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Major automakers continue China expansion plans

By Sun Xiaohua (China Daily)
Updated: 2008-11-18 17:28

Hurt by tumbling sales in many developed markets, major auto companies around the world are banking on future growth in China.

Related readings:  China considers policies to save auto market  Auto firms may step up pleas for help

Although most carmakers are going into a mode of global contraction, they have remained confident about business prospects in China. Some of them have even embarked on ambitious expansion plans to cater for projected increase in demand in the longer term.

At the end of October, Toyota Motor and China FAW Group held a groundbreaking ceremony for its new 4-billion-yuan plant in Changchun, Jilin province in northeastern China. The plant, Toyota's sixth with FAW, will have an annual production capacity of 100,000 units, with the Corolla cited as the model intended for manufacture.

US auto giant, General Motors (GM), launched the construction of a new $250 million corporate campus in Shanghai, which includes a research and development center that will focus on the study of alternative fuels, on September 17, the day after Lehman Brothers declared bankruptcy.

"No major market is expected to grow faster or play a more important role in the ongoing development of the automotive industry than China," president of GM China Kevin Wale said at the ground-breaking ceremony.

Yale Zhang, a Shanghai-based auto analyst with US consultancy CSM Worldwide, told China Daily: "Although the current actions of putting investment into China may not help them much to weather the global crisis, it makes sense for long-term profitability."

Given the relatively small number of cars in China, the market is attractive and there is space for increasing production, according to Zhang.

Passenger vehicles are one example. In the US, per 1,000 people there are 700-800 passenger cars, while in China the number is less than 20, Zhang said.

For many Chinese families with a stable income and plans to purchase their first car, they will not give up the purchasing plan (despite dark clouds on the economic horizon).

"Although some of my money vanished in the stock market, I can still afford a vehicle for less than $30,000," said Wang Lei, a media employee in Beijing, who cannot wait to say goodbye to the experience of squeezing himself into the subway every morning. He is doing homework to buy the first auto in his life.

"Now it is a good time to buy a car, because many promotion packages are on to stimulate sales."

Auto sales in China this year are not exception to the financial crisis, falling from two-digit annual growth to one-digit, Zhang said.

"China is not a haven for auto industry in current situation. My estimation shows the Chinese auto market is about two years away from recovering from the financial storm."