Automobile manufacturing

At present, there are over 100 vehicle assemblers in China, but the market is concentrated in the hands of a few. The Big Three auto companies, First Auto Works (FAW), Shanghai Auto Industry Corporation (SAIC) and Dong Feng Motors captured 47 per cent of the total market in 2001. However, a number of Chinese domestic producers “ Chery, Geely and Qinchuan Flyer “ have grabbed a significant share of the dynamic private car market from the multinational vehicle manufacturers by offering low priced basic cars .

These inroads into the market have been made possible by powerful backers. Chery is supported financially be the Anhui provincial government. The brothers Li, who own Geely, had made fortunes from the construction industry and motorcycle production, while the Qinchuan Flyer is ultimately an offshoot of NORINCO, the commercial arm of the People's Liberation Army.

These newcomers do not intend to remain at the bottom end of the market. Chery have recently invested US$55 million in a new paint-shop, whilst Geely have plans for six new models in the design stage. They are now looking for outside expertise to help them move up to the next level.

Major vehicle assemblers

The geographical location of the major vehicle assemblers with multinational participation is illustrated in Figure 6.1.3. These include the Big Three, together with Guangzhou Honda, Changan Suzuki & Ford and Tianjin Toyota.

Figure 6.1.3: Mapping of major vehicle assemblers

The current market shares of the major manufacturers and their models are profiled in Tables 6.1.3 which details unit production and sales of each model during June and for the six month period to June 2002. The table shows clearly that the two Volkswagen models of the FAW-VW joint venture and the three models of the Shanghai-VW joint venture no longer predominate.

Table 6.1.3: Car production and sales by model, June 2002

					In units
		Production		Sales
Manufacturer	Model	June	Accumulated	June	Accumulated
FAW	Red Flag	2,932	16,178	2,918	16,163
Shanghai-VW	Santana 2000	7,711	29,849	7,655	29,653
	Passat	5,016	28,131	5,004	28,088
	POLO	3,004	8,975	3,016	8,817
Shanghai GM	Buick G	2,657	10,416	2,777	10,317
	Buick 3.0	728	3,839	901	3,743
	Buick GL8	1,280	5,844	1,420	5,912
	Sail	2,142	11,715	2,020	12,285
FAW-VW	Jetta	9,364	46,713	10,903	57,848
	Audi	2,649	16,092	3,525	15,053
Guangzhou Honda	Accord	5,582	25,417	5,379	25,364
TAIC	Xiali	8,950	39,523	6,731	46,442
DCAC	Fukang	5,124	26,975	5,289	30,216
	Elysee	2,354	2,354	2,255	2,255
Channa	Alto	5,187	26,617	3,925	26,829
BAIC	Cherokee	409	1,512	312	1,414
DFAC	Aeolus	3,133	14,037	1,776	12,866
Source: China Association of Automobile Manufacturers

Profiles of the top ten automobile assemblers

FAW (First Auto Works)
Location	Changchun J
oint venture partner	VW
Models	Jetta, Audi A6, Bora, Red Flag (re-styled Audi 100)

Comments
Long-established joint venture (1985). FAW is also a leading commercial vehicle manufacturer. In mid-2002, concluded a new 50/50 joint venture with Toyota to produce cars under Lexus brand; Crown saloon will be first model (2005).

Have recently taken control of Tianjin Auto.

Outlook: Winner

SAIC (Shanghai Auto Industry Corporation)

Location	Shangai
Joint venture partners	VW, GM (since 1998)
Models	Santana, Santana 2000, Passat, Polo, Buick Regal, Sail (Corsa, with boot)

Comments

Strongly supported by Shanghai Municipal Government.
Alliance with GM has caused tensions with long-time partner VW.
Actively purchasing shares in other regional manufacturers (eg Anhui Chery).

Outlook: Winner

Dong Feng Motors

Location	Wuhan
Joint venture partner	PSA Citroen
Models	Fukang (aka Citroen ZX), 988 (Fukang with boot), Picasso.

Comments

Hampered by limited model range. In September 2002, concluded new JV with Nissan, with an ambitious target of 220,000 cars by 2006. PSA poised to introduce 307 model. Strong player on domestic CV market.

Outlook: Fortunes may improve with Nissan alliance.

Guangzhou Honda

Location	Guangzhou (Honda took over the facility when Peugeot abandoned earlier joint venture in mid 1990s)
Joint venture partner	Honda (Chinese partner), Denway (in background role)
Models	Accord, Odyssey

Comments

Accord is the best-selling 'prestige' car in China. Only plant to be operating above 70 per cent capacity. Outlook: Winner

Brilliance China

Location	Shenyang
Joint venture partner	Alliances with Toyota, BMW and MG Rover
Model	Zhonghua saloon

Comments
The 'mystery' company of the Chinese auto industry. Privately owned and listed on New York Stock Exchange. Was third most profitable auto company from manufacture of Jinbei van before profits slipped. Chairman and major shareholder, Yang Rong, has been publicly ousted.
Only received car manufacturing licence in June 2002. Outlook: Clouded. Timing when BMW 3-series production comes on stream may be critical.

TAIC (Tianjin Auto Industry Corp.)

Location	Tianjin
Joint venture partner	Daihatsu
Model	Daihatsu Charade

Comments
An early joint venture that stagnated. When Toyota decided to introduce the Vitz model, they built their own factory next door. Recently announced that they are to be taken over by FAW in first big consolidation of the Chinese auto industry.

Outlook: New ownership may revive loser.

Changan Auto

Location	Chongqing
Joint venture partners	Suzuki, Ford
Models	Alto, Ikon (starts 2003)

Comments
Solid, local sales base; but remote from other main consumer markets.
Alto engine meets higher emission standards than competitors .

