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Washington Times   Fear Of Chinese Auto Domination Overblown
 

Washington Times Fear Of Chinese Auto Domination Overblown

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Article from June 2nd Washington Times with several comments from Bill Russo on the Chinese role in shaping the global auto industry.

Article from June 2nd Washington Times with several comments from Bill Russo on the Chinese role in shaping the global auto industry.

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    Washington Times   Fear Of Chinese Auto Domination Overblown Washington Times Fear Of Chinese Auto Domination Overblown Document Transcript

    • Tuesday, June 2, 2009 Fear of Chinese auto domination overblown Michael Standaert THE WASHINGTON TIMES BEIJING | With American car makers on the ropes, speculation has run high that China might soon take over the world auto market, but analysts say China's technological base and consumer mentality makes that unlikely. More than two-thirds of the cars sold in China are foreign brands; General Motors Corp., which declared bankruptcy Monday, has the largest share of the Chinese market -- more than 12 percent last year or nearly 1.1 million cars. What's more, Chinese cars need to become relevant in their own market before they can be taken seriously abroad, said Bill Russo, former vice president of Chrysler LLC's Northeast Asia office and now head of China-based auto industry consulting firm Synergistics Ltd. RELATED: Experts expect long road to profitability for GM: • B: GM The mood at GM plants: • B:MOOD Chrysler's sale to Fiat: • B:CHRYSLER How Delaware's dealers are affected: • B:CLOSURES GOP sees GM takeover as political opportunity: • P:GOP quot;It's like a giant baby,quot; he said. quot;It's really big, but it hasn't matured yet.quot; Big numbers -- like the record 2.7 million vehicles sold in China in the first quarter, a 4 percent jump over the same period last year -- have led to speculation that China's production will soon
    • jump over the same period last year -- have led to speculation that China's production will soon surpass Japan's. Although China's car manufacturers may soon lead in quantity, specialists say, they have a long way to go in terms of quality. China could compensate in part by buying up ailing foreign brands such as GM's Saab or Ford's Volvo, but that would have a bigger impact on the domestic market than on global sales. quot;An investment in Saab or Volvo will give Chinese manufacturers a massive boost in technology, which would push them to the forefront of the Chinese car industry within a very short time,quot; said Ash Sutcliffe, who runs the Web site China Car Times. Before a Chinese car company can become a global leader, however, the domestic market needs to consolidate, Mr. Russo said. About 20 companies now account for 95 percent of the market and 130 more hold about 5 percent. quot;There needs to be an elevation in the capability of domestic manufacturers to do more than just assemble cars,quot; said Mr. Russo. quot;China can become a more significant voice in auto development, but to say China is the center of auto development is an overstatement.quot; Mr. Russo said several companies are making technological strides. He cited Chery and Geely as examples, but any Chinese-branded auto company that wants to crack major markets abroad still would have to get past the quot;Made-in-Chinaquot; factor, he said. quot;Korea and Japan went through this learning curve,quot; said Mr. Russo. quot;Korean cars are no longer considered cheap; they're considered value for the money. Japan started out making cheap cars and then eventually became the quality standard. China has a long way to go to get to that point.quot; One area where China could make a great leap forward quickly is in the realm of electric cars. In February, the government pledged to subsidize the purchase of more than 60,000 hybrid and electric vehicles in 13 major cities, including Beijing, Shanghai and Shenzhen, by 2012. Beijing alone this year is set to spend $190 million to purchase nearly 1,000 hybrid and electric buses, and Shanghai is expected to announce similar spending to upgrade its bus fleet ahead of the 2010 World Expo opening there in May. quot;There's no global leader right now in the electric car market, so China sees this as an huge opportunity where they can finally become a leader and overtake the Japanese, German and U.S. car markets without having to always play catch-up,quot; said David Vance Wagner, a policy adviser at the Vehicle Emission Control Center, a research institution at the Chinese Research Academy of Environmental Sciences in Beijing.
    • Environmental Sciences in Beijing. quot;This is an area where China says, 'Hey, we're going to reduce our oil dependence, we're going to do a lot of good for urban air pollution, probably reduce our greenhouse gas emissions, and we're going to promote the innovation of a pillar economic industry that we can export to the rest of the world.' quot; he said. Though the subsidies will be used initially for government vehicles, they'll eventually be extended to taxi fleets and purchases by private consumers in all 13 cities. The municipality of Chongqing, which has more than 33 million people - or about the total population of Canada - already has announced that it will give more than $5,000 to people to purchase locally made Jiexun hybrids from Changan Auto Co. The hybrids normally retail for about $20,000. China also is providing quot;support to infrastructure like plug-in terminals or battery-swapping stations,quot; Mr. Russo said. quot;These types of projects might flower here before they flower in places like the U.S.quot; A report from Roland Berger Strategy Consultants recently predicted that as much as 50 percent of China's domestic auto sales could be in hybrid and electric cars by 2050. A McKinsey & Co. study in October said that China's domestic market for electric vehicles alone could amount to between $102 billion and $219 billion by 2030. The Chinese government has estimated that China could have the capacity to produce 500,000 hybrid and electric vehicles within the next three years. Still, the Chinese auto industry research group CSM Worldwide issued a report recently saying that electric and hybrid cars would make up only about 1 percent of China's domestic sales volume by 2015, or about 100,000 sold annually. Current sales figures for hybrids in China are so dismal that a recent headline from the state-run newspaper People's Daily referred to them as quot;embarrassing.quot; Only 2,617 hybrid cars were sold in China in 2008, according to government statistics. quot;It is absolutely obvious that Chinese consumers are mostly interested in cheap vehicles,quot; said Thibaud Voita, an alternative energy auto researcher at the Asia Center in Beijing, a European think tank. quot;If the consumer wants an expensive car, the consumer will get a foreign car, and not a hybrid car.quot; In the first three months of this year, Honda sold just one hybrid car in China. GM is hoping the market will be better by the time it launches is Volt electric car in China in 2011. At the moment though, clean-energy cars are still priced beyond the reach of most consumers, and those with the
    • purchasing power to buy expensive cars typically aren't environmentally aware. One domestic company has promised to deliver an inexpensive, mass-market electric car to China. BYD (Build Your Dream), a battery company turned car manufacturer, is located in Shenzhen in southern China's Guangdong province. BYD has developed an electric vehicle called the F3DM it hopes to sell both at home and abroad, and has received some backing from mega-investor Warren Buffett. Though BYD has had a lot of press lately, it still has a long way to go. Only about 100 F3DM cars have been sold in Shenzhen, and these only to government and corporate buyers, a BYD spokesman said. BYD planned to start exporting the F3DM to the U.S. in 2010 but has had to push that to 2011. Consumers have posted on public forums concerns about the safety of BYD's standard engine cars, mainly relating to malfunctioning air bags. Analysts say privately that BYD electric cars could have battery problems, though any Chinese car imported into the U.S. would have to pass more rigorous tests than they do in China. Other issues that could hamper the growth of electric vehicles in China are slow development of the infrastructure to support them, such as a lack of electric power in some areas. China also has no national standards for such things as plugs, voltage, batteries or charging stations. Ads by Google China Expert Chinese Cars China Cars China Strategies China Advisory