China bids for world domination Western car-makers want a piece of the huge Chinese market. But Chinese manufacturers want to sell to us - and they may just win the territorial battle, says Nargess Shahmanesh-Banks Published : 31 May 2005
The car industry is confused about China. It's a country that has been closed off for some time, and although companies are approaching with caution, anyone with global ambitions knows that it has to gain a presence there.
With an estimated 1.3 billion people living in this vast land, there's sure to be a future market for home-grown products as well as imports. Analysts at Goldman Sachs have predicted that China's economy will overtake Japan's by 2015 and the USA's by 2039, while experts believe China will be producing more cars than both by 2020. China's car-buying middle class is predicted to grow from around 60 million to 160 million in the next five years.
"There are over 40 million millionaires in China. That's as many people as there are in the whole of South Korea," says Richard Chung, who heads up the Asian operation of Johnson Controls, the global interior design specialist.
But while everyone is keen to sell cars to China, the Chinese, it seems, want to export their own goods. "Everything is made in China, so why not automobiles?" asks Chung. Some of the key home players to watch out for are Changan, Geely and Chery. They vary in size but share the same global ambitions. To achieve their goals they are religiously picking up as much technological know-how as possible from the West.
The largest of the three, Changan, is the third biggest car-maker after First Automobile Works and Shanghai Auto. The company's philosophy, says vice-chairman Ma Yun, is to, "outperform foreign nations by [gaining] experience from them".
Changan, a state-owned concern, already has dealings with Ford, Suzuki and Mazda for its Chinese operations, but the rest of Asia, the US and Europe are on its radar. "The home market is limited and there will come a day when we have to go down the international path," admits Ma. "The power of the brand has become a significant signal to demonstrate the strength of a company, even a nation." Strong words indeed.
Changan has been working with Italian design and engineering firm IDEA and has opened an R&D centre in Italy. Its staff come to Europe to be trained, and high-performing employees are awarded with all sorts of bonuses, including free housing. The scheme has been so successful that the new CM8 car was built entirely in-house.
Chery may only be the eighth biggest car-maker in China, but it plans to begin exporting to Asia and the US in under two years, and be building cars abroad by 2010. Also state-owned, the company famously irritated General Motors a couple of years ago with the QC car, which observers thought looked suspiciously like the Daewoo Matiz. All that is history. The company has recently signed a deal with the entrepreneur Malcolm Bricklin, the founder of Subaru in the US and a known risk-taker. The agreement will see Bricklin sell 250,000 Chery's a year to the US in the next two years through his newly formed company, Visionary Vehicles. It has in turn hired the US consultancy Harbour to review Chery's factories and make sure they conform to US standards. "They'll go through a learning curve," admits president Ron Harbour. "The Japanese and the Koreans did." Chery sees itself as the next Toyota, and, like the Japanese giant, Eastern Europe and the US are being eyed as future manufacturing sites.
Austria's AVL designs engines for Chery, and the Italian design houses Pininfarina and Bertone, along with the Japanese stylist Cavax, help add a contemporary edge to Chery cars. Michael Zhang, Chery's European sales manager, explains: "We send our engineers to AVL because we want to find out how to design and develop engines so that we can make our own."
Geely is an altogether different story. Small and privately owned, it wasn't even allowed to build passenger cars at first, but soon the owners found ways of getting round the restriction. Geely prices are very competitive, with its models selling for as little as $3,000 (£1,580). Like the others, Geely has formed technological alliances with European experts, and it has also been hiring top executives from other Chinese car firms.
The Chinese are savvy consumers. Volkswagen has been there for 20 years, but is currently feeling the backlash of its decision to sell second-rate models there. Sales have sharply dropped and the brand has suffered intensely because of this short-sightedness.
Chung thinks that in the future we will see the likes of Changan, Chery and Geely coming up with more adventurous products, whereas the more established car-makers will stick to a more traditionally Western interpretation of vehicle design. There is no such a thing as Asian design, but there are certain features that have to be included. What will become of China? It will no doubt grow to be the world's largest market in 20 to 25 years, but may not become a major exporter like Japan or Korea, as some predict.
Its cars will be largely be sold in markets like India, where demand will soar in the next decade. Home > Motoring > Features
