years.

Recent Chinese media reports said that yearly production capacity for new-energy vehicles will surpass 5.5 million units by 2015.

Geely's Volvo moves

Volvo Cars Corp, the Swedish automaker acquired by Zhejiang Geely Holding Group Co last year, announced in February that it will build its first Chinese plant in the western city of Chengdu and aims to sell 200,000 cars in 2015.

Volvo's blueprint envisions a 20 percent market share in China's luxury car segment in 2015 as the company increases its sales six-fold from just 30,000 cars in 2010.

To support the ambitious plan, Volvo has been preparing for local production in China. It is also discussing plans to build a factory in the northeastern city of Daqing.

Volvo established its China headquarters in Shanghai in January and said it will also build an R&D center in the city for premium cars as well as electric and new-energy vehicles.

Geely's $1.8-billion purchase of Volvo from Ford Motor Co last August marked the biggest overseas acquisition yet by a Chinese auto company.

Luxury market booms

Toyota aims to significantly increase China's portion of its global sales by 2015. [Photo / China Daily]

 

Despite overall cooling as government subsidies expire and new vehicles purchases are limited in big cities, sales in the luxury car segment - dominated by three German manufacturers - is still blistering.

In the first three months, Audi's sales increased 25 percent to about 64,000 cars, showing the first foreign luxury carmaker with local production continues to lead the premium segment

After reaching selling its millionth vehicle in October last year, Audi has aggressive plans to move another million over just three years.

BMW Group sold nearly 55,000 of its namesake cars in China in the first quarter, up 70 percent over the same period last year. Sales of its Mini brand doubled to nearly 3,800 units.

Mercedes-Benz reported robust growth of 78 percent in first-quarter sales to 42,990 vehicles.

Toyota recall lessons

The world's largest auto company recently said it will focus more on emerging markets including China and give each geographic region bigger decision-making authority as it moves on from a massive global recall a year earlier.

It projects annual growth above 13 percent in China over the next five years with yearly sales doubling to more than 1.5 million units by 2015. Some 800,000 Toyotas were sold in the nation last year.

The Japanese carmaker also aims to increase China's portion of its global sales to 15 percent in 2015 from the current 10 percent.

The company announced its China strategy and targets remain unchanged despite the earthquake and tsunami in Japan last month.

At an emergency press conference in Beijing last year, Toyota Motor Corp President Akio Toyoda apologized to Chinese customers for the carmaker's massive recall, a first from a global carmaker's top executive.

The company announced last November it will invest $689 million to build an R&D center to strengthen its localization in China.

Guangzhou Auto IPO

To fuel its aggressive expansion, China's sixth-biggest automaker Guangzhou Automobile Group Co Ltd (GAC) is aiming for a listing on the mainland stock market as soon as September to raise more capital after it consummated a long-awaited listing in its entirety through a HK$51.6 billion ($6.6 billion) buyout of its Hong Kong-listed unit Denway Motors in August last year.

Last month the group proposed a swap for new GAC shares for the remaining stock in GAC Changfeng Motor Co Ltd, in which it already holds a 29-percent stake.

After the 5.23 billion yuan swap, it plans to seek a listing on the Shanghai Stock Exchange.

GAC Changfeng would then be delisted.

The largest automaker in southern China and the partner of Honda, Toyota and Fiat, GAC plans to hike its annual production capacity to 3 million vehicles by 2015, up from less than 1 million in 2010.

FAW Corp, Chery, and Beijing Automobile Industry Holdings Corp are also preparing stock listings.

SAIC Motor Co Ltd, China's top auto group, went public with a Shanghai listing in 2006. Dongfeng Motor Group Co Ltd, the No 3 automaker, floated shares in Hong Kong in 2005.

Lifan Industry Group Co became the first private sector automaker to be listed on Shanghai's A-share market in November last year.

Peugeot's new partner

The nation's newest Sino-foreign automobile joint venture - between PSA Peugeot Citroen and Chang'an Motor Corp - is expected to soon be approved by regulators after the deal was clinched last July.

The French company is now the latest major foreign carmaker with second partner in China, following Volkswagen, Toyota and Honda. It has already had a 25-year, largely unsuccessful, partnership with Dongfeng Motor Corp.

