China exports take aim at Australia
Robert Wilson
March 29, 2006
CHINA'S car-makers will target Australia as the Chinese auto boom turns bust, a Shanghai-based automotive analyst says.
Excess capacity in the auto sector and government pressure to export would see Chinese vehicles sold here within three years, Paul French, founder of business information firm Access Asia, said this week.
"Basically, they've been ordered to export. All China's car-makers have massive overcapacity at the moment and if they can't shift their cars the government's going to slap some limitations on them," he said. "The government has now said that it's going to control output and several new plants have had quite strict limits put on their licences. Prices are falling to silly levels and car-makers are losing a significant amount of money."
He said the lack of barriers to imports meant Australia would become a testbed for Chinese exports to the west.
"From China's perspective you guys look pretty good," Mr French said. "America is a problem because of the unions, Europe is a problem because of the welter of anti-dumping actions and trade sanctions in the European Union. There are nasty rows already around shoes and textiles, and it's broadening."
Last year China became a net vehicle exporter for the first time and two makers, Geely and Chery, have announced ambitious export programs. Geely will begin US sales in 2008 and Chery will start next year. Spy shots of a Chery SUV testing in the UK recently appeared in specialist press overseas.
But Mr French said joint ventures between Chinese and foreign firms were under even greater pressure to export and could sell through the existing sales channels of their Western partners.
Australia's 1 million annual sales made it one of the most significant national markets outside the US and Europe, Mr French said, with similiar levels of buyer affluence and expectations. "Australia would appeal to a lot of people as a good western market test case. For Chinese exporters it's a place to gain experience before taking on the big markets."
The principal of automotive industry consultants Autopolis, John Wormald, said the effect of Chinese makers entering the Australian market would be dramatic. "In the 1990s you had people spending $13,990 on a new Hyundai instead of a second-hand Toyota. This will mean people spending maybe $10,000 on a new Chinese car instead of a second-hand Hyundai. The effect will be to pull the whole price structure down," he said.
Mr Wormald, who is visiting Australia for an industry conference, predicted the effect would spread across all market sectors except luxury cars.
"Even if the local industry isn't directly competing against Chinese vehicles the effect of their coming will be severe," he said.
Sydney-based importer Ateco Automotive has already confirmed it is negotiating to launch a Chinese brand in Australia and has signed memorandums of understanding.
"Our plan is to have a range of both cars and commercial vehicles," spokesman Edward Rowe said. "The likelihood is our supplier won't be just one company, but a number of companies from whom we'll assemble a range. They are going to be cheaper than a similar Korean vehicle but they won't be hugely cheaper, because they will be built to above-average quality, technology and safety standards."
Chinese exports to Western markets have met with mixed fortunes so far. The first Chinese-built car sold in Europe, the Jiangling Landwind SUV, scored zero in a well-publicised crash test, denting potential sales. The only Chinese-built vehicle sold in Australia to date was the Volkswagen Polo Classic, which was imported here in small numbers during 2004-05.
http://www.theaustralian.news.com.au/common/story_page/0,5744,18636033%255E28737,00.html
