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Discussion Starter · #1 ·
China's auto industry growing by leaps and bounds

August 01, 2008

"China does not want to be an auto colony and depend on the West's obsolete tooling; China wants to build its own auto industry," reveals Tao, a plant manager.

To that end the central government intends to implement a policy that 50 per cent of all vehicles must be domestically made by 2010, including the technology that goes into the vehicles.

China's auto industry started in 1953, when the First Automobile Works (FAW) was set up. In 1957 the first truck was made independently by China. In 1964 the first self-designed, developed and mass-produced automobile came from the Beijing Automobile Factory. By 1978, the Second Automobile Works and a group of components factories were built. China’s auto industry grew slowly but steadily until the early 1990s, mainly producing commercial vehicles.

Since joining the World Trade Organization, technology introduction and high-tech integration in China's auto industry recorded remarkable progress. The proportion of sedans increased rapidly and improved greatly; Automobile manufacturing has become the pillar industry for China's economy.

Remarkable mileposts occurred in growth -- yearly production surpassed 1 million units in 1992 and 2 million in 2000; in 2008 production will top 10 million vehicles, half sedans, half commercial.

Three main auto makers dominate China, the First Automotive Works, Dongfeng Motor Corporation and Shanghai Automotive, and numerous joint ventures with 'foreign' car-makers add variety.

Chinese automobiles have been on display at auto shows around the world; the companies Geely, Chery and Shanghai Automotive Industry Corp (SAIC), having bought the Rover assets, come to mind. China insists on lightweight, fuel-efficient and low-emission vehicles that would rival any vehicle in existence, or on the drawing board, around the world.

The first true 'Hypercars,' perhaps?

China has "identified" the need for a plastic-bodied people's car, and their investors approached a number of composites firms in the West, settling on Automotive Design & Composites (ADC). "We learned that the objective was to leap past existing automotive technology, because the Chinese are tired of having old tooling and vehicle designs dumped on them by other automakers. They want completely new technology to make a jump to modern day," said ADC's Michael Van Steenburg.

Now, equipped with state of the art composite technology, Chinese investors intend to change the way automobiles are built.

The planned new car, 'Paradigm,' is an 850 kg mid-size, four-door hybrid-electric vehicle with a composite chassis and composite body. The chassis has evolved from a heavier and more time-consuming fiberglass chassis to the 'pultruded' version that is now over four times as strong, half the cost at just $600 and down to 38kg.

(Pultrusion: A process for producing continuous fibers for advanced composites which involves pulling reinforcements through tanks of resins, a pre-former, and then a die, where the product is formed into its final shape.)

I am wondering if anyone here have any ideas about that Paradigm car

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Discussion Starter · #2 ·
Second- and third-tier cities offer new chances for auto industry


Second- and third-tier cities offer new chances for China's auto industry, agreed experts and insiders at a recent industry event in Chengdu, Sichuan province, the China Business News reported yesterday.

"Consumers in second- or third-tier cities would be the main driver for auto market growth," Tang Teng, vice general manager of Dongfeng Peugeot Citroen Automobile, said at the China Automobile CEO Forum along with the Chengdu Auto Show, which opened on September 19 this year.

Shen Yingquan, president of Changan Ford Mazda Automobile Co Ltd, figured out auto manufactures will transfer their sales network to second- and third-tier cities in the future.

The trend is to build distribution networks in second- and third-tier cities under new market environment, said Sun Yu, director of Guangzhou Honda Automobile Co Ltd's south-western business center.

Meanwhile, a new marketing pattern will be created in these areas instead of the sale, spare parts, service and survey (4S), the common service mode for most auto manufacturers, Sun added.

Domestic automakers, like BYD Auto and Chery, were aware of the fine potential in China's second- and third-tier markets as early as in 2006. They had begun marketing their automobiles in these areas where multinational auto giants had no interest at that time.

China's automobile industry, which has experienced more than 10 years of fast growth, is encountering unprecedented pressures caused by a series of factors, including the soaring oil and raw material prices, devaluation of the US dollar, subprime mortgage crisis and the implementation of Chinese Anti-monopoly Law.

