Chinese car firms gain greater overseas foothold

Geely Automobile Holding expands its base in Belarus by setting up a new production facility, which is expected to begin operations in July 2017. [Photo provided to China Daily]

State-owned enterprise BAIC is to produce vehicles in Mexico next year to further expand and strengthen its global presence, amid the trend for Chinese carmakers to produce vehicles abroad due to the effect of fluctuating international currency rates on sales, among other factors.

BAIC International Development Co has already opened its first 4S showroom in Mexico City, and announced its globalized industrial innovation plan, which will include the construction of the only Chinese automotive plant in Mexico in 2017.

The subsidiary of BAIC Automotive Group will work with local partners in a long-term strategic plan which aims to integrate international trade, investment cooperation, brand building, and the internet.

BAIC's future industrial base in Mexico will unify the fuel vehicle, new-energy vehicle, parts, aviation and financial service sectors, as the country is deemed as a strategic regional center for the Americas.

Deloitte China has recognized the tendency of Chinese carmakers to relocate investments and build factories overseas in order to lower both cost and risk.

"Chinese carmakers are not so focused on international vehicle trade as a way to expand and strengthen their global presence because of import tariffs, non-tariff barriers, and the drastic currency fluctuation of host countries," said Charles Knight, global managing director of Deloitte M&A Transaction Services.

Chinese carmakers are rapidly building more overseas manufacturing plants, with countries in Latin America, ASEAN and Eastern Europe emerging as their preferred destinations, according to Deloitte's China Automotive Industry Outbound Investment Report, which was released this month.

Deloitte China also found that Chinese carmakers are now in favor of complete knock-down and semi knock-down plants and Europe and America are the preferred destinations for such plants.

Geely Automobile Holding has allocated seven CKD and SKD production plants around the world with a total of 182,500-unit annual production capacity. The plants are located in Belarus, Egypt, Iran, Sri Lanka, Ethiopia, Iraq and Sudan.

The Zhejiang-based private company is expanding its largest foreign CKD base in Belarus, with a new plant set to begin operations in July 2017, topping up the company's existing 120,000-unit annual productivity.

A spokesperson for Geely Automobile agreed with Deloitte's analysis that Chinese automakers have taken steps to avoid local political risks and economic fluctuations, as well as consolidate their advantages in the global market.

Guangzhou Automobile Group Motor Co, or GAC Motor, has built a sales network covering 15 countries and regions. The Guangzhou-based carmaker was recently hailed in Kuwait as "China's best carmaker" after its sales ranked first among Chinese brands available in the local market.

The passenger car division of the State-owned Guangzhou Automobile Group consolidated its leading position in the Nigerian market by opening a second dealership in Lagos in April. The brand beat off a number of global competitors to win orders from the Lagos police in September 2015.

Wu Song, general manager of GAC Motor, said: "As we go global, we should be at least at the level of Japanese and South Korean brands, and even perhaps better than United States brands.

"As a new Chinese carmaker, we are growing rapidly, both in the domestic and overseas markets, based on the principle of making quality, safe cars."