Outlook: Perception of Ikon as dated model casts doubt on market prospects. Early introduction of Mondeo would have positive impact.

Anhui Chery

Location	Wuhu
Joint venture partner	None
Models	Chery

Comments
Spectacular sales growth in 2001/2 with Chery saloon (similar to Jetta).
Strong support of local government has enabled under- cut of competitors.
Part-owned by SAIC (see above).

Outlook: Winner

Geely Motors

Location	Ningbo
Joint venture partner	None
Models	Merrie (Daihatsu derivative)

Comments
Privately-owned company with background in construction and motorcycle industries. Competitively priced entry-level car. Achieved sales of 30,000 in 2001 from standing start. Outlook: Short- term winner

BAIC (Beijing Automotive Industry Co)

Location	Beijing
Joint venture partner	Daimler Chrysler
Models	Cherokee Jeep

Comments
The first automotive joint venture in China, with track record of expensive mistakes. In particular, the wrong product led to very poor sales.
Daimler-Chrysler cannot afford to walk away from the market and has committed to another 30 years ' co- operation.
In the short-term BAIC (and other Beijing-based companies) have contracted with Hyundai to build the Sonata, rumoured to become the official taxi for the Beijing Olympics

Outlook: Daimler-Chrysler will seek to revive fortunes with Mitsubishi-based SUVs. The Pajero model has been named.

Motorcycle manufacturing

Production and sales by engine size
The proportions of motorcycle production and sales by size of engine for two- and three-wheeler categories for the month and six months prior to June 2002 are detailed in Table 6.1.4. Among two-wheelers, there appears to be a marked shift toward higher- powered models in the 110 to 250 ml categories where current growth is strong. Conversely, both production and sales of smaller engine two-wheelers are in decline, although 100 ml models remain the second most popular size with a 29 per cent market share (125 ml models “ 68 per cent).

Table 6.1.4: Motorcycle production and sales by engine displacement (June 2002)

						In units
	Production			Sales
Index	June	Accumulated	Change, %	June	Accumulated	Change, %
Subtotal on 2Ws	970,533	5,667,882	10.20	996,691	5,710,071	13.19
50ml	86,018	399,623	“14.65	89,894	424,401	“8.63
60ml	707	2,257	“60.82	523	4,910	“36.21
70ml	9,140	57,834	“37.64	9,806	63,078	“31.34
80ml	8,483	22,363	“22.04	8,689	22,259	“36.10
90ml	25,773	177,147	“16.78	25,829	179,436	“13.02
100ml	199,836	1,197,043	“14.18	209,011	1,237,936	“9.56
110ml	72,964	487,990	42.18	75,954	493,238	45.62
125ml	480,323	2,919,342	24.92	488,296	2,879,009	25.96
150ml	79,660	344,706	47.25	80,837	347,822	55.83
250ml	7,129	57,248	121.87	7,532	56,135	141.60
Subtotal on 3Ws	37,644	178,606	“8.55	38,549	180,306	“7.14
50ml	2,507	15,295	21.98	3,100	15,471	31.03
>50ml	34,106	157,608	“9.52	34,442	159,159	“8.48
250ml	723	4,301	“24.50	628	4,220	“24.71
750ml	308	1,402	“51.49	379	1,456	“48.80
Total	1,008,177	5,846,488	9,51	1,035,240	5,890,377	12.44
Source: China Association of Automobile Manufacturers

Among three-wheelers, only sales of the very small engine models of 50 ml are growing. The most popular category, where sales year-on-year fell 8.5 per cent, remains the 50 to 250 ml category with an 88 per cent market share in the three-wheeled sector.

Exports of major motorcycle manufacturing enterprises
The unit exports of the top 15 motorcycle manufacturing enterprises in June 2002 are compared with June 2001 in Table 6.1.5. The two biggest exporters are

Table 6.1.5: Volume of motorcycle export sales by key enterprises, June 2002

		In units
Enterprise	June	The Same Period of Last Year
Total	564,874	669,292
Chongqing Loncin (Group) Co., Ltd.	91,998	120,895
Chongqing Lifan-Honda Industry (Group) Co., Ltd.	84,523	146,955
Jincheng (Group) Co., Ltd.	57,236	65,107
Qianjiang (Group) Co., Ltd.	41,345	42,335
China South Aviation Power Machine Company	35,515	29,784
Chongqing Zongshen Hailing Machine Vehicle Co., Ltd.	32,622	36,784
Jianshe Industrial (Group) Co., Ltd.	30,711	28,451
Jilong Motorcycle Co., Ltd.	27,611	46,914
MACAT Motorcycle Co., Ltd.	20,595	12,100
China Jialing Industry Share Co., Ltd.	18,019	26,940
China Qingqi (Group) Co., Ltd.	15,715	24,798
Guangdong Kingtown Group Guangzhou Tianma Motorcycle Co., Ltd.	11,152	6,320
Dachangjiang (Group) Co., Ltd	14,102	3,168
Fosti Motorcycle (Group) Co., Ltd.	10,418	1,060
Luoyang Northern Enterprises (Group) Co., Ltd.	9,893	16,039
Changchun Changling (Group) Co., Ltd.	2,904	6,631
Source: China Association of Automobile Manufacturers

Chongqing Loncin (Group) and Chongqing Lifan- Honda Industry (Group), accounting respectively for 16 per cent and 15 per cent in 1992, a reversal of their 1991 positions (18 per cent and 22 per cent). Overall, motorcycle exports slipped by 16 per cent in June alone, to 564,874 units.