The country's auto industry, which performed well in the first two quarters of this year, posted the first decline of this year in August when domestic auto makers sold a combined 629,000 vehicles, down 6.34 percent year on year, according to statistics from the China Association of Automobile Manufacturers.

Shifting their focus to second- and third-tier markets could be a solution for automakers to survive amid the automobile consumption downturn.

In second- and third-tier cities, the economic and consumption level has been increasing remarkably, and transport infrastructure has been continuously improving, substantially boosting auto consumption in these areas, where fewer automobiles are currently running on the streets.

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Discussion Starter · #3 ·
Auto sector enters new era of growth


By Wang Weiwei

When the auto production and sales volumes in China respectively reach to 8.88 million and 8.79 million in 2007, people were once very sure about that the auto production and sales volumes in China will both break 10 million in 2008. However, as a series of influencing factors appear in 2008 and thus the sales drop since April, people become uncertain about the future of the national auto market.

The statistics show that the national auto market is still in the increasing trend now, but the speed is slowing down to some extent. According to the statistics of China Association of Automobile Manufacturers, the auto production and sales volumes respectively reach to 5,932,100 and 5,849,000 from January to July this year, with 16 percent and 16.66 percent growths over the same time last year, of which the passenger vehicle to 4,196,900 and 4,099,300, with 15.71 percent and 15.79 percent growths over the same time last year; the commercial vehicle to 1,735,200 and 1,749,700, with 16.69 percent and 18.76 percent growths over the same time last year.

On the Post-Olympic Auto Market Forum held by Beijing Asian Games Village Automobile Exchange at August 28, the representatives of vehicle manufacturers and distributors show the caution about the future trend of the auto market, but most of them are still full of confidence on the national auto market this year. They all think that the basic aspect of the auto market keeping increasing will not change, our national auto market will still be in the increasing period in 2008, but the increased range may float. After all the domestic average vehicle holding is still very limited, and as the living levels of people increase, the auto purchase has been one important aspect of increasing the life quality, which means the huge auto purchasing demand still exists. At the same time, the consumer group that bought cars in the past several years is now stepping into the phase of replacing the car. All these needs will promote a new round of auto sales increase. Su Hui, General Manager of Beijing Asian Games Village Automobile Exchange, also think that the auto market will soon go into a new phase after a series of challenges and baptisms. The year of 2008 will become the historical year of China Automobile Industry, and a year with obvious challenges and opportunities for the automobile industry.

BYD introduced the first type of small car FO at September 2, and aroused much amazing voices. And BYD movement has almost been the common behavior of many auto manufacturers in the market in the latter half year. In the last four months of 2008, the auto market will once again meet the hot tide of new styles coming into the market after that in the beginning of this year. According to the statistics, nearly 40 new styles will appear in the auto market in the latter half year.

European and American brand auto manufacturers will issue 5 new styles, which are mostly Class A and Class A0, and among these ChangAn Ford New Fiesta, Shanghai Volkswagon Skoda Fabia, First Auto Volkswagon New Bora, New First Auto Mazda 6 and Dongfeng Citroen C-quatre are the focus arousing the consumers' attention. The new cars introduced by Japan and Korean brand auto manufacturers are mostly the old ones with the style changed and some equipment added.

Our self-owned brands, including BYD, will also introduce several new styles in the latter half year, such as Cherry A3, Wagon Touring, LF 620, ChangAn Auto ChangAn V101 wagon, Great Wall Florid, V3 Ling Yue to be introduced by Southeast and a type of Cross style, etc.

Meanwhile, on the aspect of imported vehicles, two styles of large SUV Buick Enclave and KIA Borrego will be imported into China at the end of this year, Infinite and Acura will introduce two styles of new products to China, and Mitsubishi will bring the Japan-made Lancer and Generation 10 EVO, the Mitsubishi star sport car.

