CHINESE cars are coming to a showroom near you, but the question is: which one and when? With its low wage rates and an endless supply of manpower, China is already the main provider of several classes of manufactured goods, a subcontractor for most world-renowned electronics brands, and the maker of 50% of the world’s motorcycles. A quarter of the scooters and light motorbikes sold in Britain are made in China.
Cars may take a little longer to become established. All the big carmakers from Europe, America, Japan and Korea are represented in China, and most make cars there in association with local partners. But only Honda exports familiar models to Europe; left-hand-drive Jazz hatchbacks go primarily to Germany.
The joint ventures were set up to feed the burgeoning Chinese domestic market. Car sales in China have grown 29% this year and, at more than 4m, will soon overtake Japan to become the world’s second-biggest car market after America.
The more successful joint ventures cannot make enough cars to meet demand. PSA Peugeot Citroën recently signed an extension of its agreement with Dongfeng Motor to expand its production of Peugeot and Citroën cars from 300,000 to 450,000 a year by 2009.
But it does not expect to sell these cars outside China and its immediate neighbours in the region.
Nick Reilly, head of General Motors Asia Pacific, explained why GM did not plan to export cars made in China to Europe or America: “In the automotive business, China’s competitiveness is not yet up to world level. One reason is that the component industry has not been competitive, protected by import duties.
“But the components sector is becoming more localised as the joint ventures have invited in global suppliers,” he said. “So the situation is changing. In five years’ time I am sure that there will be growing exports from China.”
Others have warned that Chinese wage rates are rising quickly, a situation familiar to Reilly, a former chairman of Vauxhall, who has spent three years developing GM-DAT, the Daewoo car business in South Korea, which now sells its cars all over the world as Chevrolets.
At the recent Beijing Motor Show, Reilly revealed that GM was working on a car to be sold at a much lower price than anything GM has today — and that GM China would play a part in its development. But this car, a sub-£5,000 equivalent of the Romanian Renault/Dacia Logan, would not necessarily be made in China for export.
The first cars we will get from China will be from the “unaligned” domestic manufacturers. There are more than 100 of those and between them they take 25% of the Chinese market. Central government, which in earlier times facilitated the joint ventures with multinationals, is now encouraging the domestic carmakers to export. The latest five-year plan calls for the export of vehicles and components to reach $70 billion (£35.5 billion) a year by 2010.
Shanghai Automotive Industry Corporation (SAIC) and Nanjing Automobile Corporation (NAC) anticipated this with their deals before and after the collapse of MG Rover. Nanjing is promising to restart limited production of the MG TF at the Longbridge plant in 2007, using engines that are built in China with machinery bought from MG Rover’s receiver.
In November another part of the British motor industry came under Chinese control when Geely took a majority shareholding in a joint venture with Manganese Bronze, the company that makes the London black cab. The name Geely stands for “I am lucky”; it is rare among Chinese car companies in that it is entirely private, with no state or regional government involvement.
The first Chinese car to be sold in Britain may well be a Dodge. Chrysler, the American arm of Daimler Chrysler, has no small cars in its range and is poised to announce that its Dodge Hornet will be supplied for the American and European markets by the Chinese company Chery. It will be a restyled and rebadged version of one of a wide range of new cars that Chery has created.
Chery is expanding fast. It is the largest of the domestic manufacturers and is not part of any western joint ventures. Fiat has done a deal to buy engines and gearboxes from Chery and as well as using these for its Chinese production, it will specify a Chery engine for the new Fiat Linea model to be made in Turkey.
Britain’s big car importers and dealer groups are busily negotiating with a variety of car companies of which the public has never heard. But in a few years some of these names may be as familiar to British car buyers as Japanese and Korean carmakers are today: Brilliance, Chana, Great Wall, Hafei, Landwind, Liebao, Lifan, Maple, Xiali, Xinkai, Zhonghua.
Landwind, which is associated with Changan, a company that makes Fords, Volvos and Suzukis in China, could be an early arrival. Eighteen months ago it entered the German and Dutch markets with a £10,000 4x4 that has a remarkable resemblance to an old Vauxhall Frontera.
It had a bumpy start when independent crash testing showed that it was far off the safety levels of European models. But Landwind is now ready with a new and improved version and a compact people carrier called Fashion. Last month the Belgian-based European distributor of Landwind appointed Paul Williams, a Briton who was previously boss of Kia UK, as managing director.
Williams, who has also worked for the Japanese companies Mitsubishi and Daihatsu, believes the right strategy for the Chinese is to start with low-priced niche models. Thus the Landwind Fashion will be sold new at the price of a three-year-old Vauxhall Zafira and the Expedition 4x4 will be priced well below smaller “soft roaders”.
