Foreign carmakers go local to scoop up sales in China

Shanghai: China car sales are expected to continue their upward trajectory in the coming years via a combination of organic demand, ‘indigenous brands' built with foreign joint venture partners and increased ownership by drivers in smaller towns and cities.

Vehicle sales are anticipated to rise to 23 million units by 2015, up 27 per cent from their level in 2010, a senior Chinese government official said yesterday in Shanghai, just ahead of the official opening of the Shanghai Auto Show.

That figure suggests a slowing growth rate because it is lower than the 32.4 per cent rate in 2010, in which China's sales totalled 18.1 million units. Car sales alone rose a third last year to 13.8 million units. Those sales secured the country's position as the world's biggest auto market for the second consecutive year.

Su Bo, vice minister of the Ministry of Industry and Information Technology, disclosed the forecast at a seminar being held ahead of the Shanghai Auto Show, which opens to the press today.

Outlook positive

But while the official growth rate may slow, the outlook is positive enough for Chinese car makers and their overseas partners to make substantial investments on the mainland.

One example is General Motors' Chevrolet unit, where an official said in Shanghai that the company sees its international sales doubling in five years.

Susan Docherty, GM's international operations vice-president of sales, said Chevrolet sold 1.1 million vehicles globally in the first quarter, up 15 per cent from a year earlier. "We expect the Chevrolet sales to more than double over the next five years," Docherty said of Chevrolet international vehicle sales, which include China.

GM sold 1.2 million Chevrolets in its international operations unit last year, up 40 per cent from 2009 and more than double from five years ago.

GM said late last year it expects exports of its China-made Chevrolet Sail to more than quadruple this year due to rising demand for low-cost quality vehicles in emerging markets.

Officials at PSA Peugeot Citroen say they too are convinced China's car market will continue to grow by about 10 per cent a year for several years.

In a move that illustrates the importance of China, Citroen was due to take the wraps off its new DS5 premium five-seater car in Shanghai yesterday.

New offerings

"Ten per cent growth will last for several years," said Philippe Varin, Peugeot's CEO.

Gregoire Olivier, chief executive of PSA's Asia operations, said that about 5 per cent of Chinese people own a car compared with about 55 per cent of Europeans, a disparity he said showed how much room there is for the Chinese market to grow.

Car ownership is not evenly spread throughout the country, with Beijing and Shanghai having to impose limits on car registrations even as smaller towns and cities with lower car ownership numbers emerge and car makers rush in to scoop up sales.

"Smaller towns are getting into the market and car makers are starting to be able to set up there," said Varin.

PSA will produce DS5s, the latest model in its DS range, in China with its new partner Changan Automobile, China's No 4 auto maker. One way auto makers, foreign and domestic, plan to increase sales in China is by teaming up to build "indigenous brands", and Chinese car makers themselves are trying to grow their own brands both at home and abroad.

As required by Chinese legislation, PSA and Changan will launch a dedicated brand starting with commercial vehicles and passenger vehicles following two to three years later.

32.4% - growth in China vehicle sales last year

18.1m - number of vehicles sold in China last year

13.8m - number of cars sold in China last year