Although the auto industry is still full of confidence about the future of the national auto market, the oil price rises from the beginning of this year have influenced the auto market, which promotes the auto circle to begin thinking about the future developing direction, and the auto manufactures to face the industry updating and adjusting problem again.
Li Daokui, Professor of School of Economics and Management, Tsinghua University, indicates that with Chinese economy merging into the world and taking an increasingly larger part in the world economy, China economy will inevitably be affected by the international economic changes. Meanwhile, the statistics show that the rude oil demand of the oil market increases about 1.5 percent per year averagely in the past 5 years, but the oil production capacity increases only 0.7 percent per year averagely in the past 5 years, the rude oil price is rocketing, and the oil shortage has become a structural problem and the world has entered the time of high oil prices. He brings forward that China auto industry must transform as soon as possible, to develop toward the low energy-consumption and environment-friendly direction, only thus we can depend less on the oil. In some extent, this involves the state energy strategy. Wang Xiaoming, Deputy Researcher of Development Research Center of the State Council, high oil prices may be a long-term and persistent phase, China auto must make the strategy for this, raise the production efficiency and develop the new energy technologies.

The adjusted auto consumer tax, beginning to implement formally from September 1, is "to restrain the large and develop the small" on the policy level, promoting the auto consumption to adjust in the energy-saving and environmental protection direction. Among the new styles introduced by the domestic and overseas auto brands this year, we can see the auto manufacturers has already been walking towards the energy-saving and miniaturization direction, such as Mazda 2, New Aveo, New Vios, Yaris, New Fit and Fiesta to be introduced in this year.

According to the statistics of China Association of Automobile Manufacturers, in the first half year of 2008, among the sales of the major domestic wagon brands, 1L to 1.6L exhaust ones occupy 55.92 percent of the market, rising 3 percent over the same time of last year; and the sale drops of those of 1L or less exhaust obviously slow down, and the sales volume adds up to 129,100 in the first half year, and the divergent state has mitigated in some extent. At the same time, the new energy auto is developing stably. The price of Eco-Hybrid LaCROSSE freshly introduced by Shanghai GM is only 20,000 Yuan more than the general; and Dongfeng Honda will also introduce the Eco-Hybrid Civic; Volkswagon issued several models of environmentally friendly vehicles by the Olympic platform; the self-owned brands also devote much to the new energy vehicles.

Facing the international economic situation and energy shortage, the auto manufacturers has already felt the body-cutting pain, and once the challenge changed into the opportunity, the domestic auto market will welcome a new developing phase.

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Discussion Starter · #5 ·
Homegrown auto brands gain more market share

2008-11-05 10:24

By Jiang Fan

Such vehicles with independent brands have always been a vital part of China's auto market. As far as sales volume is concerned, independent brands have accounted for over 40 percent of the overall auto market, and what's more, they are taking the lead in commercial vehicle market. We can say that nowadays, independent brands have become one of the decisive powers that affect the structural adjustment and trend of China's auto market.

In a whole, although the production and sales volume this year confronted with month-to-month decline and the year-on-year increase rate slowed down, considerable growth was still achieved in comparison with the same period of last year. From January to July, the production and sales volume was 5.9321 million and 5.8490 million respectively, up by 16 percent and 16.66 percent year on year. In which the production and sales volume of passenger car was 4.1969 million and 4.0993 million, increased by 15.71 percent and 15.79 percent year on year respectively; the production and sales volume of commercial vehicle was 1.7352 million and 1.7497 million, up 16.69 percent and 18.76 percent respectively. In the first seven months, seven of the top ten best-seller manufacturers kept growing. In commercial vehicle market, the top ten biggest sales volume holders maintained continuous increase, in which eight enterprises have demonstrated a relatively rapid growth.

As the primary economic indexes showed, such vehicles with independent brands have realized a favorable development in the first half year. In the first half year, the market share of most key enterprises was increased to some extent, and only five enterprises suffered market share decrease in comparison with the same period of last year. In the first half year, both the profits and total pretax profits of key enterprises went up quickly; the monthly increase rate, although slightly lower than the same period of previous year, is still in the relatively fast interval. The growth rate of profit was between 25.42 percent and 43.75 percent, and the growth rate of pretax profits was between 17.78 percent and 37.75 percent. It is noteworthy that the total profits of some enterprises grew rapidly even if the sales volume was a little bit smaller year on year, demonstrating the achievement of strategic adjustment and the reinforcement of profit-making ability.

