..

China's carmakers wrestle with competition
AAP – 1 hour 26 minutes ago.. .
.


Email



Print
...



.
.


These should be good times for Chinese automakers as they prepare to show off their latest models at the Shanghai auto show.

Their home market is the world's biggest and growing. But independent automakers such as Chery and Geely are being squeezed by bigger, richer global rivals including General Motors and Nissan that have moved into turf the Chinese makers considered their own: low-priced models for local tastes. Domestic brands account for less than half of their own market.

"At a time when the Chinese were getting ready to move upscale, they have come under siege in their area of traditional strength," said Michael Dunne, president of Dunne & Co, a research firm. "They didn't see that coming and it hurt."

Fighting back, Chery, Geely and local rivals Great Wall and BYD are scaling down ambitious expansion plans and focusing on improving quality.

Some hired managers or designers with experience at Mercedes Benz and other foreign producers.

Others aim at specialties such as SUVs, minivans for export to other developing countries and electric buses.

This week, Chery Inc announced a corporate overhaul after sales plummeted 10 per cent last year. The company said it will shrink its range of 20 models to 11 or 12.

BYD Co, in which American investor Warren Buffett's Berkshire Hathaway owns a 10 per cent stake, plans to display a new SUV and its Si Rui sedan at Auto Shanghai 2013, which opened on Sunday.

The company, China's leading maker of electric cars, blamed intense competition for a 94 per cent plunge in profit last year and says the midsize Si Rui should help to drive a rebound.

Great Wall Motors plans to debut two SUVs, a pickup and a sedan among 23 models on display.

Last year, the company was China's top-selling independent automaker on the strength of its popular SUVs, which are exported to 80 countries.

China's failure to follow its neighbours Japan and South Korea in creating at least one global auto brand - even after this country passed the United States in 2009 as the biggest auto market - has frustrated communist leaders.

They see auto making as a national priority - the "industry of industries" that supports higher-paid jobs in fields from manufacturing to electronics to chemicals.

They have spent two decades giving producers subsidies and other help.

Beijing issued development plans in the early 1990s that called for creating three globally competitive auto groups.

Since then, planners have changed course repeatedly after efforts to create success by decree failed to pan out.

In March, domestic Chinese auto brands accounted for only 43.4 per cent of sales, according to an industry group, the China Association of Automobile Manufacturers.

The rest were imports or foreign brands assembled in partnership with local manufacturers.

By contrast, Japanese automakers control a commanding 95 percent of their home market, according to LMC Automotive, a consulting firm.

South Korea's producers have 82 per cent of theirs.

Global automakers that want to produce in China are required to work with local partners in hopes the Chinese manufacturers will learn enough to launch their own brands - a policy that has had little success.

Shanghai Automotive Industries, which assembles cars for both GM and Volkswagen AG, created the Roewe brand based on models bought from defunct British producer Rover.

Nanjing Automotive Group relaunched MG sports cars in China. But state-owned producers still make up to 80 per cent of their revenue as service providers to foreign brands.

"They are under huge political pressure to build up their own brands," said LMC analyst John Zeng."But really they are struggling."

More recently, Beijing has stepped up support to independents that emerged over the past decade such as Chery and Geely Holding Group, which acquired Volvo Cars from Ford Motor.

Some producers have bucked the hard times. While BYD earned just 81.4 million yuan ($A12.71 million) last year, Great Wall's booming SUV sales boosted profits 65.7 per cent to 5.7 billion yuan.

"Groups such as Geely, Great Wall and BYD still have big potential, because they are more market-oriented," said Zeng.

"They invest in their own brand and distribution network and their own R&D capabilities."

Chery, founded in 1997, was once China's top-selling independent brand but saw sales tumble last year to 563,000 vehicles. Its turnaround plan calls for eliminating two of its three brands and selling all its vehicles under the Chery name.

"Right now, Chery's thinking is to make an affordable car for the average person," said chief executive Yin Tongyao in a statement.

To inject style into its boxy vehicles, Chery named a Porsche AG veteran in February to lead a 30-member design team in Shanghai.

Others have hired designers with experience at Mercedes Benz, Ferrari and Pininfarina.

In a boost to the independents, state media said in March that Beijing will tell local governments to favour domestic Chinese brands when purchasing automobiles.

Until now, the bulk of government vehicle purchases were foreign brands assembled by SAIC and other state-owned manufacturers such as First Auto Works and Dongfeng Motor Co.

Communist authorities also tried to find a shortcut to success by encouraging companies to pursue electric cars, an emerging field where they had a shot

Makes you think of that old saying, "what goes around comes around", except that when their industry struggles it's our iron ore, coal and other minerals that pay the price.

Chard wrote on Apr 24^th, 2013 at 2:42am:


Don't worry. China has thousands of industrial spies and hackers. They'll eventually get their yoyomotive engineering to the same level as their foreign competitors by acquiring IP illegally.

Mnemonic wrote on Apr 24^th, 2013 at 3:02am:


Typing this sh*t from my phone, guy. It's designed and built by tiny asian people and I'm a large black Man.

Ringer wrote on Apr 25^th, 2013 at 1:23pm:


what, you mean like Israel does?

Chimp_Logic wrote on Apr 25^th, 2013 at 4:33pm:



Israel is not one of the 'evil empires' and they have plenty of money coming in for defense from their chief patron.

Chimp_Logic wrote on Apr 25^th, 2013 at 4:38pm:


UK? I thought their auto industry went under during or shortly after the Thatcher years. Rolls Royce is now German-owned. No more British owned automakers. Foreign automakers swooped in like vultures and took ownership. Bye-bye Leyland!

Chimp_Logic wrote on Apr 25^th, 2013 at 4:38pm:


I think they're still ordering in Russian-made turbofan engines for their fighters.

Chimp_Logic wrote on Apr 25^th, 2013 at 4:38pm:


Maybe it's not the engine. It's everything else + quality control. Brakes, fuel injection, transmission, cooling, structural engineering, safety and their response to defects in their product: communication with contractors about mismatched parts.

If designing and producing cars was simple, I'd be a bloody Volvo driver.

Mnemonic wrote on Apr 26^th, 2013 at 4:33am:


Slightly off topic, but the British auto industry is still very much alive. It no longer has the big brand mass production car Manufacturers that are British owned, but it still has three areas in the auto world.

Firstly, the UK still designs and manufactures a lot of cars. They may be owned by foreign companies (Ford for example) but they are still British designed and built models.

Secondly, Britain still has high performance car companies. McLaren for example are a British car company that sell in low volume. They compete directly against Supercar/Hypercar companies like Ferrari, Lamborghini, etc.

Lastly, Britain still has a lot of automotive speciality companies that are often contracted to design for larger ones. These are the kind of companies that will tune high performance engines for speciality models for the big manufactures. They are also the companies that will often design race cars/race engines for manufactures when they enter Motorsport. Ford race car engines used to be designed by Cosworth for decades. Mercedes Race engines were designed by Ilmor (until they slowly bought the company out and called it Mercedes Benz High Performance Engines). There are still many of these speciality companies operating.

British owned car companies that the average person bought to drive may be dead, but Britain is still a leader in high end speciality automotive design and manufacture.