Mon, Apr 20, 2009 - Page 11 News List

Automaker showdown looms

LAST BATTLEGROUND Deteriorating economic conditions around the world have left China as the gravitational center of the global auto market


Cars by German carmaker Volkswagen are pictured in a storage and loading tower in the so-called “Autostadt” in Wolfsburg, Germany, on March 12. Volkswagen AG said on Friday that its first-quarter sales slipped 11.4 percent from last year, with declines in the US offset somewhat by growth in China, Germany and Russia.


International automakers are converging on China’s commercial capital for a show that, once marginal, is now a key showcase — and battleground — for the world’s only major growing car market.

The biannual Shanghai Auto Show, which opens today to media and on Wednesday to the public, is expected to feature an unprecedented number of new vehicle launches, reflecting the growing importance of this market for automakers everywhere.

It follows on the heels of yesterday’s Formula One Grand Prix — another Shanghai event symbolizing the city’s obsession with cars.

“The number of new launches, especially from global manufacturers, will set it apart,” says Paul Gao (高旭), CFO of Chery Quantum Auto Co (奇瑞量子汽車), a new unit of Chery Automobile Co that is developing upscale models for the domestic automaker.

“Many automakers now see the Chinese market as at the forefront,” he said.

China, the world’s second-­biggest car market, has revived sales after a slump late last year with tax cuts and rebates that are pulling small vehicles out of showrooms nearly as fast as companies can make them.

Sales hit monthly record of 1.11 million vehicles in March, exceeding US sales for the third month in a row and up 5 percent from a year earlier.

While the surge to the forefront is mainly a result of deteriorating conditions in the US and elsewhere, the gravitational center of the world auto market clearly has shifted to China and other emerging markets.

The uptick in sales this year caught many automakers off guard, since they had cut production in expectations that the slowdown in sales seen last year would persist in China, Gao said.

“There are supply shortages and in some cases, automakers couldn’t meet demand. Joint ventures rely on imported components, and many of the tier-one global suppliers were already on the verge of bankruptcy,” he said.

But these are the kind of headaches automakers pray for at a time when sales in the US market have been plunging by close to 40 percent in annual terms.

China is a lifeline for ailing General Motors Corp, which sold 137,004 vehicles in China last month, up 24.6 percent from a year earlier. Tax cuts and other government policies focused on encouraging sales of small, fuel-efficient cares pushed sales at its minivehicle joint venture, SAIC-GM-Wuling, up 38 percent to 90,784 vehicles.

Kevin Wale, president and managing director of the GM China Group, says GM intends to double its sales in China, to more than 2 million a year, by 2014. Among its strategies: launching or upgrading more than 30 models over those five years.

It’s a far cry from decades past, when vehicles like the VW Santana, a 1980s model made by Volkswagen AG’s joint venture with Shanghai Automotive Industry Corp (上海汽車) that remains the staple of Shanghai’s taxi fleets, were among the few choices on the market.

To compete now, both Chinese and foreign automakers need a full portfolio covering the whole spectrum, from the inexpensive compacts favored by first-time car buyers to the high-margin luxury models needed to compete with foreign-brand sedans.

And vehicles need to be tailored to the preferences of increasingly particular Chinese customers, says Thomas Schiller, managing director of Arthur D. Little China, who specializes in the auto industry.

“It doesn’t work to take some car and just localize it. Chinese customers are now more educated and US designs are shifting to a more Japanese and European model,” he said.

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