Experts said that the cost of auto enterprises kept increasing due to natural disasters and the continuous increase of raw material and energy price, and profit margin was squeezed to a certain degree. Auto enterprises could react actively in the face of these adverse conditions. They successively adopted measures such as strict cost control, price-comparison purchasing, expenditure cut-down, product structure adjustment and marketing strategy change, and therefore the auto production and sales in the first half year kept a relatively steady increase trend, and the overall development of auto market was favorable.

In auto market, independent brands are the mostly-concerned ones. Since 2001, the sales volume and market share of China's independent vehicle brands had begun to increase year by year. In 2007, the total sales volume of independent brand cars was 1.2422 million, accounting for 26 percent of the total car sales. Compared with 2006, sales volume of independent brand car went up by 259.4 thousand, and the market share was increased by 0.23 percent. But since the second half year of 2007, the fast growth of independent brands had slowed down; some enterprises even suffered sales volume decrease.

In the first eight moths, the market performance of independent brand cars was not positive as far as sales volume was concerned. Statistics from China Association of Automobile Manufacturers indicates that from January to August, the total sales volume of independent brand cars was 835.5 thousand, taking up 24.77 percent of the total car sales and the market share was more than 1 percent lower than 2007. In the car sales ranking list of the first eight months, only Chery and Geely entered top ten. In recent years, all of China's independent car manufacturers have been thinking highly of and dedicating to the perfection of product series and the fast growth of production and sales scale so as to consolidate the development base and improve the capacity of risk resistance. The present speed-down of sales volume growth brings a realistic challenge to the enterprises.

Except for pressure from well-known energy and raw material cost increase, independent brand cars are still confronting with unique market "micro-climate". Before 2007, the main products of independent brands and introduced brands had rare face-to-face competition in the market, and a layout where independent brands develop low and medium grade market and introduced brands hold high-grade market was formed. As the market competition gets increasingly intensified, introduced brands began to focus on low and medium grade market and independent brands started to strive for breakthrough in medium grade market, they have more and more face-to-face competition. In the past, joint-ventures seldom came into auto market priced below RMB100, 000 yuan, but now such mainstream enterprises as FAW-Volkswagen, Shanghai Volkswagen, Beijing Hyundai and Guangzhou Honda, all launched fairly competitive low emission vehicles of the price range. Because of the long-term leading position of joint ventures in China's car market, their structure adjustment to lower grade market has caused direct pressure to independent brands.

How will independent brands react to the heavy market pressure? Our reporter learned from the interview that independent-brand enterprises have had clear forecast and relatively complete understanding of the slowing down growth. Lots of enterprises adjusted developing strategy from the second half of last year. They began to pursue quality instead of quantity, and laid emphasis on the improvement of technology, quality and service level by force of independent innovation.

Diving into quality improvement becomes the common choice of independent enterprises. At present, they are making technology upgrading in succession and are developing more competitive products with higher quality, and they are striving for transformation from "price advantage" to "technology leading" and "quality leading", from "cost leading" to "brand innovation". Only the improvement of quality, brand value and influence power could produce stronger core competency for auto enterprises. The engine innovation and breakthrough is one of the highlights of independent brands this year.

In addition, independent brands still has a bright prospect in overseas market. In the first half year, car export maintained a high speed development. From January to June, China exported 133 thousand cars, increasing by 98.6 percent year on year; the export value was US$953 million, up 84.2 percent year on year and accounting for 19 percent of China's total vehicle export value. The export value of car has climbed to and ranked No. 3 in terms of China's total vehicle export value. Independent brand enterprises are leaders in car export; they all reinforced the developing of foreign market this year.

Some experts pointed out that independent cars had wide market coverage and had relatively big advantage in rural and urban suburb areas, which possessed a huge potential for development. Independent brands should consolidate and strengthen their influence on these markets and seek for bigger development space. What merits our attention is the modulation of vehicle consumption tax and the society's concern on energy saving and emission reduction, which will bring a favorable opportunity for the development of independent brands.

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Discussion Starter · #6 ·
Auto competitiveness in China improves steadily


"We firmly believe that China market will surely have a bright future and the auto market will also develop in 2009." Recently, Xiao Shenbo, member of management director board of AUDI expressed in an interview that AUDI would not change its investment plan of research and development and would exploit the market by good products.

