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Auto Joint Ventures Set Sights on Exports
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As China's domestic carmakers rush to export to the global market, analysts are predicting the country's auto joint ventures will follow suit.


"Why not, given the large demand from the overseas market, support from the government and approval from the joint ventures' foreign investors?" said Sun Mizi, an auto analyst from Sinotrust Marketing Research & Consulting Ltd.


He predicted auto joint ventures such as Guangzhou Honda and Shanghai GM will take over China's auto export market in the coming three to five years.


Shanghai GM, a joint venture between General Motors Corp and the Shanghai Automotive Industry Corp (SAIC), shipped 14,000 Chevrolet Sail made-in-China sedans to Chile on August 8.


This amount is small change for a company that sold 325,400 vehicles in China last year. The ramifications of the transaction, however, are significant.


The auto market leader in China is planning to export more vehicles to South America, Asia and Russia rising markets that share China's penchant for vehicles.


"Shanghai GM will increase its auto export," said Fu Yin, a communications official with Shanghai GM. "The increase in auto exports is partly due to fierce competition in the domestic market and the expansion of our manufacturing capabilities."


He said Shanghai GM has long pursued global development strategies while strengthening its presence in China.


Fierce competition in China's market and an expected oversupply has encouraged auto joint ventures to speed up exploration of the overseas market.


Japan automaker Nissan's joint venture Dongfeng Nissan exported 1,000 family cars to Angola at the beginning of August.


Auto export leader Guangzhou Honda exported around 10,000 sedans last year. Market analysts forecast the company's export would increase in the future as its manufacturing base in Guangzhou is expected to double its production capabilities this year.


The rush to export comes as China's car industry heads towards overcapacity and price wars. Market analysts say auto joint ventures should expand overseas for market shares and profit margins.


"Years of large investments in the market have created China as a global top auto-manufacturing hub behind the United States, Europe and Japan. The manufacturing strength will be enhanced further," said Wang Liangfeng, an analyst with Shanghai-based Autobeat Consulting firm.


In the first half of the year a new car model was released every three days, according to a recent survey conducted by the China Association of Automotive Manufacturers (CAAM). Over 70 new models are projected to hit the market this year.


The price war is gradually taking over in China's car market as competition intensifies. The CAAM reported that prices were cut for 120 passenger car models in the last six months, ranging from luxury sedans to family small-sized cars.


Meanwhile Chinese carmakers are looking to the growing markets of Russia, South America and Africa for new growth.


China exported 34,506 sedans in the first half of 2006, up by 259.5 percent from the same period last year, according to the Automobile Branch of the China Chamber of Commerce.


Domestic automakers Chery, Geely and Great Wall are leading the export push. Last year, Chery Automobile Co sold 18,000 passenger cars overseas. The subsidiary of Shanghai Automotive Industry Corp is planning to more than double its export by 2008.


Compared to domestic carmakers, market analysts said auto joint ventures were at a greater advantage in exploring the overseas market and helping made-in-China vehicles sharpen their image.


"The joint ventures' advantages lie in their increasingly strong design capabilities and their cost-cutting," said Stephen Dyre, an analyst with AT Kearney (Shanghai) Management Consulting Co Ltd, an institute that has long focused on joint venture exports.


He added that the joint ventures would be able to use the sound sales networks built by their foreign investors.


Sun Mizi, an analyst with Sinotrust, echoed Dyre.


"For the past years, the international automakers, including General Motors, Ford Motor and Honda, have transferred technologies and management expertise to their joint ventures, which helps China's auto industry narrow the gap between auto technology and design," said Sun.


For example, Shanghai GM has strengthened its auto design capability. The Sail sedans it exported to Chile have many Chinese design elements.


The research and development push by auto joint ventures will also pave the way towards meeting US and European safety, quality and environmental standards.


And auto joint ventures may also help improve the industry's reputation, which has been tarnished by domestic makers who lack global marketing experience and the ability to guarantee quality and after-sales service supplying cheap vehicles to the global market.


But it is unlikely Chinese cars will flood the overseas market in the short term.


Yale Zhang, an analyst with CSM Consulting Company Shanghai Office, said auto joint ventures are unlikely to see massive exports to the global market in the coming three to five years.


"The export largely depends on the attitude of foreign investors. They are not happy to see their joint ventures in China drive their plants outside China bankrupt," said Zhang. "It is not only a business matter."


(China Daily August 23, 2006)


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