Posted on 09/08/2001 3:20:40 PM PDT by super175
China will sell two million cars a year by 2010 as it establishes itself as the world's fastest growing market, but analysts warn manufacturers will face quasi-legal forms of local protectionism.
The team of automotive industry analysts also predicted Volkswagen and possibly Toyota Motor will lead the market by then.
Car-makers themselves speak more cautiously of the market's development.
Cars sell better all the time, they say, but because the mainland's consumer trends and legal policies change so fast it is hard to say what is around the corner.
China's entry into the World Trade Organisation, expected before the year-end, should also have an impact.
Car-makers and the analysts agree.
Based on a spring and summer survey of 10 manufacturers and 90 car-parts manufacturers in China, Roland Berger Strategy Consultants determined the number of mainland-based car-makers will drop from today's 18 to five or six by 2010. Of those, two will dominate the market.
Roland Berger, which has done business in China for seven years and has automotive clients, gathered the data for its own use and shared it at a press conference this week.
Car-makers said they had not seen the report and were not sure how to evaluate it.
"It's crystal ball stuff. There's a lot of wild card stuff. There's also the World Trade Organisation," said Karin Malmstrom, a Daimler-Chrysler official with northeast Asia responsibilities.
"The pace at which things are evolving is evolutionary."
Volkswagen, with two joint-venture plants, will lead the market then as it does now, and Toyota is likely to be a rival because of its existing supply base in China, Roland Berger's Asia president Eugen von Keller said.
He said many companies would be profiting in China by then. At present foreign car-makers in China must work with a local partner.
The mainland's private car owners, more than half of whom will buy mid-sized sedans that fit the whole family, will drive the market, according to the Roland Berger survey. More and more families will be able to afford the 100,000 yuan (about HK$93,700) sticker prices by 2010, raising production from about 500,000 vehicles in 1999.
The determining factor on which firm prevails should depend on who offers a range of cars at a range of prices, said Daphne Zheng, a Shanghai official for the General Motors China Group - which aims to be among the top three car-makers. She also said backing from the Chinese partner - in GM's case Shanghai Auto Industry - would also determine success.
She expects the central government to bolster Shanghai Auto Industry as it consolidates state-run manufacturers and so give GM another boost.
The consultants said China's admission to the WTO would force many local manufacturers to quit the business or retool to meet foreign imports arriving in the market as tariffs fall by 2005.
China's own industry could also ease a 50 per cent oversupply by then, the consultants said.
Protectionism will grip the market to keep cities and provinces stable by making sure factories keep employing people instead of leading to lay-offs and labour unrest.
"It's natural that each country will protect its national interests after the WTO," said Xu Jian, the company's associate partner in Shanghai.
For example, Shanghai has banned cars exceeding a certain weight on major roads.
Mr von Keller noted that this ban allowed cars made in Shanghai to travel its streets, but edged out sedans made by the Changan-Suzuki joint venture in Sichuan province.
The number of dominant manufacturers will decline as companies either globalise or focus on China only, the consultants said. The number of parts providers would also decrease, to about 1,500 by 2010, from more than 5,000 now. About 70 per cent were not competitive, Mr Xu said.
Also, clouding the picture were the untold thousands of illegal parts makers in China.
The consultants found that, by 2010, the mainland should be a centre for automotive research and development.
"I can imagine not only manufacturing in China, but also research and development work," Mr von Keller said.
With 5% annual growth that would mean the US auto market will be around 25 million units in 2010.
The world doesn't need anymore sh*tboxes.;^)
Oh yeah for sure. Rolls has a plant in the PRC I think. Beijing has a Ferrari dealership. There is a lot of Benz too. Benz is my favorite though, its more comfy and practical than a Ferrari on those sometimes bumpy roads.
As you will notice in this article "about 500,000 vehicles in 1999"
Most of those cars are sold to the government or taxi companies. While I won't deny a growing customer base, the consumer driven sales were about 1/3 to 1/2 of that total number. I don't want to be dumb about it and look at just one year out of context though. The base is growing, but it is usually in the cities where those big JVs are located.
JVs have a big impact on the internal Chinese economy.
Certainly not everyone can afford a car, but if you are working in an office job(particulary at a JV) you can get one if you want with a a large enough down payment.
No disagreement. I still remember teaching one of the people in our office to drive. We were driving around in circles in a parking lot at 8pm with her yelling OH NO!! OH NO!! the whole time. She was scared that she would run over one of those bumps. (speed bump).
Many families are now looking at or are already driving a second family car. And again, these are private citizens, not the elite.
If you go to Beijing or Shanghai it looks like everyone has a car. If you don't think so go outside at rush hour. You can almost walk across SanHuan Lu sometimes.
If however you look at it in the big picture those big cities are relatively local economies.
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