Small Cars Hit High Gear

A quick tour of the First Shanghai Motor Show, which opened yesterday at the New International Expo Center in Pudong, reveals automakers are focusing more on private consumers with the launch of several new economy-car models.

The show, which runs through December 16, will see 125 automakers and auto-part suppliers showcase their latest products and technologies, including more than 60 cars.

While the world’s leading luxury carmakers, Mercedes-Benz, Toyota, BMW and Audi, provide a little glamour to the event, economy cars are the stars of the show.

Germany’s largest automaker, Volkswagen AG, launched its first made-in-China compact car, the Polo, yesterday at the opening ceremony, heating up the already competitive family car market.

The Polo will be built by 16-year-old Shanghai Volkswagen, the German auto giant’s 50-50 joint venture with Shanghai Automotive Industry Group.

Volkswagen, which holds a 52 percent share of the Chinese passenger-car market, hopes to begin production of Polo in China next April, with plans to sell 30,000 units next year.

“With China’s entry into the WTO, we expect further economic growth and an increase especially in private demand for cars," Wolfgang Glaeser, Volkswagen’s executive director of Asia Pacific sales and marketing, told a news conference on Saturday.

The Chinese government is pushing to increase private car purchases over the next 10 years.

Currently, private car sales account for 20 percent of the market, with corporate clients accounting for the other 80 percent. The government would like to see private sales make up 70 percent of the market by 2011.

"We will be offering an up-to-date car on a new platform in China at practically the same time as the world premier," Glaeser said. "Furthermore, we have decided to build a hatchback version of Polo in 2003, and in this way take advantage of the ever increasing private consumers."

Volkswagen had yet to fix a price for Polo, but the car would be priced above 100,000 yuan (US$12,000), he said. The company is poised to launch a more basic version of Polo in 2003, which will be priced between 100,000 and 110,000 yuan.

It is not all Volkswagen, however.

Fiat SpA launched its Palio model at the auto show yesterday, which will be built at its venture in Nanjing, while Toyota Motor Co. said it will start production of a new compact car in the second half of next year at its 50-50 venture in Tianjin.

"The car is still in the process of development and it will be a brand new model that hasn't been launched around the world so far," said Hasegawa Takashi, vice chairman of Toyota Motor (China) Investment Co. Ltd.

"Annual production of the car is estimated at between 30,000 to 50,000 units," the vice chairman said.

Honda Motor Co. Ltd. said that a compact model is expected to debut in two years, hopefully increasing annual sales of its Chinese venture, Guangzhou Honda Automobile Co. Ltd., to 200,000 units by 2005.

The new compacts will create immediate pressure on other domestically manufactured models, particularly the Buick Sail, which is produced by Shanghai General Motors, analysts said.

The General Motors Corp.-funded joint venture launched its Buick Sail, priced between 100,000 and 125,000 yuan, in May. Brisk sales have secured the model a 20 percent share of China’s small-car market.

Industry officials expect China’s total passenger-car sales to rise about a fifth to 900,000 vehicles next year, as more automakers market new models and com-petition in the country’s economy-car market grows.

The booming domestic auto sector is driving foreign investors to expand their investment in the market.

Volkswagen AG will invest 2.5 billion euros (US$2.2 billion) into China in the coming years, nearly doubling its current investment to develop new products and facilities in the country, according to Glaeser.

(eastday.com December 10, 2001)

In This Series

"Green" Cars Encouraged by Reduced Tax

BMW to Start Joint-Venture in China

Shanghai Auto Center to Feature Formula One Racing

Luxury Car Market Sees Growing Competition

Auto Shows Indicates Competitive Car Market

Luxury Audi A8 to Enter China Market



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