Beijing - Global car makers' love
affair with the booming Chinese market is still going strong,
but many are bracing for a new stage of competition that will
require offering better fuel economy and smaller cars - both
recipes for slimmer profit margins.
Only a few years back, foreign car makers mostly offered
their largest and priciest sedans here, slapping a "China
premium" on the price tag to boot, as wealthy Chinese mimicked
US consumers' preference for big, gas-guzzling cars.
Adopting a global view
But a doubling of crude oil prices in the past couple of
years has sparked a worldwide shift towards smaller,
fuel-saving cars - a phenomenon that China is also embracing.
"The trend towards small vehicles is global," Wang
Fengying, president of sport utility vehicle maker Great Wall
Motor Co told an industry conference on Friday ahead of the
Beijing Auto Show.
The SUV and pickup truck maker plans turn its focus on the
small car segment to ensure it keeps growing, even aiming to
lead the industry in the field, she added.
Nick Reilly, General Motors Corp's group vice president and
head of its Asia Pacific operations, said the US automaker
also had its sights on smaller cars after climbing to the No.2
position in China with high-end sedans and SUVs.
"Most of the growth (in China) will occur in the mini to
lower-medium segment," he told the Automotive News China
Other top auto executives - all due to descend on Beijing
this weekend for what has become an auto show of international
standing - are likely to echo that view.
More small cars such as Toyota Motor Corp's Yaris
subcompact expected to be showcased. Japan's top automaker is
due to begin producing the car in China later this year.
The Promised Land
No matter how tough the competition, many global automakers
still consider China to be the Promised Land, especially as
they now face the prospects of a slowdown in the US and
After becoming the second-biggest auto market in 2006,
China still has a lot of growth ahead, most forecasts predict.
After reaching nearly 8.8 million vehicles last year, the
Chinese auto market is seen growing to 10 million units this
year. Double-digit growth expected to continue at least over
the next five years, exceeding projected economic growth of 7-8 over the same period.
The rate of car ownership in China is still just 44 out of
1 000 inhabitants, according to research cited by Magna
International. That is just one-third of the global average of
120 per 1 000, and far behind 750 for the United States.
Still, competition will stiffen. In addition to an
ever-intensifying price war among foreign makes, local brands
are also stepping up. Product quality is improving and Chinese
manufacturers are inching into upper segments in the hope of
boosting local market share, as well as boosting their presence
So far, Chery, Geely and Great Wall - the top three
national brands with no foreign partnerships in China - have
managed only a 28% share due to their lack of offerings
in the $20,000-and-above car segment, said Michael Dunne,
managing director of research firm J.D. Power's China
"That's almost a third of the Chinese market," he said,
adding that the super-rich are by-passing the Chinese brands to
opt instead for the Audis, Mercedes and other status symbols.
While not quite there yet, the 'Young Tigers', as Dunne
calls the three local marques, are moving up in the price
range. Chery has the A3 car priced at $13,700, more than double
what its mainstay QQ sells for.
Geely will showcase its first sport utility vehicle, the
NL-1, at the Beijing auto show, as well as the GC-1 mid-sized
sedan in a departure from the no-frills, entry-level cars they
are best known for.
"We're moving upscale," Geely Group Vice President Frank
Zhao said. The car maker plans to develop more than 40 models
using 15 vehicle platforms by 2015.
Great Wall's Wang acknowledged that Chinese cars abroad
still have a poor image as copy-cats with little creativity.
Her company's top priority was to improve quality and step up
technological innovation to join the ranks of international
"These are the biggest challenges facing us now," she said.
"Many Chinese car makers, especially those with their own
brands, are determined to go international. The coming years
will be crucial for our growth and expansion."