World’s carmakers face growing competition from China

2011-11-24 13:17

Guangzhou, China – The first Chinese cars built in Europe started rolling off the conveyor belt this year when Great Wall Motor Co built a plant in Bulgaria together with Litex Motors.

The Voleex C10 was the first vehicle off the assembly line of the plant near the town of Lovech last week with tests of the production facilities and installations set to continue for the rest of the year before the first sales are launched at the beginning of next year.

The Hover H5 sports utility vehicle and Steed pickup would also be built at Lovech.

All were expected to receive a “Made in the EU” label and would be available for export to each of the other 26 EU countries at a competitive price without the imposition of tariffs or duties.

Ambitious Chinese automakers are exhibiting this week at the Guangzhou Auto Show in their home market and are already displaying plenty of confidence that they would be able to compete against their larger international competitors.

So far, most Chinese car exports involve cheap cars destined for Russia, Eastern Europe, the Middle East or Africa.

However, the companies also have the US and Western European markets firmly in view.

The new Great Wall factory has a production capacity of 50 000 cars per year, which are destined for the whole of Europe.

The disastrous fate of Chinese carmaker Brilliance China Automotive Holdings Ltd, which entered a partnership with BMW AG was not expected to be repeated.

The Brilliance Galena failed the EuroNCAP crash test in 2007 while the smaller Splendor model subsequently received zero out of a possible five points in the highly respected German ADAC crash test.

Car expert Ferdinand Dudenhoeffer said he believes Chinese carmakers are “still weak today” but warns against European companies underestimating their ability to make progress.

“Great Wall, Chery, Geely, Foton and the others will learn to walk very quickly,” he said.

Chinese companies such as the Lifan Group and Chery Automobile Co Ltd have enjoyed growth rates of 150 per cent in Russia, the director of the Centre for Automotive Research said.

According to Dudenhoeffer, the strategy is to build up market share in emerging markets before tackling the more difficult industrialised countries, such as the United States and Germany.

The takeover of Swedish carmaker AB Volvo by Geely Automobile Holdings Ltd has revealed that company as one of the more aggressive players, Dudenhoeffer said.

Chinese companies can also obtain valuable technological expertise by buying struggling European carmakers.

There has been some resistance to the Chinese advance with US firm General Motors Co, for instance, blocking the sale of Swedish carmaker Saab AB to a Chinese company.

Indeed, General Motors intends not to renew its licences for Saab spare parts to prevent any of its technology falling into Chinese hands.

No one wants to speculate when they believe a truly competitive export battle from China would begin.

The Chinese automobile market is still the largest in the world despite slower economic growth, meaning Chinese companies currently enjoy greater opportunities at home than in the more stagnant markets abroad.

“I think they will turn their attentions elsewhere one day but not so soon,” said Volkswagen AG’s boss in China, Karl-Thomas Neumann.

“I would estimate between five and 10 years. They still need more time.”

Dudenhoeffer, meanwhile, said he was convinced it would be impossible to stop the Chinese.
“It will happen step by step,” he said.

Exports and the presence of Chinese factories in Europe mean Chinese cars would be clearly visible on the streets of Eastern Europe by 2015.

“The position of the Koreans, namely Hyundai and Kia, is where Geely, Great Wall or Chery will be in 15 years at the latest,” Dudenhoeffer said.

“In other words, the Volkswagens of this world need to take the Chinese very, very seriously.”

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