Business

Cars

A review of China's auto industry

Updated: 2010-12-27 15:23

(China Daily)

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Another torrid market, yet year draws to end on an ominous note

Editor's note: It was a year of record sales and the biggest-ever Chinese acquisition of a foreign automaker, but as 2010 drew to a close, the Beijing municipal government moved to drastically reduce the number of new cars sold in the city in 2011. China Daily auto writers Gong Zhengzheng and Han Tianyang report on what made news in the last 12 months.

Capital cuts new cars

Advertisement above a Beijing car sales and service shop open late into the night of Dec 23 warns that city government restrictions on new car registration will take effect the following day. Just 240,000 new cars will be allowed in 2011 due to rising traffic congestion in the capital. [Photo / Asianewsphoto]

The Beijing municipal government on Dec 23 released new measures to sharply reduce new vehicle registration in a move to ease worsening traffic congestion in the city.

Only 240,000 vehicles will be registered next year in Beijing, in comparison with more than 800,000 cars sold in the capital city this year.

Analysts said that auto market in the whole country will be affected if other medium and large cities follow Beijing and implement similar rules.

Another factor to impact the market is expiry of the nation's tax rebate next year.

Anticipating the new policy, Beijing citizens rushed to buy cars and apply for license plates in the past few days.

Local press reported that a record high of 9,000 vehicles were registered on a single day on Dec 23, bringing the total number of vehicles registered in Beijing to 4.8 million.

Fast lane

Crowds at Audi's exhibition booth at an auto show. The luxury leader sold its 1 millionth vehicle in China in October. [Photo / Asianewsphoto]

Vehicle production and sales in China continued on the fast track this year, powered by the country's steady economic growth and the mounting consumer demand for mobility.

According to the China Association of Automobile Manufacturers, both production and sales hit 16.4 million units in the first 11 months, surging 33.7 percent and 34.1 percent from a year ago.

Full-year production and sales will both exceed 18 million units, maintaining China's crown of the world's top vehicle producer and market.

New-energy fever

Billboard promoting new energy vehicles. [Photo / Asianewsphoto]

A range of domestic and foreign carmakers plan to offer new-energy vehicles to buyers in China, which is facing the dual pressures of pollution and fuel shortages.

The companies include Volkswagen, BMW, Nissan, Honda and Toyota as well as homegrown brands Chery, Geely, BYD and SAIC. Volkswagen, the biggest passenger car provider in China, announced that it will build its Golf and Lavida blue-e-motion electric cars at its two joint ventures in China between 2013 and 2014.

Governments at various levels are also backing the development of hybrid and electric vehicles. Owners of purely electric cars in five pilot cities - Shanghai, Changchun, Shenzhen, Hangzhou and Hefei - have been eligible for a subsidy of 60,000 yuan since June this year. Owners of plug-in hybrid cars can receive up to 50,000 yuan.

Geely's Volvo buyout

Chairman of Zhejiang Geely Holding Group Li Shufu hugs Ford's Chief Financial Officer Lewis Booth attend the signing ceremony on March 28, 2010. [Photo / Xinhua]

China's major indigenous brand Geely completed its $1.8-billion acquisition of Swedish premium carmaker Volvo from Ford Motor Co in August after two years of negotiations, marking the biggest overseas merger yet by a Chinese auto company.

Geely then named Stefan Jacoby, former CEO of Volkswagen Group in America, the new chief of Volvo.

The new Volvo board is headed by Geely Chairman Li Shufu and has several new directors including Volvo's former president and chief executive Hans-Olov Olsson as vice-chairman.

Geely has also reshuffled Volvo's China management. Volvo retains its headquarters and manufacturing presence in Sweden and Belgium. Its management has the autonomy to execute its business plan under strategic direction from the board.

Luxury boom

Two models stand next to a new Bugatti concept car during the official opening of the world's first Bugatti showroom in central Beijing September 23, 2009. [Photo / Reuters]

German luxury carmaker Audi's accumulated sales in China since it entered the market in 1988 passed 1 million units in October.

The company, which is the first foreign luxury carmaker produce in China, has revealed an aggressive plan to move another 1 million vehicles in China over the next three years.

Audi produces the A6 and A4 sedans as well as the Q5 SUV at a joint venture with its parent Volkswagen Group and China's FAW Corp.

In the first 11 months of this year, Audi's China's sales topped 200,000 units, maintaining its two-decade reign in the country's luxury car market. Arch-rivals BMW and Mercedes-Benz also posted blistering sales growth in China this year.

Toyota's apology

Akio Toyoda [Photo / Asianewsphoto]

In a first by a global carmaker's top executive, Toyota Motor Corp's president Akio Toyoda apologized to Chinese customers in an emergency press conference on March 1 in Beijing for its massive global recall over brake problems.

In China, the company recalled 75,500 RAV4 SUVs made at its joint venture plant in Tianjin due to defective brake pedals, a tiny ratio of its global recall of nearly 8.5 million vehicles because of similar problems.

"The incident caused worries to Chinese consumers. I hereby express my sincere apologies for these worries," Toyoda said at the press conference.

He blamed the problems mainly on the carmaker's overly rapid expansion. While he made a similar apology in Washington, the company faces far more serious sanctions in the US.

According to China's current regulations, vehicle producers that try to cover up defective products can be fined a maximum of 300,000 yuan, a negligible punishment compared with what they face in Western markets.

Guangzhou Auto listed

The GAC display area at the 2010 Beijing Auto Show. [Photo / Asianewsphoto]

To fuel its aggressive expansion, China's sixth-biggest automaker Guangzhou Automobile Group Co Ltd consummated a long-awaited listing in its entirety through a HK$51.6 billion ($6.6 billion) buyout of its Hong Kong-listed unit Denway Motors at the end of August.

Guangzhou Auto - the partner of Honda, Toyota and Fiat - is also expected to float shares in Shanghai next year.

During the Guangzhou auto show set to close today, the company announced it plans to hike its annual production capacity to 3 million vehicles by 2015, up from less than 1 million this year.

FAW Corp, Chery, Lifan and Beijing Automobile Industry Holdings Corp are also preparing for stock listings. SAIC Motor Co Ltd, China's top auto group, went public in a Shanghai listing in 2006. Dongfeng Motor Group Co Ltd, the No 3 automaker, floated shares in Hong Kong in 2005.

Peugeot's new liaison

A model stands by a Citroen car in the 2007 Shanghai Auto Show. [Photo / Asianewsphoto]

PSA Peugeot Citroen in August clinched a deal with Chang'an Motor Corp to form a joint venture to develop and produce cars in China.

The move made the French company the latest major foreign carmaker with second partner in China as well as Volkswagen, Toyota and Honda.

The move came amid PSA Peugeot Citroen's unsuccessful 25-year partnership with Dongfeng Motor Corp.

The French carmaker's new joint venture with Chang'an will have a production capacity of 200,000 cars and 200,000 engines in the initial stage. The new association in China will pose a big challenge to PSA Peugeot Citroen on how to balance relations between two different major partners.