Carmakers vie for China sales amid global slump

Carmakers are cutting any costs they can these days, but China is one place where they won't be skimping as they battle for customers in one of the world's few remaining growth markets.

Shanghai will host what has become an increasingly high-profile auto show in China next week, when virtually every brand will try to impress with glitzy new cars and concepts while offering a glimpse into the next generation of green vehicles to showcase their technological advances.

With floor space roughly the size of 30 football fields, Auto Shanghai 2009 will house 13 world premieres -- mostly from local brands -- up from five at the show two years ago, organisers said. Shanghai and Beijing take turns hosting the main Chinese auto show every year.

One of the highlights will be the unveiling of the Panamera grand tourer, Porsche's fourth model line and its most important product launch in years.

German rival BMW will also take the wraps off two brand new models, including the 760Li sedan, the first car to feature its newly developed eight-speed automatic transmission.

"China is the largest market in Asia," said Wang Xia, a top official at the China Council for the Promotion of International Trade, one of the event organisers. "The Shanghai auto show has every reason to be the most influential auto show in the region."

That has rung true especially after the exit of virtually every major non-Japanese automaker from Asia's premier Tokyo Motor Show, scheduled for late October.

Among the executives attending Shanghai will be General Motors Corp ( GM - news - people )'s newly appointed chief executive, Fritz Henderson, who is racing against a government-imposed June 1 deadline to hammer out a restructuring plan or face bankruptcy.

CHINA TOPS NOW

Only a few years after surpassing Japan as the world's second-biggest car market, China has overtaken the United States in sales so far this year as a deepening recession and credit crisis keep Americans from showrooms.

While the outlook for Chinese car sales will depend largely on what other stimulus measures the government offers, analysts point to a consensus of around a 10 percent rise this year.

"(China) is the only healthy large car market in the world right now," said Graeme Maxton, a Europe-based auto analyst.

"And that means it's going to get far more attention. Everything else is collapsing. The only place you can grow is China," he added, while warning that that would also mean fiercer competition.

Research firm J.D. Power has forecast an 8.2 percent fall in global auto sales this year as demand tanks in the United States, Japan, Russia and most other markets.

The Shanghai auto show will open to the media on April 20 and to the public for a week from April 22.

PULLING OUT THE STOPS

Chinese car sales grew 10 percent from the year before to a record in March, extending gains from the previous month fuelled by the introduction of lower taxes on cars with engines smaller than 1.6 litres.

While no sweeping incentives have been directed towards hybrids and other fuel-saving cars, many Chinese automakers will join their foreign rivals in showcasing such advanced technologies to demonstrate they have the means to compete when environmental regulations are eventually tightened.

Top Chinese carmaker SAIC Motor will display an electric car developed in-house as well as a hybrid version of its Roewe sedan, expected to hit showrooms next year.

Privately held Chery Automobile, best known for its low-end QQ model, is also due to display vehicles in the hybrid and pure electric car segments, which BYD Auto, a unit of battery maker BYD Co, is keen to dominate.

"It seems that both local and foreign car makers are eager to tap the potential of clean vehicles even though government subsidies have not covered private buyers so far," said Zhang Xin, an analyst with Guotai Junan Securities.

Perhaps more staggering is the sheer number of prototypes that will be on display from some of the Chinese brands.

Hong Kong-listed Geely will unveil no fewer than 22 new models, mostly under three new upcoming brands: Gleagle, Emgrand and Shanghai Englon. Thrown into the lot will be a Formula One concept car.

Geely will also be joined by Chery and Great Wall Motor, among others, in unveiling mid- to high-end sedans as local brands attempt to move upmarket.