the world's carmakers gather at the Shanghai Auto Show, probably the
last thing they want to hear is that China's much-hyped car market is
already showing signs of maturity.
That's the verdict of CCID Consulting, the HK-based consultancy, which predicts that competition will intensify in the next three years and growth drop to just 10% in 2009 compared to 25% this year.
Everything is relative, of course. Western and Asian carmakers
facing static or even negative growth rates in their traditional
markets will kill for even a slender slice of a market delivering
double-digit growth and likely to reach 10m cars a year by 2009.
That explains why foreign car giants are so bullish on China despite
the CCID's prediction that market conditions will get tougher.
Chrysler, for example, announced at Auto Shanghai 2007 that it will begin selling Dodge
vehicles in China. The US giant said the Caravan minivan (pictured)
would go on sale in China at the end of this year, and the Caliber
small sport utility vehicle would follow early next year.
Ford unveiled its third generation Ford Mondeo at the show and said
it would be produced at Changan Ford Mazda Automobile's (CFMA)
Chongqing plant later this year. CFMA will also produce the all-new
Mazda2, developed to suit the tastes of the Chinese market, at its new
Nanjing plant. CFMA is a JV betweeen Mazda, Ford and Changan Automobile
But western carmakers now face tougher competition from China's
home-grown carmakers. CCID says 2006 was the year that China's national
brands started to step up their efforts and took a 26% share of car
sales, up 6% over 2005.
These home-grown brands have grown stronger by leveraging the
expertise and technology of foreign carmakers, which were only allowed
to operate in China through JVs with local firms.
Perhaps the best example is SAIC, a former tractor maker, which is
now producing car models for the Chinese market that directly challenge
those of its JV partner General Motors. SAIC scored a real coup when
GM's president for China, Phil Murtaugh, quit in 2005 and joined SAIC a
Flush with cash from surging sales of vehicles made by its JVs, SAIC
recently launched its first home-grown brand, Roewe, which is based on
technology purchased from failed UK carmaker MG Rover. More on Roewe in
On Thursday, SAIC chairman Hu Maoyan said his company would broaden
its own-brand range to include vehicles in the mid-to-high-end, middle,
SUV, compact and mini categories, according to the Financial Times ($).
He also said SAIC is keen to cooperate with rival Nanjing Automobile,
which bought most of the bankrupt British company's assets in 2005.
GM downplays the growing signs of friction between Chinese carmakers
and their JV partners and says they are a small price to pay to get
into the world's second largest car market.
At the Shanghai show, GM's China president Kevin Wale told
AP that the US giant always knew that SAIC would develop its own
brands. “We have spoken of it since we began our JV car company. It's
not a surprise to us.”
GM now operates seven JVs and two wholly owned foreign enterprises
in China. Along with five vehicle factories and one engine plant, the
company has also launched a financing venture and a chain of
Its China sales last year rose 32% to almost 880,000 vehicles, and
its flagship JV, Shanghai General Motors, became China's top-selling
domestic carmaker with more than 365,000 vehicles sold.
Reflecting its sprawling presence, GM is showing a record number of
new vehicles at the Shanghai show. The 41 vehicles span all six brands
that GM offers and include a hydrogen fuel-cell car and a new version
of the classic Buick Riviera developed by its local engineering and
design JV. More on GM's Auto Shanghai 2007 announcements here.
Toyota, a late starter in the Chinese market, is making up for lost
time. It was the fastest growing foreign carmaker in China last year,
almost doubling sales, and has a market share of 7%. Some analysts even
believe that if the steady advance continues, the company could end up
being the largest in China, according to the FT ($).
Foreign carmakers may still be gung-ho on China, but the local
carmakers have realised that China's car market is maturing and
conditions getting tougher. They want to reduce their heavy dependence
on the domestic market by seeking export opportunities overseas.
Ahead of the Shanghai show, Yin Tongyao, chairman of Chery
Automotive, unveiled two new cars meant for export. He said said the US
market was “attractive” but did not say when Chery might try to start
selling there. More on Chery in this EngagingChina story.
to CCID, there are several signs that China's car market is maturing:
the demand for passenger cars is taking a greater proportion of the
overall vehicle market; manufacturers are offering more sophisticated
features; consumers are more savvy about buying decisions; and the
government has introduced measures to regulate the industry
particularly in areas such as product recall and energy consumption.
In the next 3 years, CCID says competition will intensify, leading
to mergers and restructuring of enterprises, more keener pricing from
manufacturers, and improved after-sales services.
Car output and sales grew by over 25% in 2005, topping 7.2m
vehicles, making China the second largest car market and the third
largest producer in the world.
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