In fact, before the rapid changes of global economic situation, either AUDI or joint-venture brand or self-owned brand all showed confidence to Chinese market, which was originated from positive judgment of the development environment and certainty of own advantages, and also from the active and effective strategic adjustment of the company.

It's said that Chinese auto market is the most complex and the most inclusive one in the world. By classifying consumers in each area based on income, culture and consumption custom, we'll find that there are many different consumption groups. It's because of this huge and diversified market that auto companies are exploiting space for development.

"Though our sales in east area were impacted by the international financial crisis, business in middle and west areas of China keeps increasing which can balance changes in sales volume." He Junjie, general manager of Mazda sales operations of Chang'an Ford said, despite the short-term market adjustment, they felt confident to the mid-long-term development of the company. "Our product development is processing according to the plan without being disturbed. Perhaps feeling worried about future, consumers will keep an eye and postpone plan of purchase, but market demand still exists."

This idea has been accepted by many insiders. At present, the new round of escalation of consumption structure hasn't been completed in China and powers pushing consumption growth still exist. In big cities of high per capita GDP, auto consumption is transferring from popularization to replacement. Huge market in secondary or tertiary cities and rural areas still need assistance of large number of vehicles to achieve a fast economic development. As the state is enhancing investment to infrastructure construction and speeding reform in rural areas, a new round of driving effects in domestic auto market will be visualized gradually.

Besides the market advantages, during the process of reform and opening up to the outside world, capability to adapt to globalization and market changes of auto companies in China has been greatly strengthened, and the ability of anti-risk and self-recovery has been reinforced continuously.

The reform and opening up to the outside world not only has brought advanced product technology and manufacturing technique to auto industry in China, but also accelerated auto industry development. The auto output in China in 1978 was 149 thousand, occupying only 0.35 percent of the world market shares; with a total production value of about RMB6 billion yuan. In 2007, the auto production in China reached 8.88 million, occupying one eighth of the world shares, with a total production value of over RMB2 trillion yuan. The reform and opening up to the outside world has greatly enhanced the international competitiveness of China's auto industry.

China's auto industry met with some difficulties in 2008. Actually, during the years of fast development, China's auto industry also had encountered slow growth and unfavorable situation.

"For example, during the years from 1979 to 1982, from 1985 to 1986, and from 1988 to 1990, auto output had experienced decrease and shrink." When concluding the development of China's auto industry during the thirty years, vice president of China Machinery Industry Federation, Zhang Xiaoyu said so, from a development view, though China's auto industry was facing severe competition and market situation, China's auto industrial strength had been improved and was quite different from the past. The anti-risk capacity was deeply enhanced. Future development was still prosperous.

It's because of the experiences in market competition for long that many auto companies has built sound basis, and is always adjusting strategies, that is, by improving brand, quality and service to transform increase pattern of the company.

From 2007, GEELY has stepped into a wholly new product strategic arrangement period by improving product quality and brand connotation. "The sales volume and profits in 2008 both exceeded than ever, thanks to the successful product transformation." Liu Jinliang, vice president of Geely Group and general manager of sales operations, expressed Geely had made fast progress in service satisfaction in 2008. "Customers' satisfaction will certainly go up with better quality. In the present economic situation, consumers will be more realistic. 2009 will be a year for small-size vehicles and economical cars."

"Chery will transform from building self-owned brand by independent innovation to building international famous brand by continuous innovation." Chery published this news on the offline ceremony of the one millionth car. Since then Chery began to fix future development direction as to stabilize price system, improve vehicle quality, develop model potential, actively decrease and slow down increasing speed, upgrade service level and elevate customer satisfaction.

"Make full use of time to strengthen own power. Then spend more on product structure adjustment and on development pattern study." Just as Chen Jianguo, director general of Industrial Coordination Department of National Development and Reform Commission, said on 2008 International Forum on Chinese Automotive Industry Development held recently, reduction of cost couldn't assist auto companies to shake off poverty; only by accelerating organizational structure adjustment and product structure adjustment could basically drive domestic auto companies to develop continuously.
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