Experts encourage indigenous auto making sector
By Liang Yu (China Daily)
Updated: 2004-03-12 10:51

Auto industry leaders say China should, and can, create an indigenous manufacturing sector, despite the continuing trend by foreign auto makers flooding brand names onto the market.

The comments were made at the first China Automotive Industry Roundtable, hosted by Economist Conferences, which wrapped up in Shanghai yesterday.

"While the auto industry continues to be globalized, Chinese auto OEMs (original equipment manufacturers) still have a good chance to catch up (with their overseas counterparts)," said Norbert Wittemann, vice-president of AT Kearney, one of the world's largest management consulting companies.

Although Chinese auto companies are still weak in terms of product development (PD), they can hopefully establish PD capabilities through innovative methods, especially as technologies are now becoming a commodity, said Wittemann.

His idea echoes concerns from a growing number of Chinese experts, auto firm executives and government officials who are worried about the prevailing presence of foreign auto makers in China, which might result in an incompetent domestic auto industry in the long run.

Currently, all of the world's major auto companies like Volkswagen, GM, Ford, Toyota and Daimler Chrysler have established in China a complex presence pattern through various joint venture (JV) partnerships with multiple Chinese auto makers.

Foreign auto giants have reportedly invested nearly US$10 billion in China so far, creating a total output of 2.7 million units, and they are planning to double local production in the near future.

According to AT Kearney, these global giants control an 82 per cent market share of China's passenger car market, while the rest goes to a limited number of Chinese compact car makers, including Chang'an, Chery, Hafei, Brilliance and Geely.

In Wittemann's view, a feasible breakthrough point exists for struggling Chinese OEMs as the "super low-end" segment of the domestic market - cars sold below 30,000 yuan (US$3,630) - remains undeveloped.

He predicts there could be about 60 million potential buyers in China, especially in the vast regional markets.

Starting production in the super low-end market, described by Wittemann as a "greenfield," Chinese OEMs can gradually enhance their PD capabilities and foster their own brands before elbowing into upper-market segments.

Other big-name Chinese auto manufacturers, however, hold their own views.

"We are on the way to build our own brands, though the approach we choose may be different from that of some other domestic firms," said Cheng Jinglei, executive director of the automotive engineering academy of Shanghai Automotive Industry Corp (SAIC), one of China three largest auto makers.

Rather than focusing on quickly launching fancy new car models, SAIC pays more attention to nurturing core competitive edges of its own vehicle brandnames, where it can have full control over the entire PD operation chain, according to Cheng.

Targeting an output volume of 50,000 units of vehicles by 2007 with SAIC's self-owned brands, the company has set up a special team to guide the development process.

While the academy where Cheng works is a key contributor to the programme, SAIC's two local joint ventures with General Motors and Volkswagen respectively are also expected to play a supportive role in it.

Media reports said SAIC was determined to turn its subsidiary in Yizheng, Jiangsu Province, into one that handles the manufacturing and marketing of its own future vehicle designs.

Other industry leaders believe China has a chance to keep up with foreign countries in terms of the development and manufacturing of new-generation vehicles like electric cars, which can hopefully make up for the existing gap in mature vehicle products, according to Jack Perkowski, chairman and CEO of ASIMCO Technologies Ltd.

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