Road to victory in car war runs through south China

PUBLISHED : Tuesday, 22 November, 2011, 12:00am
UPDATED : Tuesday, 22 November, 2011, 12:00am


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China may be the world's biggest car market, but it is also one of the most regionally diverse.

If the mainland were divided into four regional markets of equal size, they would occupy the No 2 to No 5 slots in global car sales rankings by volume - behind the US but ahead of Japan.

For carmakers, no regional market is more sought after than southern China, home to both the wealthiest and savviest car buyers on the mainland.

That fact was on display yesterday at the opening of the annual Guangzhou car show, where 600 exhibitors hosted 56 press conferences to show off their wares to thousands of journalists who turned up for media day.

Volkswagen Group China's chief executive, Karl-Thomas Neumann, said: 'People say you will win or lose the battle for China's auto market in the south.'

VW entered the mainland market in 1984 as the first foreign carmaker to launch local production, and has enjoyed a leading position in nearly all regions, 'but, historically, not in the south,' Neumann said. 'That's the reason why we decided to focus more on this important region.'

The German carmaker andits joint venture partner FAW announced last year that they would spend Euro520 million (HK$635.94 million) on a new plant in Foshan, VW's first in southern China, with a planned annual capacity of 300,000 cars.

Over the past three years, VW's sales growth in southern China has outpaced its national sales growth, and its market share in the south has risen to 15.8 per cent from 12 per cent, Neumann said.

But challenging the traditional southern dominance of Japanese carmakers including Honda, Toyota and Nissan is no easy task, and they are expanding production and vehicle line-ups, too.

Guangqi Honda, the joint venture between the Japanese firm and Guangzhou Auto Group Corp (GAC), showed off a series of concept cars under its Everus sub-brand yesterday. GAC also debuted the second model under its own standalone 'Trumpchi' brand, a compact SUV called the GS5 that is expected to launch retail sales in April.

SUVs remain one of the fastest growing segments on the mainland, and another major debut yesterday was the production version of the BMW X1. The X1 will be the third model series put into local production by the German luxury marque following its 3 and 5 series cars, and will be built from early next year in partnership with Brilliance China Automotive Holdings at a new, second joint venture plant in northeastern Shenyang, Liaoning province.

Mainland car sales have hit the brakes this year after two years of runaway growth of more than 20 per cent. Passenger car sales grew 6 per cent in the first 10 months of the year, with foreign, and especially luxury, brands outperforming their domestic rivals.

The slowdown hit following the January 1 expiry of a number of government tax breaks, rebates and other purchasing incentives that disproportionately boosted sales of lower cost and smaller-engine models.