Detroit Free Press Tom Walsh Column: China's No Joke in the Auto World

Detroit Free Press Tom Walsh Column: China’s No Joke in the Auto World

It would be easy to dismiss Auto China 2006, the 10-day show in Beijing that wrapped up last week, as a pretender on the world automotive scene. With its deafening music, raffle drawings, flying acrobats and dance acts, and Disneyesque costumed donkeys, roosters, penguins and oranges strolling around, plus all the copycat cars and names, the atmosphere was more carnival than world-class business event. But Auto China 2006 is no more a pretender than its host country, China, which is forcing massive change in global auto markets and some of the world's industrial giants.

From Detroit Free Press

BEIJING — It would be easy to dismiss Auto China 2006, the 10-day show in Beijing that wrapped up last week, as a pretender on the world automotive scene.

With its deafening music, raffle drawings, flying acrobats and dance acts, and Disneyesque costumed donkeys, roosters, penguins and oranges strolling around, plus all the copycat cars and names, the atmosphere was more carnival than world-class business event.

But Auto China 2006 is no more a pretender than its host country, China, which is forcing massive change in global auto markets and some of the world’s industrial giants.

Hear this from Tom LaSorda, president and CEO of the Chrysler Group: "We need to be more aggressive in Asia. We need to pick up the pace," he said last Saturday.

Or this from Nick Reilly, head of General Motors Corp.’s Asia-Pacific operations:

"The biggest growth will come at the lower end," he said last Saturday, referring to small cars that millions of first-time vehicle purchasers in China and India will choose. "Traditionally," he added, "GM has not been a very good competitor in that end of the market. We have to be more serious."

China, Reilly said, will pass the United States in the next 10 years as the world’s largest market for cars and trucks. This year, about 7.2 million vehicles will be sold in China, less than half the 16.5 million or so in the United States.

The big question

The Auto China show, which rotates each year between Beijing and Shanghai, isn’t yet on a par with the sprawling show of Frankfurt, Germany, but it’s plenty big, filling 10 buildings at the China International Exhibition Centre with a who’s who list of the world’s auto companies.

Not only are Detroit’s GM, Chrysler and Ford Motor Co. there, but so are Japan’s Big Three of Toyota, Nissan and Honda, China’s largest homegrown automaker Chery, plus a number of key players — Skoda of the Czech Republic, and Citroen, Peugeot and Renault of France — that don’t compete in the U.S. market.

Since China’s growth in total vehicle sales will likely outstrip that of the next 20 fastest-growing auto markets combined during the next six years, every auto company that aspires to be a global contender feels obliged to compete there. And they’re all wondering when the homegrown Chinese automakers will start exporting into the United States and Western Europe.

"Japan did it. Korea did it. It’s only a question of time and in what format the Chinese enter the big Western markets," said John Parker, Ford group vice president for Asia-Pacific and Africa.

Chery and Geely, the two largest Chinese carmakers, are seen as the likely first entrants into the U.S. market. Geely exhibited at the North American International Auto Show in Detroit last January, but has since pushed back its target to 2009 or beyond for exporting cars to the United States. Chery, a small-car maker that settled a legal claim by GM that it had ripped of the design of the Chevrolet Spark car, is one of two companies negotiating with Chrysler to partner in a small-car venture. [Editor’s note: Chery and Visionary Vehicle’s Founder Malcolm Bricklin announced at the show that they had dropped their plans to bring the Chery brand to the U.S.] Chrysler’s LaSorda said Saturday that a decision on the project is expected by year’s end.

Doing more in China

Of Detroit’s three automakers in China, GM has the largest presence and most coherent strategy. Through partnerships with Shanghai Automotive Industry Corp. and Wuling, GM’s 12.1 percent share of combined car and truck sales is tops in the China market, although Volkswagen still leads in passenger-car sales.

GM will sell about 863,000 vehicles in China this year. It has more than 1,000 dealerships for its six brands sold there.

Ford will sell about 150,000 Ford-branded cars from its Changan-Ford joint venture plant in Chongqing and about 135,000 Mazdas from Chongqing and other joint venture plant. Ford is also building an assembly plant, engine plant and technical center in Nanjing, looking to double its China sales during the next two or three years, Parker said.

Chrysler (although its Jeep brand was the first with a China joint venture plant in 1983) is only now starting to get really active there. LaSorda said he wants to build annual sales volume from less than 25,000 now to 100,000 in three or four years. The company has 58 combined Chrysler-Jeep-Dodge dealers in China and will have 100 by the end of 2007, LaSorda said.

This is serious money that GM, Ford, DaimlerChrysler and others are pouring into China.

As LaSorda said, "China’s the hot spot of the world."

All the big boys must play there. And hope they don’t get burned.