Xiamen to back up bus makers as sales dip sharply

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By Tong Hao and Hu Meidong (China Daily)
Updated: 2009-05-04 07:46

Even as car sales increased 3.88 percent in the first quarter, the sale of buses saw a downturn of 36.38 percent in the same time.

According to ChinaBus.info -- an authority on the bus industry - bus sales in the country dropped to 23,495 in the first quarter of the year compared to 2008.

This has severely hit the business of bus manufacturers in China, including those in Xiamen.

Xiamen, a southeast city in Fujian province, is a major production center of buses in China, with two of the top 10 bus manufacturers -- Xiamen King Long United Automobile Co Ltd (King Long) and Xiamen Golden Dragon Van Co Ltd (Golden Dragon) -- based there. The city produces about 30,000 big and medium-sized buses every year.

According to a three-year industrial plan (2007-2009) issued by the municipal government, Xiamen plans to raise the capacity of its annual bus production to 40,000 in 2010.

However, with the sales of King Long down by 33.6 percent year-on-year, to 1,956, during the first quarter and the sales of Golden Dragon plunging by 44 percent to 2,621 units, the future of the plan remains uncertain and bus manufacturers are trying to devise methods to make up for slow sales and decreasing revenue.

According to the bus manufacturers, cost control is seen as an important measure to tackle the sluggish bus industry and they are already trying it out.

"Raw materials account for more than 85 percent of our total cost," Jiang Shihuang, King Long's general manager, said.

King Long saved nearly 38 million yuan in 2008 by making joint purchases, worth 610 million yuan with other bus makers and related industry enterprises. In addition, their cooperation with the Shanghai Auto Mart E-Procurement Co. Ltd and on-line purchases, saved the company a total of 100 million yuan last year.

"In order to reduce cost further in 2009, our company plans to increase online purchases from 40 percent in 2008 to 100 percent this year," Yu Feng, purchasing director of King Long, said.

For King Long, cost control is also reflected in their daily consumption of electricity and paper. All offices try to use only two-thirds of the fluorescent lights at a time and employees are encouraged to reuse paper. A sign on the printer and fax machine reads: "Please print both sides of the paper."

The manager of Golden Dragon could not be contacted as he was out of town.

As a measure to help the interests of local enterprises, the Xiamen government will also allocate 50 million yuan in 2009 to construct an automobile industry park, but this park is not specifically targeted to the bus industry.

However, experts in the industry say that the government should offer more policy support to help China's bus industry face its current difficulties, rather than just build an automobile park.

"The major reason for sales decline is that the bus industry has closer ties to the macro economic environment as compared to other vehicles," Yao Hongguang, industry analyst with Pingan Securities, said. "For example, export accounts for about 20 percent of the total bus sales in China, but since the overseas market is shrinking sharply, it affects the industry."

Officials from the Xiamen government and municipality were unavailable for comment.

During the Chinese People's Political Consultative Conference in March, Li Daokui, a professor from Tsinghua University, submitted a proposal advising the cancellation of purchase taxes for all automobiles and not just consumer cars.

He said that a uniform policy will not only help stimulate auto consumption, but also enable bus manufacturers to pay more attention in developing energy-saving technologies.

"The stimulus package for the auto industry exerts limited effect to the bus industry. It encourages auto consumption, while buying buses is more like an investment," Yao said.

Besides advising the government to purchase more buses for public transport and speed up elimination of old ones, Yao said that the government should provide subsidies to bus makers to help them upgrade their production technology.

According to the stimulus package for the auto industry, purchase tax on vehicles with engines having a capacity of or lesser than 1.6 liters, was reduced to 5 percent. Since a majority of buses are equipped with engines that have a capacity of more than 1.6 liters, they do not get as much benefit.

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