Chinese Automakers Buy into Europe

Feb. 21, 2012
Move is way for Chinese manufacturers to make progress in quality and branding.

Chinese automakers have returned in force to Europe, buying up brands and plants after early efforts to get a foothold in one of the world's largest car markets failed.

Great Wall Motor is the latest China entrant, with production at its plant in Bulgaria due to start on Feb. 21, giving it access to the European market of some 500 million people with a very competitive line up which may give Europe's established firms pause for thought.

Prices for its base Voleex C10 model, the Steed 5 pick-up and Hoover H5 four-by-four run from just 8,000 euros to 14,700 euros ($10,600 to $19,400) and the company, which has 10 sites in China, says is aiming for production of 500,000 vehicles overseas by 2015.

Analysts said it may be surprising that Chinese firms seem so determined to get into Europe, a saturated market where car sales are declining, but there are benefits for them, especially in terms of branding and prestige.

"It is a way for them to make progress in quality levels," said Yann Lacroix, analyst at Euler Hermes in Paris.

In Britain, Geely Motors plans to start selling a mid-range sedan by the end of the year at a very competitive 10,000 pounds. Announcing the move in December, the company, which owns Sweden's Volvo Cars, said "the leaps and bounds made in manufacturing mean that China's car makers are rapidly closely the gap with Europe's establishment.

"We will be aiming to widen our range just as quickly as possible, probably at least a new model range every year for the next four to five years."

Reflecting the growing global ambitions of Chinese automakers, Geely bought Volvo from Ford for $1.5 billion in 2010, less than a quarter of what Ford paid for the company in 1999.

"In that way, the company made a very significant technological jump," Lacroix noted.

Meanwhile, China's largest home-grown carmaker Chery Automobile has established its base in Italy with local company DR Motor and at the end of last year bought a Fiat plant at Termini Imerese in Sicily. Chery is developing its own marque for Europe, Qoros, in cooperation with an Israeli company which should make its first model next year.

Chinese auto companies have also shown an interest in acquiring those European firms which have run into hard times as their home market falters.

Beijing Automotive Industry Holding Co. expressed an interest in acquiring General Motors' European operations grouped in the Opel business as the U.S. motor giant collapsed into bankruptcy from which it has only just emerged. In the event, GM -- which has large Chinese operations of its own -- turned down the sale on concerns about technology transfer and decided to keep Opel.

Similarly, it refused to sell its Saab auto business to two Chinese firms -- Youngman, a constructor, and distributor Pang Da -- with the unit eventually being taken on by a Dutch group before it failed and was forced to file for bankruptcy in December. Swedish press reports have said Youngman may still be interested in buying the company and ready to make a multi-million-dollar bid. Youngman showed keen interest in snapping up Saab before it declared bankruptcy but its efforts were thwarted by the GM which balked at transferring the necessary technology licenses.

Analysts said that Chinese manufacturers got off to a bad start in Europe in their first efforts as critics highlighted safety concerns and lack of individual styling. Since then, China has emerged as the world's largest auto market, covetted by the major U.S. and European brands as a major source of growth and profits, and standards have improved dramatically.

"We are seeing spectacular progress," said a spokesman for Euro NCAP, the safety standards authoritiy which tests all autos for safety in Europe.

Copyright Agence France-Presse, 2012

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!