Carmakers hold high hopes for Beijing show
By Gong Zhengzheng (China Daily)
Updated: 2004-06-10 10:18

Foreign and domestic automakers remain confident about China's auto market, despite slowing growth in vehicle sales.

The growth in the first four months of this year stood at 28 per cent, down from 34 per cent for the whole of last year.

Speaking as industry representatives converge at the Beijing International Motor Show, Ford Motor Asia-Pacific head Mark Schulz said: "What you see for Ford and other brands of Ford (during the motor show) is a reflection of how important the motor show and the China market are for Ford."

"No automaker can ignore what happens in the China auto market," said Schulz.

The world No 2 automaker has joined forces with almost all of its affiliated brands - Volvo, Mazda, Jaguar, Aston Martin, Lincoln and Land Rover - to show off more than 40 models in an area of 5,000 square metres, making it the biggest exhibitor of the one-week show.

Ford's new generation Focus concept car will also make its global debut during the motor show. Schulz said Ford intends to produce the Focus in China.

"The auto industry is contributing greatly to China's overall economy and will make a bigger contribution in the future," said Bernd Leissner, president of Volkswagen China Group.

"China's auto market is expected to grow 15 per cent annually by 2020."

Volkswagen, the biggest carmaker in China, has established Volkswagen Group China, replacing its Asia-Pacific operation, helping the firm become more attuned to the needs of the China market.

"We will make decisions about our local operations, including purchasing, marketing and sales, finance and human resources here in China, instead of at our global headquarters in Germany," Leissner said.

Volkswagen, which sold nearly 700,000 cars in China last year, yesterday launched the Touran multi-purpose vehicle produced at one of its joint ventures in Shanghai.

Volkswagen, which plans to invest 6 billion euros (US$7.3 billion) in China over the next five years, is exhibiting 24 models during the motor show, almost its entire product range.

"We should not overreact to some changes in the market. China's auto industry will grow steadily, we expect the growth will double that of China's GDP (gross domestic product) over a long period of time," said Phil Murtaugh, chairman of General Motors (GM) China.

GM has announced that it will invest US$3 billion jointly with its joint venture partners in China over the next three years to more than double its annual production capacity to 1.3 million vehicles.

"China is potentially the biggest premium car market in the world," said Akio Toyoda, a board member of Toyota Motor, at the Beijing launch ceremony of its US-made Lexus luxury sedan.

The Japanese automaker is displaying 13 models, including the Crown, which will be made in China next year.

"The recent slow down in car sales growth is a temporary adjustment in the market and we believe growth will remain at 13 to 18 per cent over the next five years or longer," said Zhu Yanfeng, general manager of First Automotive Works Corp (FAW).

FAW, the biggest Chinese automaker, is showing 19 models, including those produced by its joint ventures with Volkswagen and Toyota.

The company aims to lift its annual output to 2 million vehicles by 2008 from last year's 902,000 units, said Wu Shaoming, assistant general manager of FAW.

Japan's Honda Motor and French PSA Peugeot Citroen yesterday announced the prices of their newly launched cars in China.

The 1.5-litre Fit notchback, produced by Honda's joint venture in Guangzhou, the capital of South China's Guangdong Province, will retail at between 109,800 yuan (US$13,260) and 119,800 yuan (US$14,470).

The 1.6 and-2.0-litre Peugeot 307 notchback, made by the French firm's joint venture with Dongfeng Motor in Central China's Wuhan, will sell at between 148,800 yuan (US$17,500) and 196,800 yuan (US$23,800).

Both of the carmakers said the two models' prices "are in line with international levels."

Average prices on the domestic car market currently exceed those on the international markets.

Sales of China-made vehicle reached 4.39 million units last year, including almost 2 million passenger cars.

Growing concerns for industry

Wang Huailin, a Beijing taxi driver, said he will try his best to avoid areas near the Beijing International Exhibition Centre, the venue of the motor show, because of traffic jams.

"It will be extremely difficult for us to travel in that area in the coming days as so many cars will crowd there, although there will be plenty of business for taxis," Wang said.

Traffic conditions are getting increasingly worse in many major Chinese cities, such as Beijing, Shanghai and Guangzhou, as the number of cars grows rapidly in the nation.

This is one of the main factors which will curb the development of the auto industry.

"Oil supply and environment will also be great challenges for the auto industry," said Chen Qingtai, deputy director of the State Council Development and Research Centre, one of the main government think-tanks.

He predicted that automobiles will consume 138 million tons of oil annually by 2010, accounting for 43 per cent of China's total oil demand.

Auto oil consumption will grow to 256 million tons by 2020, 57 per cent of total demand.

"Urban pollution will mainly be generated by automobiles, instead of coal, if we are unable to effectively control auto exhaust emissions," he said.

Auto exhaustion emission will account for 79 per cent of total air pollution in Chinese cities by 2005.

There is another major weakness challenging Chinese automakers - the lack of strong independent development capacities and brands.

The domestic passenger car market is dominated by foreign brands, as almost all of the world's auto giants have built one or more car plants in China.

More than 90 per cent of passenger cars made and sold in China are foreign automakers' brands, such as Volkswagen, GM, Honda, PSA Peugeot Citroen, Toyota and Ford.

However, Chinese companies are not prepared to throw in the towel, although they lag far behind the big foreign names in terms of development capacity.

"Half of our annual output of 2 million vehicles by 2008 will be our own brands," said Wu from FAW.

"FAW will launch a host of self-developed passenger and commercial vehicles in the near future."

FAW's current own brands are the Red Flag sedan and Jiefang truck.

Chang'an Motor Corp, China's biggest mini vehicle producer, said that domestic automobile brands will continue to control at least 50 per cent of its total sales.

Chang'an is displaying one new self-developed - CM8 - and two concept cars, named "Chinese Dragon" and "Sturgeon" on the show.

The company, which has two joint ventures with Ford and Japan's Suzuki, aims to increase annual sales to 1.5 million vehicles by 2010, up from last year's 410,000 units.

"The motor show demonstrates how foreign automakers are making inroads into China's auto market as most foreign automakers and we, as independent Chinese brands, are squeezed into corners," said Li Shufu, chairman of Geely, a privately owned carmaker in China.

The carmaker, which depends on its own development, produces the low-cost Geely Haoqing, Merrie, Ulion, Meirenbao and Maple cars.

Geely aims to double its sales to 165,000 cars this year.

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