Spotlight on Shanghai As China Competition Intensifies

The Shanghai car show underlined the fact that competition in China is intensifying as growth slows and the gloves are coming off as the fight for market share gathers pace.

That was the conclusion of IHS Automotive analyst Paul Newton, who said General Motors was perhaps the most aggressive of the foreign automakers in China.

GM unveiled the new Chevrolet Malibu and a Buick SUV at the Shanghai show, and plans to raise its sales in China to around five million by 2015, up from 2.35 million in 2010, Newton said.

VW took the wraps off the new Beetle.  VW sold 1.92 million vehicles in China last year and plans to grow by 12 per cent a year over the medium term.

Toyota aims to double sales by 2015 from 846,000 last year.

Luxury car sales – mainly Audis, BMWs and Mercedes – surged 48 per cent to 459,000 last year, and will rise 20 per cent this year, according to J.D.Power.

China overtook the U.S. as the world’s largest car market in 2009.

Newton said there was a strong electric vehicle theme running through the Shanghai show from nearly all the manufacturers present, underlining that China is rapidly becoming the world leader in promoting this technology, Newton said.

Ford unveiled the Ford Focus Electric, and claimed its charging time was three to four hours, half the time for a Nissan Leaf. Honda announced it was aiming to produce electric vehicles in China as early as next year, showing the Fit (Jazz) EV concept electric car.

China has almost been a license to print money for the German luxury car makers, and although sales growth rates are expected to slow, most investors expect the market to continue to provide enormous profits for the German premium manufacturers.

Will the boom bust?
A recent report from investment bank UBS pointed out that China’s rapid growth in income was based on a property boom. It worried that the boom might become a bust.

“There is low risk of a bubble near term, which supports healthy auto demand, but less certainty mid-term,” the report said.

That might reassure shareholders in BMW, VW-Audi and Mercedes, but recent statements from the Chinese government might make them a little nervous. The government banned advertising promoting “hedonism, lavishness and the worship of foreign things”, according to a report from Automotive News Europe from Shanghai.

It has also restricted the issuance of vehicle license plates to ease traffic congestion.

Meanwhile, as growth cools, the harder it will be to achieve sales.

“Competition wars are about to become serious in China as vehicle market growth cools, and the fight for market will intensify,” said IHS Automotive’s Newton.

Neil Winton – May 1, 2011