China Auto News of the Week (March 10-14)
Chinese lawmakers appeal government to offer incentives for small cars
By Tony From:Gasgoo.com March 14, 2008
Shanghai. March 14 (Gasgoo.com) - Delegates to the annual session of National People's Congress are appealing the government to offer incentives to both manufacturers and consumers of small displacement cars, state media China Youth Daily reported yesterday.
The delegates asked Chinese government to lower or cancel taxes and other charges for both manufacturers and consumers of small displacement cars in road maintenance fee, toll, parking, insurance and etc, the report said.
While surging oil prices and worsening air pollution are becoming more and more serious concerns for both Chinese government and industrial experts, the sales of small displacement are declining continuously.
Last year, China sold a total of 730,200 small cars with engine displacement below 1.3 liter, which represents only 11.6 percent of China's total sedan sales, according to China Association of Automobile Manufacturers. While China's sedan sales rose 21.84 percent, the sales of small displacement cars dropped 3.7 percent. Also last year China sold only a quarter million small cars with engine displacement below 1.0 liter, down 30.9 percent.
Official statistics from National Passenger Vehicle Manufacturers indicate that average engine displacement of China-made sedans last year stands at 1.68 liter, an increase of 0.15 liter from one year earlier.
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.
Traditionally, small displacement cars are perceived by Chinese consumers as low priced, poor quality vehicles that deliver poor driving experience, low safety standard and poses serious pollutions. More Chinese cities and local governments have restrictive polices against small displacement vehicles.
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.
Industry experts identified two reasons behind the continuous decline of the sales of small cars. First most Chinese consumers consider "face-losing" to drive small cars and therefore have an inclination not to buy small cars; secondly, the repeated price-cuts of middle and high-end cars are squeezing the market share of small cars.
Now industry experts are talking about one more important factor that government has done nothing to show its support to small displacement cars: not preferential polices or incentives are offered to small displacement cars.
To address this problem, Wang Feng Ying, president of Great Wall, suggests that the future belongs to high quality, high safety performance, fuel saving and less polluting small vehicles and they should have all the incentives from the government.
China prepares to end foreign control over domestic sales network
By Tony From:Gasgoo.com March 13, 2008
Shanghai. March 13 (Gasgoo.com) - Chinese Ministry of Commerce is preparing to revise The Regulation on Automobile Brands in a bid to end foreign automakers' monopolization over sales networks. So far, China Automobile Dealers Association has held a string of seminars and conferences on this problem, the Shanghai Securities News reported today.
Despite continuous declines of local-made automobile prices over the past decades in Chinese market, the average prices of imported automobile are increasing by 7 percent annually over the past years.
"Regulations on Automobile Brands is a major factor behind the price growth of imported vehicles," said Su Hui, general manager of Asia Olympic Village Automobile Trading Center in Beijing. "If you want to improve this situation, you have to change the Regulations."
Since the execution of Regulations on Automobile Brands three years ago, all global automakers have taken control of sales networks of their brands and thus monopolized the sales of imported cars. Consequently, these global companies have taken complete control over the pricing of imported cars, Su said.
On a Forum sponsored by China Trading Center for Automobile Imports in January, Wang Qinhua, an official from State Council said that "The Regulations have created an uneven level field for China's domestic auto sales companies and foreign automakers. Foreign automakers have monopolized the sales networks of imported vehicles. By contrast, Chinese automakers in Sino-Foreign joint ventures are losing rights of speaking."
According to official Customs Statistics, China imported a total of $7.52 billion worth of autos or chassises in 2006. However study shows Chinese customers paid nearly a total of $10 billion for these imported vehicles. That means about $2.5 billion profits are taken away by auto sales companies controlled by foreign automakers, Shanghai Securities News said.
American private equity group acquires 10% stake of Brilliance Auto
By Ally From:Gasgoo.com March 12, 2008
Shanghai. March 12 (Gasgoo.com) -American private equity group Rocket Capital Investment Group and Red McCombs have signed a memorandum of understanding with Chinese automaker Brilliance Automotive Holdings to acquire 10%-15% stakes of the latter, China Securities Journal reported today.
Under the agreement, Rocket Capital Investment Group's owner Les Alexander and Red McCombs, a founder of Clear Channel Communications, will pay around US$100 million to acquire these stakes. Rocket Capital will also send a non-executive director to Brilliance's board.
Headquartered in Houston, USA, Rocket Capital is a leading private investment platform founded by NBA Houston Rockets owner Mr. Leslie L. Alexander. Mr. Alexander also owns one of the largest bond trading private accounts on Wall Street.
