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China Automakers see tough road to global market
2006-12-10
China has created a vibrant auto industry over the past two decades, but executives said on Sunday that a significant gap still separated local manufacturers from the world's top brands. "If we want to become a global automotive giant, there is still a long road to travel," Yin Jiaxu, chairman of China Southern Auto Holdings Corp, told a conference on Sunday. China Southern Auto owns 52.5 percent of Changan Automobile Co. Ltd. (000625.SZ), Ford Motor Co.'s (NYSE:F) partner in China. Foreign car makers are eager to increase their share of China's auto market, which grew 21 percent in 2005, amid slowing growth in more mature North American and European markets. The fast growth, however, has spurred rapid expansion by the local ventures of the likes of General Motors Corp. (NYSE:GM) and Volkswagen AG (VOWG.DE), leading to severe price competition and plans to increase exports and fatten profit margins. Last month, Brilliance Automotive (1114.HK) (NYSE:CBA), BMW's (BMWG.DE) China partner, became the latest with overseas ambitions when it announced plans to export 25,000 of its sedans to Europe next year. Brilliance has an export target of 158,000 within five years, while Changan Auto also has plans to produce 250,000 cars in the year 2010. But like the Koreans and Japanese before them, the price advantage enjoyed by Chinese exporters is offset by poor quality, outdated designs and the lack of any brand recognition. "For Chinese consumers there is still a huge gap between foreign brands and local brands ," said Frank Zhao, the vice president of Zhejiang Geely Holding Group Co. (0175.HK). "But without some leadership or guidance, it will be difficult," said Zhao, referring to the critical role of the government in nurturing the industry. Last month, China said it aims to lift automotive exports to $120 billion, or 10 percent of the world's total vehicle trading volume, in the next 10 years, official media quoted the Ministry of Commerce as saying. Last year, such exports reached $10.9 billion, an increase of 34 percent over 2004. The mainland is the world's second largest automotive market and one that is expanding quickly as double-digit economic growth bolsters consumption. China last year became a net vehicle exporter for the first time, exporting 172,800 vehicles mostly to Africa, Southeast Asia and the Middle East, where pricing is a decisive factor. Other manufacturers are looking to gain export experience by building cars with foreign partners. Chery Automotive Co. is in talks with DaimlerChrysler (DCXGn.DE) to make subcompact cars in the mainland targeting markets including the U.S. and Europe. Despite the obstacles, executives were upbeat the industry was on the right track and that eventually they would succeed. "Just because the goal is distant doesn't mean it's not reachable," said Southern Auto's Yin. (US$=7.83 yuan)
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