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China's emerging car industry

(BusinessWeek.com)
Updated: 2007-04-13 11:29

Less than 10 years ago, China's annual car production did not match the output of a single large auto company in a developed country, but recent years have seen quite a transformation. Domestic companies like Geely, Chery and Changfeng have learned quickly, expanding production capacity and developing new models.

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Yet China is home to almost as many automakers as the United States, Japan and Europe combined. Like so many industries here, the fat needs trimming.

It seems clear which companies will lead the way. Chery Automobile, based in Wuhu,Anhuiprovince, now exports cars to 29 countries. Last year the company produced 305,000 cars and exported 50,000. Chery cars are expected to hit the European market later this year.

Geely Autos is another company looking to export to Europe as soon as this year. The firm was the first from China to appear at the Frankfurt Motor Show (in September 2005) and is now re-engineering its cars to comply with EU auto import regulations. Brilliance Auto, which is collaborating with BMW, also made an impressive display at the Geneva Auto Show earlier this year. Its BS6 model is already being sold in Germany.

The domestic players also have competition from abroad as foreign automakers are starting to export cars from China through their joint ventures. Volkswagen plans to export its China-made vehicles to 84 countries by 2009 and Honda is already exporting to Europe from China.

The government has made it an official goal to compete as a global auto player, even enshrining it in the11th Five-Year Plan. A quality-control licensing system is in its initial stages, though details are scarce as of yet.