Tuesday, April 21, 2009

"Moo-ve over Ox, this is the Year of the Car"

So read the headline in the China Daily yesterday. It is astonishing that in the first 3 months of this Year of the Ox, there have been higher monthly auto sales in China (1.1 million cars in March 2009) than in the USA. 20 years ago, there were only a few outdated models available, the grand old Red Flag was the Chinese Mercedes, and the total production volume of the few local car companies in the whole country was even less than that of a single Western or Japanese car-maker alone. Buying a car was so easy then since there was little choice in size, shape, style, colour or price.
There were few delivery time problems since there were high taxes and import duties imposed so few white collar workers were able to even think of buying a car. That was the privilege of the few foreigners in China or government leaders.

Now, after a decade of double digit growth in annual GDP as well as annual car production, all that has changed. Firstly there are several hundred million 'middle class' consumers who have, or will soon enter the market. Secondly, most major multinational automakers are in China with one or more joint venture factories producing a whole range of compacts, luxury sedans, hatchbacks, jeeps, and SUVs.

Did you know that even the ever so British London taxi is being produced in China? And the automakers are not bringing their old outdated models, anymore but the latest ones for the increasingly sophisticated Chinese car owner.

On top of that, China has been buying technology and brands, notably MG (now 'Modern Gentleman') and Rover (now Roewe),

and is developing her own emerging auto 'giants, notably SAIC, FAW, JAC, Geely and Chery, as well as BYD specialising in electric/hybrid cars.

The Red Flag brand still going strong after 50 years, has reinvented itself as a high end sedan car,........

whilst Geely's high end model has definitely taken inspiration from Rolls Royce.....

What has happened in the past couple of decades with household goods such as TVs, fridges, microwave ovens, air conditioners, computers and cameras - where China changed from being a net importer to global exporter - will soon happen to the auto sector as well. Watch out Detroit!

The biennial Shanghai Auto show (13th one, also called Auto Shanghai 2009) which opened this week is a sign of things to come, with an unprecedented number of almost 40 new product launches by domestic and global manufacturers. 1500 companies from 25 countries are present. Volkswagen, Mercedes -Benz and BMW have stands each with an area exceeding 2500 sq. m. GM, nervous under the shadows of possible bankruptcy back home at its headquarters in USA, is showing off 37 models over its full range.

Porsche has even chosen this show for the global launch of its first ever luxury sedan model.

There is undoubtedly a marked contrast between the optimism here and the gloom in other parts of the world in the auto industry. Of course, part of the demand is due to government policy measures with reduced taxes and subsidies, especially for smaller fuel efficient models and rural buyers. Demand has also been artifically boosted by delayed purchases rolled over from last year by customers waiting for prices to drop. It remains to be seen for how long the surge can be maintained. Meanwhile, there are many happy faces to be seen at Auto Shanghai 2009, both from manufacturing suppliers as well as potential new car owners. As some headlines have been proclaiming, "Crisis, What Crisis?".

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