Auto market remains attractive
(China Daily)
Updated: 2005-04-27 09:03

China remains a magnet for the world's auto giants, despite slowing car sales and persistent concerns over the nation's vehicle production capacity.

The 11th Shanghai International Auto Show, to end tomorrow, is a strong reflection of the seduction of China's auto market as foreign automakers parade their products in a record exhibition area of more than 120,000 square metres.

All have vowed to maintain or speed up their expansion plans in China, although some are suffering profit slumps and even huge losses globally.

Troy Clarke, vice-president of General Motors (GM), told China Daily that the world's No 1 automaker will maintain "the pace and timing" of its investment plans in China, even though its sales in the country have decelerated sharply.

"China is still the most dynamic and best place in the auto world today," Clarke said.

GM announced last June that it would invest a further more than US$3 billion jointly with partner Shanghai Automotive Industry Corp to double its annual production capacity to 1.3 million units in China by 2007.

GM's sales in China grew mildly to 132,000 vehicles in the first quarter of this year, he said.

Last year, GM sold 492,000 vehicles in China, up 27 per cent from 2003.

The company reported a 13-year record quarterly loss of US$1.1 billion during the first quarter, the firm's figures show.

Ford Motor Co, a latecomer to China's car market in terms of local production, is recording better results in China than ever before.

On the eve of the seven-day Shanghai auto show, Ford clinched a deal with Japanese affiliate Mazda and Chinese partner Chang'an Motor to build a 350,000-unit engine plant in Nanjing, capital of East China's Jiangsu Province.

The deal came less than three months after the three parties announced they would seek approval from Chinese regulators to build a new car joint venture in Nanjing with an initial manufacturing capacity of 160,000 units a year to produce Ford and Mazda brand cars.

The two projects are part of Ford's US$1.5-billion investment plan for China unveiled in 2003.

"We have seven brands attacking the Chinese market... We will build market share in China and we will do it profitably. We started a little bit slowly (in China), but we have built our momentum rapidly," said Jim Padilla, Ford's global president and chief operating officer.

The seven brands are Ford, Lincoln, Mazda, Volvo, Land Rover, Jaguar and Aston Martin.

Combined sales of these brands in China surged 70 per cent year-on-year to 170,000 vehicles in 2004.

"Lasting success in China will not be won in a sprint. It is going to be a very long endurance race - and we still are in the early laps of this race," said Mark Schulz, president of Ford's Asia Pacific operations.

"China's auto market is continuing to see strong growth - no longer stratospheric growth, but steady 8 to 10 per cent annually. And there are no other markets of this size anywhere that offer car sales growth of 8 to 10 per cent annually," Schulz said.

"As yet, only 3 per cent of China's population owns a car. That percentage will undoubtedly grow," he added.

Ford formed a car joint venture with Chang'an in Southwest China's Chongqing Municipality in 2001. The venture produces Fiesta compact sedans and Mondeo mid-sized sedans.

Ford will launch a 1.8-litre New Focus sedan at the venture in the third quarter of this year.

The company also started selling Lincoln Navigator sport utility vehicles in China as imports a week ago.

"We will also consider producing Lincoln vehicles in China if the car's sales reach the volume we expect," said Chen Meiwei, chairman of Ford Motor China Group.

Mazda, 33.4 per cent owned by Ford, will launch four new models in China this year, including a RX-8, two Mazda6 sedans and a Tribute.

Ford announced last week that its operating profits dropped by US$1.25 billion to US$579 million in the first quarter of this year from a year ago.

Nissan Motor, one of the world's most profitable automakers, also recognizes China as an important contributor to its growth during its three-year Value-Up plan which began this month.

"We will significantly expand our product lineup here (in China) and we expect most of our global sales growth to come from this market," said Steven Wilhite, Nissan's senior vice-president.

"By the end of Nissan Value-Up, we are expecting our China sales to be over 500,000 units, making this our third-largest market in the world," Wilhite said.

Nissan plans to launch four new models in China this year, including the Tiida compact car, Fuga luxury sedan, Quest mini van and 350Z sports car.

The 1.6-litre Tiida, produced at Nissan's joint venture with Dongfeng Motor, was put on sale just before the Shanghai auto show.

The model retails from 119,800 yuan (US$14,500) to 159,800 yuan (US$19,300) with sales expected to hit 40,000 this year.

Earlier this month, Nissan's Chief Operating Officer Toshiyuki Shiga said the company aims to sell nearly 180,000 own-brand vehicles in China this year, up from 80,000 units last year.

As part of its Value-Up plan, Nissan aims to increase global sales to 4.2 million by 2008 from 3.4 million units last year.

Toyota Motor said that it would start producing the Reiz sedan at its joint venture in North China's Tianjin Municipality with First Automotive Works Corp this autumn.

Last month, Toyota launched the Crown sedan at the joint venture.

DaimlerChrysler plans to invest 1.2 billion euros (US$1.56 billion) over the next three to five years in China to expand its businesses, said Ruediger Grube, a board member and China chief of the German-US auto giant.

DaimlerChrysler's joint venture in Beijing will start producing Mercedes-Benz E and C-Class sedans in the second half of this year.