The new joint venture with Chang'an will have a production capacity of 200,000 cars and 200,000 engines in the initial stage.

The ongoing Shanghai auto show is the first major industry exhibition for the new joint venture.

Beijing limits new cars

To battle worsening traffic congestion in Beijing, the municipal government sharply reduced new vehicle registrations at the beginning of this year.

According to the new policy, only 20,000 new plates will be issued by lottery system every month, far below the monthly average of almost 70,000 in the national capital last year.

March vehicles sales in Beijing were estimated at around 30,000 to bring first-quarter sales to about 100,000 units.

A number of cars listed as sold in the first quarter were actually ordered in December as residents rushed to buy cars and apply for license plates before restrictions took effect.

Nearly 400,000 residents vied for new plates in the city's third lottery in March, according to figures released by the local government, resulting in one out of 23 aspiring new buyers receiving required licenses.

About 17,600 plates were issued to individuals and more than 2,000 allotted to governments, institutions and companies.

Local brands from JVs

To further tap the potential of the world's largest auto market, foreign carmakers are launching all-new brands with their Chinese partners.

The first entirely new brand designed and mass produced for Chinese customers by a Sino-foreign joint venture - the Everus - rolled off the production line at Guangqi Honda Automobile Co in March.

The first Everus model, a subcompact called the S1, will go on sale in April targeting entry-level consumers, mostly in medium-sized and small cities, according to Guangqi Honda, the joint venture between Guangzhou Automobile Group Co and Honda Motor Co.

China's Dongfeng Motor Corp unveiled a new brand, the Venucia, in September last year. It plans to have production models on the market in the first half of 2012.

GM's joint venture SAIC-GM-Wuling will start to sell its Baojun-brand cars this year.

Volkswagen AG is also considering development of a new brand at its local joint venture.

Similar plans also are on the agenda at Ford and Kia's joint ventures, according to media reports.

First recall on tires

South Koreas' Kumho Tires began a recall of more than 300,000 tires in China on April 15 after a China Central Television report in March said the company's Tianjin plant used excess recycled rubber in its products.

The company initially denied the charge and called the report "inaccurate", but later apologized on television and submitted notification to the national quality watchdog for a nationwide recall. It is the first-ever recall on auto tires in China.

One of the largest tire manufacturers in China, Kumho supplies many Sino-foreign car joint ventures including Shanghai GM, FAW Volkswagen, Beijing Hyundai, Dongfeng Yueda Kia and Dongfeng Peugeot Citroen, as well as domestic carmakers FAW Car, Chery Automobile, Great Wall Motors and Hafei Auto.

Three automakers - Dongfeng Yueda Kia, Beijing Hyundai and Great Wall Motors - then announced the recall of 75,800 vehicles equipped with affected Kumho tires.

Daimler-BYD electric

One of the world's oldest carmakers and one of its youngest are joining forces to produce an all-new brand of electric vehicle in China.

Daimler AG and BYD Co Ltd, a battery and auto manufacturer, formed the Shenzhen BYD Daimler New Technology Co Ltd last May, which recently received its business license from Chinese authorities.

The 50-50 partnership plans to start out with an R&D operation funded by 600 million yuan in registered capital.

Daimler and BYD said the partnership aims to make the car available in China in 2013 and will market it under a new brand jointly created and owned by both.

SAIC commercial van

China's biggest carmaker Shanghai Automotive Industry Corp (SAIC) launched its own brand of commercial van, the Maxus Datong, in February using technologies it acquired from Britain's commercial van maker LDV in 2009.

Along with its dominant passenger car business, the move is expected to cement the company's leading position in the industry.

Commercial vehicles were before a weak point in the SAIC lineup. Domestic competitors Dongfeng Motor Corp and First Auto Works both have strong products in the segment.

The first Maxus Datong light commercial vans will debut at the Shanghai auto show. The company said it will begin selling the models globally in the second half of the year.

Lan Qingsong, deputy general manager of the SAIC commercial vehicle division, estimates that 30 percent of Maxus Datong vans will be exported, with the rest sold in China. The ratio could reach 50-50 in the long term, he added.

The Maxus Datong is made at SAIC's plant in Wuxi in East China's Jiangsu province, which has an annual production capacity of 50,000 units.