By on April 22, 2010

While all eyes are on the Beijing Auto Show, which starts by the end of this week, manufacturers are looking at plots of land and architect plans for new plants. According to The Nikkei [sub], carmakers are adding capacity to keep up with the ravenous appetite of the world’s largest car market.

Foreign carmakers don’t seem to be in a mood to exit, or to be squeezed out of this market anytime soon. According to the Nikkei, their building plans are “in response to the growing prominence of Chinese automakers.”

Volkswagen will build two plants in Southern China, where Volkswagen’s presence is thin at the moment. To keep matter balanced with their joint venture partners, one plant will be built with FAW, the other with SAIC. Both plants will add an annual output capacity of at least 200,000 units. The Volkswagen brand currently leads the Chinese passenger vehicle market. In the first three months, VW and its two Chinese joint ventures, FAW-Volkswagen and Shanghai-Volkswagen, sold 457,259 vehicles in China, up 61 percent. The Chinese market grew 76.3 percent in the first quarter. According to the Nikkei, Volkswagen’s “share has begun to slip as demand outstrips production, forcing it to expand output to stop the decline.”

GM China also has big expansion plans. They will launch 25 models this year and next. They target sales of 3m units in 2015, up more than 60 percent from 2009. Remember when I reported that car executives predict an average sales growth of 20 percent per annum between now and 2015 in China? Those who questioned my sanity should ask GM first. As a majority shareholder, you deserve an answer

Japanese carmakers, “are wary about further capital spending,” says the Nikkei. But they want to understand and develop better for the Chinese market.

Toyota is in final talks with authorities to build a wholly owned development facility in Jiangsu Province.

Nissan plans to open a design center in Beijing early next year.

Japanese car makers, especially Toyota, are lagging in the Chinese market. Toyota gained a paltry 39 percent in Q1. Sumimasen, that’s hemorrhaging market share.  Admonishes the Nikkei:  “Japanese automakers must go beyond lifting local production and increasing the proportion of Chinese-made parts. They are now at a stage where they need to further localize their products by other means.”

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12 Comments on “Foreign Car Makers Start A Building Boom In China...”


  • avatar
    VanillaDude

    Gee, you’d think that after sixty years, the Chinese would have gotten over being devastated and destroyed by the Japanese Imperial Army and Navy for twenty five years.

    If the Japanese wish to understand and develop better for the Chinese market, they probably need to recognize that unlike the US, China remembers.

    • 0 avatar
      Dr Strangelove

      Everybody remembers. However, unlike China, the U.S. never had their country destroyed and so have not been traumatized to the same degree.

      The fact that the Japanese to this day don’t fully face up to their war crimes doesn’t help.

    • 0 avatar

      Baloney.

      This is a myth that won’t die. In my many years in the business, I’ve never seen mainstream buying decisions being clouded by ancient history.

      Didn’t Hitler’s own car make quite a splash in the USA, especially in the 50’s and 60’s?

      Don’t those wonderful people who brought us Pearl Harbor hold pretty much half of the US market share?

      German cars are revered in Poland and Russia, and the Poles and Russians have all reason to be pretty sick of the Germans.

      Likewise, Japanese brands, and cars, are very much liked in China. Toyota sold nearly the same amount of passenger cars in China last year as GM. 700K+ . The great numbers reported by GM are inflated by little Wuling trucks.

      Automotive racism lives on in the minds of stick-in-the-muds who live in a long gone past.

      That Japanese brands are a bit weak at the moment in China isn’t rooted in ancient animosity. Chinese homegrowns, and Hyundai are eating into the segments the Japanese ruled. BYD’s F3 is the top-selling car in China, pretty much a Corolla knock-off from the front and a Honda Fit from the rear. If imitation is the sincerest form of flattery, then Chinese revere Japanese brands. Actually, they do.

    • 0 avatar
      Dr Strangelove

      Well, my Chinese wife tells me that she would never consider buying a Japanese car. Whenever possible, she will go with merchandise other than Japanese – and it is not for reasons of price or product quality. And she wasn’t even around in WW2 (just to prevent that “you dated yourself” comment ;)

      That’s not to say that every Chinese will feel the same way, I see lots of them riding around in Japanese cars here in Canada. Also it’s not to say that the reasons you cite for relatively low Japanese market share aren’t valid. But I wouldn’t dismiss history out of hand either – who knows how well Japan would do in China, or Germany in Russia, without the history of WW2.

    • 0 avatar
      Areitu

      Dr Strangelove–There are plenty of people in America who go out of their way not avoid purchasing certain Japanese products for reasons other than quality, who weren’t around during WW2.

  • avatar
    YZS

    Unlike Germany, Japan never apologized simply and sincerely to its victims for what happened. And that’s why relations are still and will never be more than, lukewarm between the two countries.

  • avatar
    Areitu

    Bertel, Speaking of Japanese brands, do you recall if the Chinese say “Honda” in the Japanese pronounciation or do they tend to read the characters in Mandarin? I didn’t pay attention to what people said last time I was there.

    • 0 avatar

      Areitu:

      No idea, I need to ask my Chinese. They usually have very Chinese names for foreign brands. Volkswagen sounds something like “Dah-jung”

      Everybody: In the more than 30 years in that business, I’ve seen market study after market study that came to the conclusion that generally speaking, country of origin has very little impact on the buying decision, that old history has no impact, and that relying on the supposedly perceived superiority of a country (such as “Made in Germany”) is fallacious.

      In my book, all these “the Chinese hate the Japanese”, “the Japanese don’t buy Korean cars because they hate Koreans” etc. is closet racism by proxy. We don’t dare to say that we hate some people, not PC. Instead we insist all day long that other people hate other people. It’s hate-mongering all the same. Outsourced to other people. Who might not like the outsourcing. Give it up already.

      I live with a Japanese wife in China. She’s nice to people, and that’s why people are nice to her.

    • 0 avatar
      psmisc

      Yeah, they say Honda in Chinese, which is “Ben Tian”. Same for Toyota (Feng Tian). I think they say Nissan in both Nissan and “Richan”. Nissan literally means “made in Japan”. Mazda is just Mazda, since there’s no Kanji for it, I think the name came from Persian?

  • avatar
    rnc

    When I worked for a German company starting up in America, they flew me over and after long hours of drinking with my new German masters, in Germany, I decided it was time to bring up the holocaust and the response was “yes we did that, by the way on a map of america can you show me where all the indians live? What happened to them?” I just smiled. All nations and peoples are capable and have done what the Germans and Japanese did in recent history. Is there a generation that would never buy japanese in China? Sure, just as there once was in the US, they are dead or dying now.

  • avatar
    wsn

    1) I don’t think Japanese brands suffer because of the war. After all, those who hate the Japanese are mostly immature or poor people who can’t afford a car anyway.

    2) However, that is not to say Japanese brands didn’t suffer. Mostly due to racism. Even though they don’t admit it, most Chinese regard Caucasians as being superior to Asians.

    Just look at Hyundai. If the war is a main contributing factor, you would think that would benefit the Korean brand (because Korea was an ally), right?

    Wrong, Hyundai suffers even more than the Japanese. It’s the kind of mentality that you prefer total strangers (Germany) to win a lottery, than your coworkers (Japan/Korea) to win it.

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