Industry tastes life in fast lane

PUBLISHED : Sunday, 28 March, 1993, 12:00am
UPDATED : Sunday, 28 March, 1993, 12:00am

ANY country which snaps up Morris Ital cars must be desperate. The Morris Ital was a notorious and unloved British lemon made by the British Leyland company, now called Rover. Production ceased in Britain more than 10 years ago but Rover managed to sell its assembly line to the Chengdu Automobile Factory in Sichuan province.

Goodness only knows what Chinese buyers will make of the Ital, but many have little choice - they want to buy a car, have the money and are attracted by the cache of foreign marques.

Chinese car production is planned to grow by more than 500 per cent in the coming three years. Most of the increase will be derived from joint venture companies getting into their stride.

The enormous demand for vehicles pushed China's vehicle production to record levels last year. A report in the People's Daily stated that 1.08 million had been made in 1992, 52 per cent more than the previous year.

Chinese production statistics are not reliable but give some idea of growth rates. The collection of data is complicated by the existence of 130 vehicle manufacturers, 40 of whom are in the mainstream vehicle manufacture and assembly business.

The most reliable statistics come from the joint venture companies. At the moment these companies are concentrated in the car-making business, accounting for China's entire output of saloon cars. The China National Automotive Industry Corporation estimates car production rose from 80,000 to 120,000 units.

The biggest increase was registered by Shanghai Volkswagen, the country's largest car-maker. It made 65,000 cars in 1992, compared with 35,000 in 1991, an increase of 86 per cent. The company's Santana model is the biggest selling car in China.

Chrysler Corp's joint venture Beijing Jeep Company also registered a big increase in output. It turned out 20,000 Cherokee four-wheel-drives last year compared with 13,000 in 1991.

Guangzhou Peugeot Automobile CY recovered from a series of problems to increase production 53 per cent to 20,000 last year. The company focuses on the Peugeot 405 and 505 range. Control of Guangzhou Peugeot is in the hands of Denway Investment Ltd, whichwas floated on the Hongkong stock exchange this year.

The Tianjin Minibus Works has a transfer of technology agreement with Daihatsu of Japan, although the Japanese company has no equity in the project. It makes China's smallest car, the Charade, which notched up sales of 25,000 units last year.

The newest of the joint venture companies is SAW Citroen Auto Ltd, a joint venture between the French company and the Dongfeng Automotive Co (formerly known as the Second Automotive Works) in Wuhan. Last year was its first year of production, turning out6,000 Citroen ZX units.

China's strategic planners have decided to place the future of the car industry in the hands of joint ventures, the only remnant of the indigenous Chinese car industry being in Changchun where a slow-moving assembly line turns out Russian-designed Red Flag limousines for senior officials.

The scope of Chinese ambition for the car industry is breath-taking. Should current plans be realised output will reach a level of 780,000 cars by the end of 1995, an increase of 550 per cent over last year.

At the moment the bulk of the Chinese auto industry is devoted to lorry production, making workhorse vehicles such as the Jiefang mid-sized lorry, produced by the First Automobile Works in Changchun which turned out some 80,000 units in 1992. The bigger selling Dongfeng lorry, in the same class, is made in Shiyan where production is estimated to have reached over 130,000 units last year.

There have been fewer joint ventures in the commercial vehicles sector, however this is changing. General Motors has established a joint venture with the Jinbei Motor Company in Shenyang to make lightweight lorries and is looking for another partner to build minivans.

Japan's Toyota has a long-standing technology transfer agreement with China's enterprising Gold Cup Automotive Corp, which assembles Hiace vans.

Other foreign companies are actively seeking joint ventures in the commercial vehicle sector, seeing the car market as becoming over crowded and believing that commercial vehicle sales are likely to remain more steady.