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China Auto News of the Week (February 13-15, 2008)
Despite recent WTO ruling, China's JV automakers vow to increase local content
By Ally From:Gasgoo.com February 15 2008
Shanghai. February 15 (Gasgoo.com) – Despite World Trade Organization’s recent ruling against China over taxation on imported auto parts, China's joint venture automakers reaffirmed their commitment to increasing local content on cars they produce.
The World Trade Organization on Wednesday issued its first official condemnation of Chinese commercial practices, siding with the United States, European Union and Canada in a dispute over car parts, the Associated Press reported yesterday.
The WTO found that China was breaking trade rules by taxing imports of auto parts at the same rate as foreign-made finished cars, according to a copy of the ruling's conclusions obtained by The Associated Press.
"BMW will commit itself to promoting localization rate in China, which is of vital importance to our future. And that’s a top priority in China’s government policy on automobile industry,” said a public relations official from BMW Brilliance Automotive Co Ltd.
In 2007, BMW increased the number of its auto parts suppliers from 60 to 100 and total value of auto parts sourcing in China surged to 3.6 billion yuan ($500 million) from 2 billion yuan ($278 million). BMW sales in China rose 37 percent to 27,000 units last year.
Company officials from Beijing Benz and FAW-Audi also said they would increase the local content of their cars in line with Chinese government policies.
"Even if China loses the case and is forced to slash taxation on imported automobile parts, most automakers will continue to purchase in China due to price advantages," said Zhong Shi, a senior auto industry analyst in Beijing.
United States and the EU, joined by Canada said on Wednesday they had won a preliminary ruling on the case, even though the final ruling is not expected to be made public until the second or third quarter of this year.
Chang’an Auto Group injects $29 M into Changan Ford Mazda
By Tony From:Gasgoo.comFebruary 15 2008
Shanghai. February 15 (Gasgoo.com) – China’s fourth largest automaker group Changan Auto Group has decided to pump additional $29 million into its subsidiary Changan Ford Mazda, the Shenzhen-listed company said in an announcement yesterday.
The registration capital of Changan Ford Mazda will be increased to $35.14 million from $29.34 million, the announcement said.
After the new investment, Changan Auto Group’s total investment in Changan Ford Mazda will reach $175.72 million, which represents 50 percent of the joint venture’s total investment.
Ford Asia has invested $86.10 million in the joint venture. After Changan Auto’s new investment, Ford Asia’s stake in the joint venture will drop to 24.5 percent; Ford China, with a total investment of $36.90 million investments in the joint venture, will have a 10.5 percent stake; Mazda Motor will hold the remainder 15 percent stakes.
In 2007, Changan Ford Mazda sold 217,848 vehicles in China, an increase of 60 percent from one year earlier.
Sales of small-displacement cars will continue to decline this year
By Tony From:Gasgoo.comFebruary 14 2008
Shanghai. February 14 (Gasgoo.com) – Sales of small displacement cars (engine displacement 1.3 liter or smaller) in Chin’s passenger vehicle market will dwindle to 12 percent this year, according to a study report released by China’s National Association of Passenger Vehicles.
The report says China has not so far taken any serious steps to halt the declining trend of small displacement vehicles. The official definition (criteria) of small displacement made by National Development and Reform Commission does not even mention engine displacement. Under NDRC's criteria, small displacement vehicles must meet three standards: fuel economy (mileage), emission standards and car size.
Although Chinese government has included small displacement cars into its government procurement catalogue, in reality, no government agencies are really interested in buying small displacement cars, the report said.
More importantly, the government has not so far offered any substantial favorable policies toward the use of displacement cars. For example, the government imposes same property tax on a 1.1 liter displacement QQ (about $5,000) and a luxury Bentley ($1.5 million).
Separately, a recent survey conducted by Sinotrust found that more than 80% of Chinese car buyers choose to buy vehicles with engine displacement between 1.3L and 2.0L; only less than 20 percent opt for vehicles with displacement of 1.3L or smaller.
Sinotrust, a supplier of marketing solutions and credit solutions in China, surveyed 15,000 car consumers on small displacement vehicles.
