Renault, Daimler, Peugeot, Jeep, General Motors, Tesla And Toyota Are All MAD For China

Automology’s guest writer, MAC, was watching the Shanghai F1 race from his favourite armchair (at home), when he notice something unusual… 

For those of you paying attention during the Shanghai Formula One race over the last weekend, you may have noticed something a little different on one of the cars. The Renault logo was prominently displayed in Chinese characters on the Lotus cars (Renault supplies the engines to Lotus). So we must assume that Renault was hoping that F1 would give the French automaker a much needed boost ahead of the opening of its joint venture plant in Wuhan by 2016.

The new plant will have a capacity of 150,000 vehicles and will mean that they no longer have to import the more expensive Korean or European manufactured units, and it is this increase in competitiveness that they hope will allow them to achieve 3% of the market share. Renault is not the only company that is fighting for increased sales in the world’s largest auto market. Toyota is looking to boost the sales of their famed Prius there. Worldwide, the Prius is the bestselling hybrid vehicle and has been manufactured and on sale in China for about ten years, but despite this, the Prius is still about as common in China as the endangered Panda.

Will the Prius ‘die out’ before the panda?

Whilst Toyota vies to be the top carmaker by volume in China, they currently rank a lowly sixth, far behind Volkswagen and General Motors. China is claimed to be a very price-sensitive market and whilst hybrids could help resolve much of the pollution woes that dog China, the cost of the Prius in the market, which uses very few made-in-China parts, is seen as the barrier to success. Last year, Toyota sold a total of 315,000 Priuses but only 1,400 went to China, and when you compare this to the 1,600 pandas in China, this could make the Prius an endangered species.

To avoid the extinction of the Prius in China, Toyota has declared that they will be looking to source a lot more of the vehicle parts in the territory. The other French carmaker, Peugeot-Citroen is also looking to up their market share. Peugeot has the Chinese auto company Dongfeng as a global equity partner and has an avowed intention of increasing manufacturing capacity from 600,000 to 1.5 million. The other JV that Peugeot has with Chongqing will see an increase from 50,000 to 200,000 units per year.

Not to be outdone, Beijing Benz Automotive, the Chinese arm of Daimler Benz, has announced that they are considering increasing production from 120,000 units per year up to 350,000 after the end of 2014. The push will come from the new, long wheelbase Mercedes C-class model, specially tailored for the Chinese market.

Car sales had been showing signs of slowing in China with growth in sales now cooling down to a single digit after years of double-digit expansion. The market for light vehicles grew by 15% in 2013 but is expected to slow to 2.5% by 2020. GM has forecast a growth rate of 8% in 2014, which will mean some 24 million cars will be sold and they are predicting that the rate would be about 33 million units a year by 2020; of course, this does make me wonder where they are going to put them all.

GM is looking to remain a dominant force in the territory and has announced plans to invest an eye-watering USD12 billion into the country by 2017, with a goal to boost capacity by at least 65%. GM is China’s second largest manufacturer by volume and it already has five new plants due to come on stream by the end of 2015, which will lift capacity from three million to five million units annually. GM has focused their new offerings on the SUV market, which is probably very smart as 60% of first time buyers last year opted for an SUV.

The limited Jeep Wrangler Dragon made its debut in the 2012 Beijing International Automotive Exhibition

Fiat has obviously seen the same market research that GM has and is planning to restart building the iconic Jeep brand in China in a JV with Chrysler and Guangzhou Auto. Jeep was the first foreign auto brand assembled in China when production started in 1983, but this was halted in 2006. Fiat is targeting more than one million Jeep deliveries worldwide this year, a 36% increase, and 60,000 of these are targeted for China.

Following up the rear are our old friends over at Tesla. The all-electric automaker is starting to deliver cars in China this year and CEO Elon Musk said, “At some point in the next three or four years, we’ll be establishing local manufacturing in China. China is very important to the future of Tesla. We’re going to make a big investment in China in terms of charging infrastructure.”

Of course, China has long practised trade barriers to ‘encourage’ manufacturers to produce in China. By establishing a factory there, Tesla will avoid the 25% import duty levied on CBU vehicles and, thus, make the car more affordable. Tesla hopes to sell as many cars in China as they do in the USA every year and is confident that they will capture the imagination of the Chinese buyers, even though the statistics show that Chinese buyers are shunning all-electric options due to range anxiety issues.

It would seem that the autoworld has gone crazy investing in China, during a time when the authorities there are wrestling with rampant air pollution problems throughout the country, and some now fear that there could be a restriction in new vehicle sales implemented throughout the country to try and rein in the rampant growth.


A polluted Beijing canal

The pollution in China is not just in the air but also in the ground. A new report out of Beijing and carried on the AFP wire service announced that the drive for industrialisation has taken its toll on ground water, with a staggering 60% too polluted to drink. The decades-long economic boom has brought with it environmental problems as growth was the target and environmental issues were ignored. Over the years, western companies were almost forced to move production into China to be able to compete on price. In western markets, strict health and safety rules and environmental standards increase the cost of production; in China, it would appear that the standards are much less strict which has resulted in an estimated 20% of the nation’s farmland becoming tainted by inorganic elements such as cadmium. Is this the price of progress?


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