Carmakers open throttles in China expansion drive

Global carmakers are gearing up for aggressive expansion in the mainland, despite tougher government policies on car loans and fears of excess capacity.

Speaking at a Beijing motor show yesterday, Mazda China strategy chief Kiyoshi Ozaki said the firm would build a factory for eight new models to fulfil its aim of tripling sales to 300,000 by the end of the decade.

The Japanese carmaker expects to lift sales in the mainland this year by 38 per cent to 110,000.

'We are clearly engaged in expanding our operations in China and are involved in numerous discussions,' Mazda executive vice-president John Parker said.

Other carmakers, including Ford Motor, General Motors, Nissan Motor and Peugeot Citroen, have also announced their intention to increase their market share in China, the world's third-largest car market.

However, they will be fighting a battle against increasingly competitive domestic companies and slowing car sales as consumers anticipate further price cuts and the lifting of car import restrictions next year.

Merrill Lynch analyst Grace Mak expected the mainland passenger car industry's growth to slow to 41 per cent next year from 53 per cent this year.

She projected the industry's capacity utilisation rate would fall from 95 per cent last year to 87 per cent this year, 81 per cent next year and 80 per cent in 2006.

Last month, passenger car sales in the mainland dropped 20 per cent from April, the China News Service reported. Analysts blamed the decline on tighter credit and anticipation of price cuts.

The less than positive forecast caused Hong Kong-traded Chinese carmakers to fall yesterday. Denway Motors shed 6.61 per cent, while minibus maker Brilliance China Automotive Holdings slid 3.63 per cent. Great Wall Automobile Holding eased 3.09 per cent.

Despite concerns about the market, Toyota executive vice-president Katsuhiro Nakagawa said the company was targeting a 10 per cent share by 2010. Last year, the firm sold 98,000 cars, or 5.2 per cent of the mainland's passenger car sales of 1.9 million.

Nissan is also joining the party, gearing up to double sales to 620,000 vehicles by 2007.

Honda Motor is set to increase its annual capacity from 120,000 to 320,000 cars this year and to 410,000 next year or in 2006.

GM, the world's No1 carmaker, announced this week that its array of Chinese ventures would invest more than US$3 billion over the next three years in an attempt to more than double capacity to 1.3 million vehicles.

Domestic carmakers are under pressure to boost market share. First Auto Works, the largest producer, was targeting an 11 per cent increase in output this year to one million units, vice-president An Dewu said.

Additional reporting by Eric Ng