"The small displacement vehicles are usually poor in driving experience, comfort, and safety compared to larger vehicles. I would rather spend a little more money on a larger vehicle, such as Polo, Fit or Peugeot 206," a car owner said.
Most small-displacement cars, including Chery QQ, FAW Xiali and Changan Benben, cannot meet Euro III emission standard yet and will be banned in major cities like Beijing and Shanghai.
Last year China's low-small segment vehicles sold 765,977 units, down 7.2 percent year on year, mainly due to the sluggish sales of key models, like Chery QQ(11,019 units, down 34.1 pct) and ChangAn Benben(1,973 units, down 43 pct).
China's auto industry association expresses doubts on government-backed mergers
By Tony From:Gasgoo.com February 14 2008
Shanghai. February 14 (Gasgoo.com) – China’s automobile industry experiences a string of government-backed mergers last year and is expecting more mergers in years ahead. However, China’s National Association of Passenger Vehicle Manufacturers expresses a skeptical view in a report on the recent wave of government-backed mergers in automobile industry.
Unfortunately, most mergers and acquisitions have finally ended up in failures, the Association’s report said. The report cited two examples to make its case: Mercedes-Benz finally got rid of Chrysler many years after it acquired Chrysler and BMW finally sold out Rover at one British Pound though it spent 3 billion euros purchasing the automaker.
Last year, Shanghai Automotive Industry Corporation acquired Nanjing Auto and Dongfeng Motor is in talks with Hafei Group for a possible tie-up.
"These are typical government-backed mergers,” the report said. “It takes at least five years for us to conclude whether or not these government-back mergers are successful.”
As Chinese auto industry is booming, it still lacks competitiveness in international marketplaces. Analysts say mergers between major automakers help pool resources. Clearly Chinese government encourages mergers between Chinese auto-makers in order to increase their capability to compete in the international markets.
China's auto industry association expresses doubts on government-backed mergers
By Tony From:Gasgoo.com February 14 2008
Shanghai. February 14 (Gasgoo.com) – China’s automobile industry experiences a string of government-backed mergers last year and is expecting more mergers in years ahead. However, China’s National Association of Passenger Vehicle Manufacturers expresses a skeptical view in a report on the recent wave of government-backed mergers in automobile industry.
Unfortunately, most mergers and acquisitions have finally ended up in failures, the Association’s report said. The report cited two examples to make its case: Mercedes-Benz finally got rid of Chrysler many years after it acquired Chrysler and BMW finally sold out Rover at one British Pound though it spent 3 billion euros purchasing the automaker.
Last year, Shanghai Automotive Industry Corporation acquired Nanjing Auto and Dongfeng Motor is in talks with Hafei Group for a possible tie-up.
"These are typical government-backed mergers,” the report said. “It takes at least five years for us to conclude whether or not these government-back mergers are successful.”
As Chinese auto industry is booming, it still lacks competitiveness in international marketplaces. Analysts say mergers between major automakers help pool resources. Clearly Chinese government encourages mergers between Chinese auto-makers in order to increase their capability to compete in the international markets.
China's automobile price may drop 5 percent in 2008 -- NDRC
By Tony From:Gasgoo.comFebruary 13 2008
Shanghai. February 13 (Gasgoo.com) – A latest survey made by National Development and Reform Commission (NDRC) indicates that China’s automobile price will continue to decline as much as 5 percent this year, according to Shanghai-based Chinese language newspaper Oriental Morning Post.
Strong supply, limited demand and growing competition in automobile industry will further bring car prices down in 2008, NDRC said in a report.
The Car Price Monitoring Center under NDRC said China’s automobile price dropped 4.86 percent last year. In last December, China’s passenger vehicle prices dropped more than 6 percent year-on-year.
China’s income per capita will continue to rise in 2008, but China’s car production will rise at a faster pace, which will lead to a continuing decline in car prices, the NDRC report said.
In addition, China will import or locally produce more than 80 new car models this year. The expansion of output capacity, growing stockpiling and more imports will bring down car prices, NDRC said.
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