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Shanghai auto expo: showdown for global automakers

(Agencies)
Updated: 2009-04-20 09:09

To compete now, both Chinese and foreign automakers need a full portfolio covering the whole spectrum, from the inexpensive compacts favored by first-time car buyers to the high-margin luxury models needed to compete with foreign-brand sedans.

And vehicles need to be tailored to the preferences of increasingly particular Chinese customers, says Thomas Schiller, managing director of Arthur D. Little China, who specializes in the auto industry.

Workers prepares for the biennial Shanghai Auto Show which opens Monday to media and on Wednesday to the public, in Shanghai Sunday April 19, 2009. [Xinhua]

"It doesn't work to take some car and just localize it. Chinese customers are now more educated and US designs are shifting to a more Japanese and European model," he said.

Chinese automakers, still unable to successfully challenge their foreign rivals in affluent Western and Japanese markets, are striving to bring quality up to snuff, while also going after the small-car market where their home player status gives them cost and distribution advantages.

Among those who have made headway: privately owned Geely Automobile Holdings. Based near Shanghai, it has worked hard to upgrade its sedans after floundering in European markets, several analysts said.

Meanwhile, global automakers are struggling to get their products right and to set up strong dealer networks, a major challenge given China's vast territory and disparate regional markets.

"There is huge potential for first-time car buyers. They will buy a car because they need a car," Schiller said.

Even now, first-time buyers account for nearly three quarter of sales. But reaching all the hundreds of millions of potential car owners in this market of 1.3 billion people requires new strategies since most of them live outside the traditional auto market centers of Shanghai, Beijing and Guangzhou.

"The biggest challenge for most players is how to enter the tier-three and -four cities," said Schiller. "It's a battlefield in the market and it will decide the next two to three years of growth in China."

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