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China's Auto Industry Has the Bit Between Its Teeth
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The luxury Rolls-Royce Phantom priced at 6.6 million yuan (US$825,000) is drawing envious glances at the ongoing Beijing Auto Show, but what makes this year's expo really different is the unprecedented number of homegrown Chinese brands.

The explosion of homegrown brands in the Chinese auto industry in the five years since the country entered the World Trade Organization has made a mockery of worries expressed in 2001 that international competition would harm the fledgling local auto industry when the country cut customs duties and opened up its domestic market.

According to the organizers, homegrown brands account for one third of the 572 vehicles on display, the biggest share in the history of the biennial event.

First Automobile Works (FAW), the country's largest automaker, wheeled in 29 vehicles and 10 of them are homegrown brands. The luxury Red Flag HQ3 -- in its stretched and bulletproof versions -- was the highlight.

The new Red Flag, no longer based on the old Audi 100 designs, was developed to rejuvenate the country's image.

In 1958, it took FAW only 33 days to churn out China's first V8 limousine - later known as the Red Flag CA72 - for late Chinese leader Mao Zedong. The model made a great stir when it appeared at the National Day celebration ceremony in the capital city in 1959.

Zhu Yanfeng, FAW general manager, said his company will sell two million vehicles in 2010, half of which will be homegrown brands, worth a total of 200 billion yuan (US$25 billion).

The state-owned auto giant plans to transform itself from a loss-making enterprise into a competitive one, with priority given to developing homegrown brands and earning profit, said Zhu.

At present, FAW's own brands are mainly cheaper models manufactured in a Tianjin-based plant and priced at about 50,000 yuan each, according to Shanghai Securities News.

Shanghai Automotive Industry Corporation (SAIC) took part in the exhibition with the highly anticipated Roewe sedan, the company's first own-brand high-end model. Up to now, SAIC's high-end models all came from its joint venture partners General Motors and Volkswagen.

SAIC expects to produce two million vehicles a year by 2010, including 600,000 cars marketed under local brands, said company president Hu Maoyuan.

An advanced automotive engineering center will be built to facilitate the development of homegrown brands, said Hu.

In its 1,100 square meter exhibition space, Chery Automobile Co. Ltd. unveiled three concept cars, five engines and a gearbox, all with proprietary intellectual property rights.

The company, based in Wuhu of eastern Anhui Province, is one of the few Chinese companies that successfully develops and produces its own models rather than manufacturing foreign brands under licence.

Chery sold 300,000 cars in 2005, taking a 30 percent share of the homegrown passenger car market, said Yin Tongyao, chairman and general manager of Chery.

Fifty thousand Chery cars had been sold overseas by the end of September this year.

Asked whether domestic automakers can compete with multinational giants, Yin said that "we often underestimate ourselves, while foreign counterparts have a clearer view".

Chery's exhibition stand has attracted top names from the auto industry, including Philip Murtaugh, vice president of SAIC. Meanwhile, Tom LaSorda, president of Chrysler Group, announced that his company is negotiating with Chery about establishing a joint venture to produce compact cars for the Dodge brand.

The privately-owned Great Wall Motor Co., Ltd., originally an SUV producer, grabbed a slice of the compact car market this year and displayed three new models - Perey, Florid and Coolbear. Other domestic automakers, such as Brilliance, Geely and Chang'an, also had a strong presence at the auto show with a dozen brands.

It is only five years since Chery and Geely, now regarded as the flag-bearers of Chinese homegrown brands, broke into the market, with "good cars that ordinary people can afford".

These well-equipped compact cars, priced between 30,000 and 50,000 yuan, became household names as soon as they hit the market, forcing down the prices of foreign brands made by Chinese-foreign joint ventures.

However, for many years homegrown brands were regarded as low-end, substandard products in China because many of them proved unreliable. That is now a thing of the past. According to the Economic Observer, this auto show is a historic watershed -- homegrown brands such as Red Flag and Roewe are now moving into the more lucrative high-end market currently dominated by foreign automakers.

Homegrown brands are "a beautiful butterfly that is struggling free of its ugly chrysalid", said Chen Guangzu, an expert with the China Automotive Industry Consultative Committee.

They will give the Chinese auto industry a competitive edge in the world, said Chen.

Geely's ambitions know no bounds. The company has said it wants to be a world famous brand by 2015, with an annual output of two million cars, including 1.3 million sold overseas.

The year 2006 saw Chinese homegrown brands reach a new level of sophistication -- besides improving product quality and exterior design, they are now developing their own engines.

This August, Geely put China's first continuously variable valve timing (CVVT) engine into production in its plant in Ningbo, in east China's Zhejiang Province. Great Wall said it would equip all its SUVs and pick-ups with its newly developed oil-saving diesel engine. Meanwhile, both Brilliance and Chery turned out their own 1.8T turbo engines.

Statistics show that homegrown brands are taking an increasing share in the domestic market for passenger cars, up from 10.5 percent in 2004 to 26 percent in 2005. Tianjin Xiali, Chery and Geely rank among the top 10 best sellers in 2005.

Sales of homegrown brands outperformed those of Chinese-foreign joint ventures in the first two months this year.

The history of the industry is simple, said Shen Ningwu, vice secretary general of the China Automotive Industry Association. Chinese automakers used to manufacture foreign brands under licence, then they began developing and producing new models with foreign companies, and now they are building their own research centers, and nurturing homegrown brands.

Chinese automakers have the bit between their teeth and will become rivals of their counterparts in the United States, Japan and Germany in the near future, said analysts, quoted by the Shanghai Securities News.

China, once known as the kingdom of bicycles, has been transformed over the last two decades into a car culture, with vehicle ownership up 30 times between 1985 and 2004.

A roadways plan devised by the Ministry of Communications will more than double the existing expressway network, bringing it to 85,000 kilometers within 30 years. The roads are needed to accommodate the growing number of cars and to support economic growth.

(Xinhua News Agency November 24, 2006)

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