Landwind has ambitions to sell 50,000 cars a year in Europe within three years. Right-hand-drive models will go on sale in Britain in 2008.
Whichever company takes on the UK distribution of Great Wall — also privately owned — might like to talk about rebranding. This company already claims to be “the first brand for export in China” on the basis of the Hover 4x4s and Wingle pick-up trucks that it sells in 60 countries from Russia to the Middle East.
Great Wall plans to produce 500,000 vehicles a year by 2008, with a range that will be expanded to include passenger cars. Its new models, which are facsimiles of cars from established makers, have excruciating names — Florid (looks like a Suzuki Swift), Gwperi (Fiat Panda) and Coolbear (a boxy small Toyota).
SAIC thought that it had the answer to the name game when it retained the intellectual property rights to the Rover 75 after the collapse of MG Rover. But the Rover name remained with its previous owner, BMW, which had agreed to give first refusal to Ford, to whom it had sold Land Rover. Last October Ford exercised that option by paying £11m for the Rover title, leaving SAIC with no name and badge for its own version of the Rover 75 which was just about to go on sale in China.
So the Rover 75 became the Roewe 750, a name that sounds similar to the Chinese and, more importantly, fits in the same space as the Rover badges. But this has not stopped SAIC promoting it with over-the-top Britishness, including images of Big Ben, castles in Scotland, and quotes from Sir Winston Churchill.
The Roewe is a Chinese copy made from the original plans; SAIC started again and tooled up to build both the car and its engine. Although it is made in China, most of the engineering work was done at its research-and-development centre in Leamington Spa, Warwickshire, where there is a team of 250, half of whom used to work for MG Rover.
SAIC will export the Roewe primarily to Asia. As the first of its modern own-brand cars, it is anxious not to tarnish its image by entering western European markets with an old Rover design at a knock-down price. The follow-up cars being prepared at Leamington will be sold in Britain.
When Chinese cars come here, we can be sure of one thing: they will be cheap. But will they be any good? That’s not as easy to answer. These are new companies moving at breakneck speed. They make use of some of the world’s best engineering consultancies and design houses and are equipped with the latest manufacturing equipment, but they lack experience in the demanding markets of the West.
And even in China a recent quality survey found the ageing Volkswagen Jetta to be top for customer satisfaction while Chery and Geely came near the bottom of the list.
India, the other Asian powerhouse, roars onto the scene
CHINA is not the only Asian nation with a car industry trying to push its way onto the world stage. India’s carmakers have big ambitions of their own — ambitions that are often overlooked in the West, which tends to view the subcontinent as an IT powerhouse but an also-ran to China in manufacturing, writes Dominic O’Connell.
That would be news to Ravi Kant, managing director of Tata Motors. Where his western counterparts are struggling just to maintain current production — or in the case of the Detroit giants, trying to halt the rate of decline — Kant is in the enviable position of running a profitable company with bold plans to double production over the next five years.
The Pune-based company is part of the Tata business empire. One of its sister companies, Tata Steel, is in the middle of a hostile bid battle for Corus, the Anglo-Dutch firm that includes the rump of British Steel.
The carmaker is probably best known in Britain for making the ill-fated City Rover for the now-defunct MG Rover. The City Rover was a rebadged version of the Tata Indica, India’s first indigenous car, that was built in Pune and then exported to the UK.
The Rover deal started with high hopes, but collapsed when MG Rover went into administration in May last year, leaving Tata as one of its creditors. At the Pune plant, that seems years ago. It is running flat out, with nearly every part being reorganised to increase production.
Tata is surfing the wave of one of the fastest-growing car markets in the world. India’s GDP is growing at a steady 9% a year, and the much-talked about Indian middle-classes — and millions of others who do not quite fit that description — are eager to buy cars and other vehicles.
Kant acknowledges the company’s good fortune, but said it had been disciplined after it recorded a £657m loss in 1999-2000 — the biggest ever posted by an Indian corporation. Kant said this made the company risk-averse, and it was tailoring its new products to fit the specific demands of India and other developing countries.
A big hit has been the Ace, a small four-wheel pick-up powered by a 750cc engine. It is being bought by those who might in the past have bought one of India’s famous three-wheelers — and in record numbers. Tata is building new plants across India to cope with demand, and once all the variants on the basic chassis have been introduced, will turn out 1,000 a day.
Tata Motors’ other plan for low-cost cars has caught even more headlines in the West. It plans to make an £1,150 car to attack the mass market in India — and in other developing economies.
Kant said that meeting the price target, announced by Tata chairman Ratan Tata three years ago, will be “a tough challenge”. The first vehicle should go on sale halfway into 2008.
