Carmakers see future in China
( 2003-09-12 15:23) (New York Times)
Canvass the top executives at the Frankfurt International Motor Show about
what gives them hope for their industry's future, and the answer is the same:
With their home countries in the doldrums, and the outlook for
2004 scarcely better, the eyes of the world's automakers are fixed firmly on the
Chinese market, where sales of cars and trucks are rocketing.
New Mercedes Benz
vehicles stand in a show room of the DaimlerChrysler branch in Munich.
DaimlerChrysler is set to sign a joint venture deal with Chinese
manufacturer BAIC to build Mercedes vehicles in China.
"Growth in China is absolutely amazing," G. Richard Wagoner, the chairman of
General Motors, said here Wednesday. "The Volkswagen brand sold more vehicles
during the first quarter of 2003 in China than they did in Germany," he said.
"Last month, GM sold more vehicles in China than we did in Germany."
understand what that means, consider that GM owns one of Germany's major car
companies, Adam Opel.
Wagoner's theme was echoed by DaimlerChrysler's
chief executive, Jščrgen Schrempp, who increasingly regards China as the cure to
what ails his trans-Atlantic colossus. And China is top of mind for BMW's
chairman, Helmut Panke, who likened his company's foray there to its landmark
decision to open an assembly plant in Spartanburg, South Carolina, in
It is easy to understand what is fueling the euphoria over China.
Automobile sales in China are growing at an annual rate of more than 50 percent,
compared to about 3 percent in the United States and Europe.
Schrempp predicted, China will be the world's second-largest car market, after
the United States, with 8 percent of global sales. In trucks, where it already
accounts for a quarter of worldwide demand, China will be the world's largest
market within a decade.
"The auto industry certainly hopes that China
will be the cavalry pouring over the hilltop, with bugles blaring," said Garel
Rhys, the director of the automotive industry research institute at Cardiff
University in Wales.
But, he added, "the industry would be very foolish
if they thought China was the answer to all their problems."
the euphoria masked a range of potential threats: a glut of foreign carmakers
entering China, the lack of a genuine used-car market, the development of
consumer credit in a country with debt-laden banks, and the simple question of
whether torrid growth in China is inevitable.
"In 1976, it was
confidently predicted that Brazil would be an eight-million-car-a-year market by
1996," he said. "It didn't happen."
As with the makers of products from
laundry detergent to cellphones, car manufacturers look at China and see a
burgeoning middle class of perhaps 400 million people, with rising incomes and a
taste for consumer products. Bayerische Motoren Werke's new assembly plant in
Shenyang, in northeastern China, will be equipped to turn out 30,000 5-series
sedans per year. Chinese drivers, Panke noted, tend to favor cars with the most
powerful engines. He expects China to become BMW's best market for 12-cylinder
DaimlerChrysler signed an agreement Monday to produce its
Mercedes-Benz C-class and E-class cars with a Chinese partner, Beijing
Automotive Industry Holding. Mercedes also has a thriving business in China
importing its top-of-the-line S-class sedans.
like other foreign investors, wants Chinese officials to drop a regulation that
requires carmakers to maintain separate distribution channels for imported and
domestically made cars.
"Does it make sense to have separate sales
channels for S-class and the C- and E-class? Absolutely not," said Eckhard
Cordes, a DaimlerChrysler executive who helped negotiate the China venture. He
said he was confident the government would ultimately drop the requirement.
DaimlerChrysler's investment in trucks in China may prove as important as its
venture in cars. It agreed to buy a stake in Beiqi Futian, a truckmaker
controlled by Beijing Automotive. The venture, Cordes said, would allow
DaimlerChrysler to produce a full range of commercial vehicles, from Futian's
simple trucks to Mercedes's sophisticated ones. As China's economy develops, he
expects buyers to gravitate to the Mercedes end of the market. "The trucks you
see today in China are the trucks we made 30 or 40 years ago," he said. To some
extent, DaimlerChrysler is playing catch-up in China. Most of the global
carmakers already have joint ventures there. Volkswagen, an early entrant,
controls nearly half the Chinese passenger car market, and is well represented
in the luxury range by its Audi brand. GM, which has a factory in the Pudong
industrial park near Shanghai, has had success selling its Buick Regal sedan to
Communist Party officials and executives at state-run enterprises.
Rolls-Royce, the venerable British carmaker now owned by BMW, has set up dealers
in Beijing, Shanghai and the southern city of Guangzhou to handle sales of its
new Phantom, which retails for $330,000.
Not every company is joining
the eastward march. Renault, the French carmaker, is content to sit on the
sidelines for now. Its chairman, Louis Schweitzer, said at the auto show that he
would decide by next spring whether to undertake a major China investment.
Renault has a big presence in Asia through its 44 percent stake in Nissan Motor
of Japan. But it has struggled in other countries, notably Brazil. And China is
every bit as crowded as Brazil. "With everyone rushing into China, there's not a
lot of visibility right now," Schweitzer said.
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