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Eight Trends Emerging In China's Auto Industry

3217 Views 0 Replies 1 Participant Last post by  mrgq
SHANGHAI - August 8, 2007: Eight trends emerged as China's auto industry has experienced fast expansion over recent years.

Innovation oriented
After years of reform and studies, business leaders in China's auto industry realized that they needs more self-innovative capability to support its rapid development, and this involves more than technical improvement but a comprehensive development strategy covering economy, culture and society.

Era for joint ventures
In China, foreign automakers are allowed to establish a maximum of two joint ventures with local partners producing the same category of products. However, more joint ventures can be set up through mergers and acquisitions of other companies in China. Currently most global auto giants have already established more than two joint ventures in China, and the few remaining homegrown automakers, such as Chery, Hafei and Changfeng, are still seeking cooperation opportunities with them. But whether local automakers will be able to stand on their own feet in the JV and not be controlled by the foreign partner is left unclear.

Production base move to west
Saic Iveco Hongyan, Brilliance Auto as well as FAW-VW have all built new plants at China's western region recently. There are two motives behind this move- cheap labor and lower logistic costs. New models produced at the plants in western China can go on sale in nearby cities, which will greatly cut down logistic costs.

Moreover, Chengdu and Chongqing is more favorable as they are the most developed cities in the Western region.

Government encourage local products
Last month the Chinese government has just made make public a purchase list for high-end FAW Bestrun model. In the purchase 2007 and 2008 list released by the China's financial authority, thirteen local brand models, such as Hongqi, Zhonghua and BYD produced by the home car companies have been included. Purchases of items not included on the list will not be paid for by the government financial departments.

If a home-brand vehicle is chosen by central and provincial government or government-affiliated organizations, it means a great opportunity for domestic automakers to make advertisements on themselves.

Locally built foreign-branded vehicle appear
On July 4, Beijing Chrysler CEO Tom LaSorda and Chery Automobile Co. Chairman and President Yin Tongyue finalized a deal to develop and distribute Chery-built small cars globally. This deal marks the first time Chinese-made cars will be sold in the U.S. by an American car company and it also heralds an emerging trend that Chinese automakers are expanding to international auto market.

Surging demand for new vehicles
A recent survey shows 71.2% of those car owners believe they prefer to buy a second car within three or five years after they purchase the first car. Auto experts say a total of 8.5 million new cars will be sold in the market this year and more customers will choose to buy a new car in the second half year than in the first half year.

Auto parts production bases
Auto parts production in China tends to concentrate on one particular region instead of spreading all over the country, and by this way they can enjoy more preferential policies from the local government and cut costs. Nowadays major auto parts bases include Kunshan in Jiangsu province; Dongguan in Guangdong province, Wuhu in Anhui province, Changchun in Jiin province and Shiyan in Hubei.

Joint ventures to make home-brand vehicles
Guangzhou Honda, Honda's automobile production and sales joint venture in China, announced the founding of its wholly-owned R&D subsidiary on July 19. The company will develop a new automobile product which will be sold under an original brand of Guangzhou Honda starting in 2010.

This will be the first time a joint venture company to develop and market a product under a true brand of the joint venture company in China. It is an excellent example of “Market for Technology.”
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