The new investment will be used to fund Brilliance's research and development programs on new sedan models and BMW models. The investment will also be used to fund a joint venture program, according to the MOU.
"Both sides want to take a controlling share of the proposed joint venture," said Wu Xiao An, president of Brilliance Auto. "It may finally come out as a 50-50 joint venture."
The joint venture will concentrate on the development of after-market business, according to the China Securities Journal report. "The profit margin of the after-market business is much bigger than that of the automobile manufacturing business." Wu said.
"Car exports are an important part of business operation," Wu said. "By the middle of next year, we will be able to clear all legal hurdles in the United States and export the first batch of Brilliance's Zhonghua brand vehicles to that market."
China's auto financing industry turns profitable for the first time ever
By Joanne Jiu From:Gasgoo.com March 11, 2008
Shanghai. March 11 (Gasgoo.com) - China's auto financing companies gained RMB16.47 million($2.31 million) in profits last year, marking the first year for the industry to turn profitable since the first auto financing company opened four years ago, reports Beijing Daily today.
"Back in 2006, non-performing loans in vehicle consumption sector rose to a new high, as some commercial banks tightened lending which in turn gave the auto financing companies an opportunity," said Wang Hong, expert from B. Thinking Management, a Shanghai-based company providing consulting service for the auto financing industry.
Since 2004 when G.M. began operating China's first auto financing company, auto financing industry has been a money-losing business over the past few years, as commercial banks are the only vehicle to offer auto financing loans.
"In 2007, China tightened monetary policy and banks were ordered to reduce lending. And that revived the business of auto financing companies," added Wang.
Currently nine companies have gained approvals to operate auto consumption lending business from China Banking Regulatory Commission, and eight of them have started business in China.
By the end of 2007, the eight companies have a total asset of RMB28.498 billion, a credit balance of RMB 25.515 billion, liabilities of RMB22.822 billion and ownership interest of RMB5.676 billion, according to B. Thinking Management.
"This year will be positive for the auto financing companies based on the current situation," Wang forecasts.
First China-made recreational vehicle shows at Asia Bus Show in Shanghai
By Ally From:Gasgoo.com March 11, 2008
Shanghai. March 11 (Gasgoo.com) - The first Chinese-made recreational vehicle is displayed at the Asia Bus Show in Shanghai today.
The recreational bus, made by Bailujia Bus Co., a subsidiary of KAMA Co, ran off assembly line in Nanchang of Jiangxi province on March 8. A ceremony was held for the event.
At the launching ceremony the company also signed export contracts with Mohammad Vehicle Co of Jordan and Bus and Coach International from Australia respectively. Under the contracts, Bailujia Bus will delivery 200 luxury recreational vehicles and 500 complete knock down kits to the Jordan company and 300 units to the Australian company.
The recreational vehicle is built by Jiangxi Bailujia with its own intellectual property rights and is priced between $200,000 and $500,000. It is equipped with beds and other advanced equipments and features high fuel economy and safety.
KAMA is a machine-building corporation in China, mainly engaged in producing automobiles, auto parts, intermediate and small-sized multi-function diesel engines, and general-purpose machineries.
Headquartered in Shanghai, the company's total assets reach RMB 2.384 billion Yuan in total; sales revenue hit more than RMB 2.66 billion yuan last year. The automaker currently employs 10,000 workers.
Chery, Chrysler may reach partnership agreement in first half year, official says
By Ally From:Gasgoo.com March 10, 2008
Shanghai. March 10 (Gasgoo.com) - China's Chery Automobile Co is expecting to forge tie-up relations with Chrysler as early as the first half of this year, a senior Chery official confirmed to local Chinese newspaper last week.
The business newspaper Information Times report cites Jin Gebo, top aide to Chery's general manager, as saying that "Talks between the two parties are accelerating and a final agreement is likely to be reached as earlier as the first half year."
The report said Chery plans to use land and technology as investment in the joint venture while Chrysler will fund the project with cash. And this joint venture will be a 50:50 partnership.
Chery is to build Dodge-badged A1 and A3 model at its third plant, which has an annual capacity of 250,000 vehicles, according to the report.
The Chery-Chrysler joint venture will be built in the same fashion as Chery and Quantum LLC's joint venture, which was unveiled in earlier this month.
In the Chery-Quantum LLC joint venture, Chery will invest US$270 million in terms of land and technology in return for a 55 percent stake of the joint venture while Quantum LLC, a subsidiary of Israel Corp, will invest US$225 million for a 45 percent stake in the joint venture.
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