Chinese Cars To Hit European Market
July 8, 2005
German companies like Volkswagen, BMW and DaimlerChrysler have all invested heavily in China, building new factories there in order to benefit from the country's automobile boom. Yet China could become a worry to European carmakers in the future.
The Chinese are not buying as many compact cars as German companies hoped for. And now, Chinese carmakers are beginning to export inexpensive vehicles to Europe.
The first shipment of the Zhonghua, a classic notchback sedan, is expected to arrive in the German port of Bremerhaven this fall. With the caliber of a Mercedes-Benz E-class, the five-door model from China has got a smaller price tag at under 20,000 euros ($23,875).
The sedan built by car manufacturer Brilliance, the joint-venture partner of BMW in the northeastern Chinese city of Shenyang, already got a positive reception at the automobile trade fair in Leipzig earlier this year.
An appealing car, with an exotic touch
Brilliance wants to export 3,500 cars to Europe this year. In the coming years, this figure is supposed to continually increase by 20 to 30 percent.
"One of the benefits of the Zhonghua is the fact that the car is from China and therefore presents a new face on the European market," said Brilliance's export manager Liu Juan. "It's very appealing, with a hint of an exotic touch."
"Another benefit is that though it may be a car from China, it is thoroughly a European automobile: designed by an Italian and optimized by Porsche," she added. "In this sense, it fulfils European needs."
Three Chinese manufacturers export to Europe so far. This week, 200 of the first SUV Landwind were delivered to the Netherlands. They have reportedly all been sold already.
The model by Jiangling Motors, which Ford also has a stake in, costs between 17,000 and 18,000 euros -- half of the next affordable competitor.
Beijing's status mentality
But why should China go to Europe and the United States when international manufacturers currently have one goal only: China, the fasting growing car market in the world?
The answer is simple: sales difficulties in their own country and the enormous status mentality of the Chinese government.
Beijing wants to prove to the world that it can now build cars suitable for the world market. Without financial support from the government, the Landwind would never have been able to drive off the production line in Jiangxi province.
The price is decisive
Europe might still be looking down its nose at Chinese cars. But market observers reckon that the Chinese might follow the same road as the Japanese, which convinced more and more customers in the long-run with low prices and much technological gadgetry.
In times of economic recessions, many a customer will think twice if he can refuse a deal 30 to 50 percent less just because of the "Made in China" stamp, said Liu Juan.
"The price is decisive," she said. "In the future, we want to increase our competitiveness even further in all sectors: management, production, sales and finances. If we succeed in achieving the same level of management as our foreign competitors and, at the same time, at Chinese prices, then we can certainly beat them."
China can score in the long-term
The ambitious aspirations of Chinese manufacturers on foreign markets reflects a change in China's industrial policies. In the past 20 years, China has systematically built up its production base by bringing foreign companies like Volkswagen or General Motors into the country.
Estimates show that the production capacities of the Chinese automobile industry will triple by 2007 to 15 million cars per year. This would put it 50 percent above the expected demand.
Industry experts are of the opinion that the Chinese can score mainly with inexpensive models in the compact car sector in the long-term, as they offer good design and technology.
The Association of German Automobile Manufacturers VDA isn't worried, though. VDA president Bernd Gottschalk said that China will not achieve a significant market share in the next five years.