Chinese Cars Pick Up Speed in Germany

The cars from Chinese manufactures Geely, Jiangling and Brilliance that Germans saw at last year's Frankfurt IAA auto exhibition -- some of which will be popping up again next week at the Detroit Auto Show -- can't match their German competitors for now, but it won't be long until they do, according to Ferdinand Dudenhöffer of Germany's Center for Automotive Research.

"The Chinese will be competitors sometime around 2010," he said. "However, they do need a certain amount of time until they have cars that are marketable in Europe."

This point was proved by recent crash tests conducted on Jiangling's Landwind sport-utility vehicle by the ADAC, Germany's largest automobile association.

The club said a driver would have virtually no chance of surviving a head-on crash at 64 km/hour (40 mph). The vehicle preformed better in a similar test by TÜV, another German certification board, after a series of changes were made.

Germany, Europe provide technical assistance

To help the Chinese meet stricter Western safety and environmental standards, European and American manufacturers partner with Chinese companies in exchange for access to China's domestic market.

While the western companies are wary of losing their competitive edge to their partners, the deals are the only way the Beijing government allows non-Chinese car manufacturers to reach the 160 million Chinese expected to buy a car by 2020.

"The Chinese automobile manufacturers are using joint ventures to learn how to build cars from Germans and Europeans," Dudenhöffer said. "With this knowledge, the Chinese are moving aggressively into export markets."

Like Japan and South Korea but faster

While smaller manufacturers like Geely and Jiangling, with a combined total annual production of just 155,000 cars, try to make names for themselves at international auto shows, China's export market is still in the teething stages -- with just 2 percent of the 2.3 million cars China produces leaving the country, according to KPMG's annual China Automotive Report.

"The Chinese will not be a threat in the first years, but they will be a serious additional provider in the market," said Thomas Böhm of the German Association of Motor Vehicle Importers.

But Dudenhöffer said he doesn't think it will be long until China's two largest carmakers, Shanghai Automotive Industry (SAIC), which produces 740,000 cars, and First Automotive Works (FAW), with production of 650,000 cars, get involved.

"The big players are more reserved, they are building up their strengths, and we can expect that in three to five years they will begin their attacks on the USA and Europe," he said.

For an idea of what could be in store down the line, carmakers only have to look towards Japan and South Korea. After initially writing off the Japanese and Korean competition as cheap alternatives that would not meet the demands of the German market, Mercedes and co. watched their market share drop as Toyota's and Hyundai's reputation improved.

"The Chinese have more automobile manufacturers, the manufacturers learn much faster," said Dudenhöffer, comparing the Asian nations. "They are going to grow very quickly."

Europe won't give up mass market production

To fight the emerging competition, German companies won't willingly give up any segment of the automobile market, as advocated by Chinese officials suggesting Europe concentrate on luxury vehicles and leave the cheaper, mass produced cars to China, according to Böhm.

"The Europeans would not be happy with splitting the market in the long run," he said. "That is one reason why German manufacturers are moving to China to lower prices."

Although German drivers can get very emotional when it comes to buying a car and often remain devoted to their chosen brand, cost could start dictating that Chinese cars end up on German driveways.

"We have a very high emotional connection to automobiles in Germany, but we will not be able to afford it forever," Böhm said, adding that Germany's difficult economic situation is forcing people to examine spending habits. "If I buy a German car made with relatively high number of parts from China, why not just get a completely Chinese product -- if the price is right?"