Be Careful What You Wish For: Sales Slowdown At Home Revs Up Chinese Exports

by Bertel Schmitt

October 30th, 2012 7:10 AM

be careful what you wish for sales slowdown at home revs up chinese exports

The slowdown of Chinese car sales, applauded in some circles that applaud any negative news out of China, could finally unleash the flood of cheap Chinese cars exported to foreign markets, something that had been long predicted, but which has been a bust for even longer. “Battling a slowdown and intense competition in their home market, Chinese carmakers are increasingly looking to exports for growth,” China Daily writes.

Vehicle exports by Chinese automakers in the first three quarters climbed 28 percent to 785,300 units, statistics by the China Association of Automobile Manufacturers say. In August, China exported (112,300)slightly more cars than it imported (110,100).

So far, Chinese carmakers focused at the ferocious appetite of their home market. With the home market going on a diet, carnakers look abroad for buyers:

Lifan said it will invest heavily in overseas operations in the next three years in a bid to more than double its exports to 120,000 vehicles in 2015, some 40 percent of its total sales.
Dongfeng wants to sell 300,000 units a year overseas, up from about 63,800 in 2011.
Geely’s exports in the first nine months reached 68,600 units, about 20 percent of its total sales in the period.

IHS Automotive expects passenger vehicle exports by Chinese carmakers to double in the next three years.

TTAC readers learned nearly two months ago that this would eventually happen. However, it remains to be seen whether Chinese automakers make big inroads abroad. Many big automakers are hurting and will defend their markets ferociously. What’s more, big automakers decided to beat the Chinese at their own game: Low cost cars.

#BertelSchmitt #China #Exports

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4 comments

Marcelo de Vasconcellos on Oct 30, 2012

Hi Bertel! Apparently Haima, and some others I can't remember the names of are building (will build) a plant in Linhares, Espírito Santo. Which is odd as I never kn ew the state of E.S. had any part of the supply chain. Haima apparently specializes in copying other people's cars. If this is for real, they could get a new "Focus" before Ford does! Lifan, though it is in Brazil and I pass by their dealership all the time seems to be specializing in used car sales. Lifan also didn't participate in the São Paulo Show. Chery's biggest dealer (only?) in my city seems to have closed. Geely is not here. JAC sales have fallen by more than 50% due to the tax wars. Chinese have a long road to go yet! Commercial vans are what that have gained some traction though due to the tazes sales are also off by more than 30%. In other news, a Wuling van (or some) have been seen on the streets in SP in heavy camouflage. Could GM be thinking of bringing it? Could work specially using the bow tie as GM has nothing in this market segment. In other vary interesting news, a Tata Nano, of all things, was spotted puttering around one of the main avenues of my city this very morning! Tata has been rumored to be coming for years. COuld this be it or is it just some sort of leftover from Fiat as Tata and Fiat have been taliking on and off again for many years? Interesting times for BRIC countries in cars.

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- L'avventura on Oct 30, 2012
  
  As you say, Brazil is a great case-study for Chinese automakers expanding overseas. Its one of the markets that they are heavily invested in, and found some level of modest success in. In addition to Haima, which you have mentioned, Chery, JAC, and Lifan all have plans in building factories in Brazil. The Chery's São Paulo factory in particular is very ambitious as it plans on having a $400m plant that will have 170,000 vehicle capacity. Given that Chery sold around ~13k cars last year in Brazil, their aspirations are enormous (they plan on having triple-digit growth year-over-year in Brazil). Lifan is much more modest in their Brazilian plans. They plan to have a factory with only 10,000 car capacity, which will be a JV with Uruguayan Grupo Effa. Exporting Chinese-made cars overseas is not a very viable business option these days. 25% of the cost of a car can be in transportation fees, then there are tariff/custom walls, not to mention local protectionism. For low-cost models with razor thin margins, large volume overseas export of cars is fiscally untenable. But as you say, China has a long way to go. Building cars and selling cars are two totally different things.
  
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PintoFan on Oct 30, 2012

In order to export cars, you need a market that's willing to buy them. The inevitable Chinese recession won't strengthen their native carmakers, it will finish them off. The Chinese don't even want to buy them.

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MrWhopee on Oct 31, 2012

Indeed this all seem like just talks with little to back it up. Which country are these Chinese autos selling? Where do people lining up to buy Chinese cars? "Dongfeng wants to sell 300,000 units a year overseas, up from about 63,800 in 2011" Sure. Everyone does. Talk is easy. Whether they can make that happens though, is another matter. Even here in Indonesia where people clamor for low prices and not as sensitive with regards to quality, Chinese motorcycles are all but busts (due to poor quality of their products and horrible reputation), and their cars hardly sells. If they failed in 'easy' market like Indonesia, what chance do they have in places like the U.S., Europe? Of course things could change in the future, as the Japanese, Korean proves. But saying it now is like counting your chicken before the eggs hatched.

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