China Auto News of the Week (June 23 - June 27, 2008)

Russia's new certification to affect China's auto exports

Shanghai, June 23 (Gasgoo.com) The Russian government will implement the revised version of its certification system for vehicle imports starting July 1, which will raise the standards for foreign carmakers to enter the Russian market and affect China's auto export to Russia.

Russia has used three means of importing vehicles: temporary import in small quantities, one-year import, and three-year import. But from July 1 when the new certification system takes effect, the temporary import will be canceled, and some of the three-year import standards will be used for the one-year import, which has additional requirements for emissions and safety. This will keep foreign carmakers, especially those from China, who are not ready for the new certification system, at bay from one of the world's emerging auto markets.

But Ford Motor will have lots of rivals driven away because it has large manufacturing facilities in Russia and is well prepared for the new system. Currently Ford has 133 sales and service centers in 88 Russian cities and it aims to sell 200,000 vehicles in the country in 2008, up 17.6% over last year.

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SAIC to put $1.3 bln auto-parts assets into Bashi

SHANGHAI, June 23 (Reuters) - SAIC group, China's biggest auto conglomerate, is to inject 8.8 billion yuan ($1.28 billion) of auto parts assets into Shanghai Bashi Industrial (Group) Co, becoming its parent under a previously announced asset-for-equity deal.

Meanwhile, Bashi, a struggling bus service provider in Shanghai, will shed about 2.2 billion yuan of public transport assets, Bashi said in a stock exchange statement on Monday.

The planned injection of SAIC's auto parts assets, a business growing more than 30 percent a year, would almost double Bashi's profit and boost its net assets by 59 percent.

Bashi first announced on June 2 that it would divest its public tranport assets and become a listing vehicle for SAIC. Its shares have been suspended since May 16 pending announcement of the transaction details.

Many auto dealerships may go under by year end

Shanghai, June 23 (Gasgoo.com) The sharp slide of the auto market and the mounting stockpile of vehicles in the past two months have put China’ car dealerships in great difficulty. A recent survey by a market research firm predicts that a large number of auto dealerships will be closed by the end of 2008.

"Dealers of our brand have closed their stores," said a Shanghai VW dealership manager, who is now falling back on his years of car repair expertise for his store to sustain its business. Most managers of big-name car brands have experienced the same market depression, which has left large supplies of vehicles piling up in their courtyards. On the other hand, banks are controlling credit loans more strictly and the auto dealers are unlikely to get any timely cash flow.

Baosteel agrees with Rio Tinto on iron ore price rise

Baosteel, China's largest iron and steel maker, said Monday it had agreed with Australian mining group Rio Tinto on a price increase of up to 96.5 percent for iron ore in 2008, nearly double that of 2007.

Baosteel, which negotiated on behalf of China's steel industry, agreed to a 79.88 percent price hike for Pilbara blend fines and Yandicoogina fines and a 96.5 percent price rise for Pilbara Blend Lump for the contract year starting on April 1.

Prices will be 144.66 U.S. cents for per dry metric tonne unit of Pilbara blend fines and Yandicoogina fines and 201.69 U.S. cents for per dry metric tonne unit of Pilbara blend lump.

China Aviation Group to boost auto-making business

Shanghai, June 24 (Gasgoo.com) China Aviation Industry Corporation I (AVIC I) and China Aviation Industry Corporation II (AVIC II) will be merged to form a new China Aviation Industry Group Corporation, and one of its top priorities is to expand its auto business. Dongfeng Motor's investment in AVIC II's subsidiary Hafei Auto is put on the table again. 

Currently, AVIC II has three auto-making subsidiaries (Hafei Auto, Changhe Auto, Shaanxi Hanjiang Auto) and two engine manufacturers (Harbin Dongan Auto Engine Co., Ltd., Harbin Dongan Engine Manufacturing Corp. which is a joint venture with Mitsubishi); the auto businesses of AVIC I include the Silver Bus, Jincheng Motorcycle and Chengfei Auto Die.

The new group will not give up the automobile businesses of both the current corporations, because these businesses will be closely related to the new group's future interest. "To maximize the benefits of the group is one of the prerequisites for our decision to expand the auto-making business," said an official of the preparatory committee of the group. The group will integrate all the auto businesses of the two corporations to build up a competitive auto-making giant in China's auto industry.

Changan signs a deal to build Benben in Iran

Shanghai, June 25 (Gasgoo.com) Chongqing Changan Automobile Co, partner of Ford Motor Co in China, has sign a cooperative agreement in Chongqing with Iran's Pars Industrial Development Foundation (PIDF) to assemble compact cars in Iran starting the first half of next year, the state run Xinhua news agency reported Wednesday.

Changan will provide technologies and auto parts to the joint venture facility, while PIDF will in turn take charge of the production. The facility will have an initial annual capacity of 50,000 units, which will rise to 250,000 eventually.

Changan's compact Benni, which it developed in-house, will be assembled in the facility near Tehran, mainly targeting the local market. 

Shanghai VW's Lavida on sale for 112,800 yuan plus

Shanghai, June 26 (Gasgoo.com) Shanghai Volkswagen launched its new Lavida to the Chinese market on June 25. This all-new Lavida model is the first A-Class sedan jointly developed by Chinese and German technicians of the joint venture between Shanghai Auto (SAIC) and Volkswagen. The Lavida "made in and for China" will sell for 112,800 yuan ($16,430) to 149,800 yuan.

The Lavida sedan, which debuted at the 2008 Beijing auto show in April, is said to be "thoroughly tailored to the automotive wishes of modern Chinese society." It is Shanghai VW's first production model of the Lavida sedan, which Volkswagen has designated as one of its new strategic models for the growing Chinese market.

Toyota JV set to sell 35,000 Yaris cars this year

Shanghai, June 26 (Gasgoo.com) Guangzhou Toyota Motor Co., a 50-50 joint venture (JV) between Toyota Motor Corp. and Guangzhou Automobile Group Co., said today it will keep its original sales target for Yaris despite rising raw-materials prices.

"We are confident of selling 35,000 Yaris cars by the end of this year and we do not want to adjust that target," said Feng Xingya at an event to mark the official launch of Toyota Yaris in Shanghai. Feng is the deputy general manager of the company's sales and marketing division.

At the ceremony he also confirmed the company's second production line is scheduled to start operation in mid 2009, which will boost the JV's annual output to 400,000 units eventually, but he stopped short of commenting on whether the Highlander SUV or any other model will be build there in future.