Shanghai bets on home-grown cars

PUBLISHED : Thursday, 10 May, 2012, 12:00am
UPDATED : Thursday, 10 May, 2012, 12:00am


Despite the slowdown in the market for cars on the mainland, Shanghai is moving into higher gear, beginning construction on an automotive research campus yesterday.

The city hopes to entice global car designers such as Pininfarina to help develop China's domestic marques.

The research and development campus, located at Shanghai International Automobile City (Auto City), an industrial park backed by the municipality's government, aims to attract 150 companies when it is completed in about 20 months.

The research campus, with a total investment of 1.5 billion yuan (HK$1.8 billion), represents China's first major effort to develop distinctive models of its own in the world's largest car market, still dominated by foreign makes.

'The slowdown in auto sales has reminded Chinese carmakers of the need to strengthen research for their own brands,' said Rong Wenwei, chief executive of Auto City, which is investing in and will operate the research campus.

'By attracting global car-design firms, auto assemblers and car-part manufacturers to research and develop their products here, we believe it will greatly help the city and the mainland's car industry.'

Famed Italian car-design firm Pininfarina is one of the first 17 companies that has agreed to set up research facilities on the campus.

China's major state-owned carmakers have stressed the importance of developing the country's indigenous marques for about a decade, but little has been achieved thus far by way of creating China's own Volkswagen or General Motors.

The domestic car giants, including SAIC Motor and FAW, have grown by leaps and bounds on the back of soaring sales from their joint ventures with international brands.

Foreign carmakers can only set up joint ventures with local partners to assemble and sell their vehicles in China.

International brands dominate the market in China, accounting for 70 per cent of sales nationwide.

'The plans to develop China's own cars were just lip service by the bosses of those state-owned companies in past years, since they didn't feel it was urgent to do so,' said an owner of a Zhejiang car-part firm who preferred not to be identified.

China has been the world's largest car market since it overtook the United States in 2009.

However, growth in car sales slowed sharply to 5 per cent last year from 33 per cent in 2010, as Beijing applied tightening measures to cool the economy.

Home-grown carmakers Chery Automobile and BYD, which unlike their bigger, state-owned rivals have actively developed their own low-end brands in past years, were among the main victims of the slowdown last year.

Fitch Ratings said competition in the car market would heat up in the short term, with low-end domestic manufacturers expanding into the mid-market.

Francesco Motta, CEO of Pininfarina's China operations, said the market still offered great opportunities for the design firm.

'It is just a matter of time before local carmakers mature,' he said. 'We want to give our support to different brands and companies here.'