World's Carmakers Woo China Despite Slowing Sales

April 23, 2012
China to invest more than $14 billion to develop the technology and infrastructure for clean energy cars.

Major carmakers gathered in Beijing Monday for China's leading auto show, seeking an edge in the world's largest automobile market after a sharp slowdown in growth.

China emerged as the world's top car market in 2009, but the sector stalled dramatically last year, with sales rising just 2.5% to reach 18.51 million units, after the government rolled back auto-purchase incentives.
Nonetheless, many of the world's carmakers remain confident of continued steady growth in the Asian nation, where three out of every four new car purchases are by first-time buyers.

Organizers say 120 new models will be launched at the Auto China 2012 exhibition, which runs until May 2 and is expected to attract hundreds of thousands of visitors.

"This big country merits big ambitions," said Dieter Zetsche, chairman of Daimler AG (IW 1000/15) and head of Mercedes-Benz Cars."So we will continue to build our manufacturing presence... all in all, the local car market will double by 2020. In turn, we will double our production capacity here by 2015."

Daimler will invest about three billion euros in China in the coming years in an effort to achieve a sales target of 300,000 units by 2015, he said.

Toyota Motor Corp. (IW 1000/5) President Akio Toyoda told reporters the growth of China's car market was unprecedented in its speed, as he unveiled a new hybrid car his company is building especially for the country of 1.3 billion people.

"In 2009, the Chinese car market surpassed the United States to grow into the world's largest market. The speed in which it did so was unlike any other ever experienced," he said.

China has pledged to invest more than $14 billion to develop the technology and infrastructure for clean energy cars in a bid to have more than 5 million on the road by 2020.

Toyota, BMW, Honda Motor Co. (IW 1000/23) and China's Warren Buffett-backed BYD Co. (IW 1000/494) have all announced they will unveil electric or hybrid cars as part of a total of 88 new energy vehicles to be displayed at the show.

But analysts warn it may still take a long time for the Asian nation to fully embrace an electric future.
"International carmakers are all trying to appease the government by showing they are indeed bringing electric vehicles to China," said Namrita Chow, an analyst at research firm IHS Global Insight."Almost every international automaker has announced plans for electric vehicles in China. But almost all are equally as skeptical of volume sales."

Carmakers are also scrambling to tap markets in China's second-tier cities where automobile ownership remains starkly lower than in the nation's major urban centers along the eastern coast.

U.S. automaker giant Ford Motor Co. (IW 1000/6) recently opened a new production facility in China's southwest city of Chongqing, while Volkswagen AG (IW 1000/10) has announced plans to open up a factory in the nation's westernmost region of Xinjiang.

"We are ready to demonstrate aggressive growth this year in China, the most exciting car market in the world," said Joe Hinrichs, president of Ford Asia Pacific and Africa.

World number one carmaker General Motors Co. (IW 500/5) unveiled many new vehicles, including two models from its Buick brand. GM's Chevrolet introduced its midsize Malibu, while Cadillac announced it will begin selling two luxury models this year.

"Car buyers will see once again why General Motors has been the leader among global automakers in China for seven consecutive years," said Kevin Wale, president of General Motors China.

Foreign brands still dominate the Chinese market, but the government is trying to shift the balance by seeking to further cement cooperation between foreign carmakers and their Chinese partners.

Overseas carmakers have long been required to set up operations in joint ventures with Chinese companies.
But the government is now pushing such ventures to create more local brands specifically for China's market, and earlier this year, Beijing said it was withdrawing some support for foreign investment in the sector.

The drive is aimed at securing more technology transfer for the Chinese companies and further raising the profiles of the joint ventures.

To this end, Chinese carmakers introduced a series of new models at the show, with Geely unveiling a four-wheel-drive compact and its rival Chery showing off two new vehicles, including a compact SUV.

Volvo AB (IW 1000/99), recently purchased by Geely, announced it would launch a new brand in China, but did not give details.

Wholly Chinese manufacturers hold just 30% of their home country's market and are battling international makers, which enjoy better brand recognition and reputations for higher quality.

Copyright Agence France-Presse, 2012

See also:

Volkswagen New Plant Part of Plan to 'Go West' in China

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