Chinese Automakers Face Challenges


SINGAPORE – Chinese automakers benefit from the fact that their homeland is both the largest and one of the worlds fastest growing automobile markets. The nation now accounts for nearly a quarter of global auto sales, and it is widely assumed to still have enormous potential to grow.

But that does not mean that all is rosy for members of the home team. Along with the huge opportunity presented by the Chinese market, domestic automakers also face big challenges, one observer told a recent lubricant industry conference here. To be successful, Tongji Universitys Liguang Li told the Fuels and Lubes Asia Conference March 6, Chinese automakers need to make advances in fuel economy and control of air pollutants while also transitioning to global business models.

China is easily the worlds biggest auto market and seems likely to put more distance between itself and the world, said Li, who is executive deputy dean at Tongjis School of Automotive Studies in Shanghai. Sales in China increased 14 percent in 2013 to nearly 22 million units. The United States, the worlds second biggest market, had sales of 15.6 million units and is growing much more slowly.

China accounted for 23 percent of global automobile sales in 2012, Li said, but the country has hardly begun to scratch its potential. The worlds automobile population is projected to reach 2 billion by 2020. The vehicle population in China is expected to reach 450 million to 550 million by 2030, Li said.

Such growth runs the risk of significantly increasing air pollution in a nation where problems associated with dirty air are well documented. Nearly 30 percent of China suffers from problematic frequency of heavy haze caused by air pollution. The U.S. Energy Information Administration projected that China will generate 13.9 million metric tons of carbon dioxide in 2015, more than 60 percent of the total generated by undeveloped and developing nations in Asia and Europe. All developed nations generate a combined 12.8 million tons of CO2.

Chinas central government faces growing pressure from within the country to do more to combat emissions of CO2, particulate matter and other pollutants. From 2006 to 2010, average CO2 emissions per vehicle in China declined at an average annual rate of 1.2 percent, a small improvement that was overwhelmed by the much faster growth in numbers of vehicles, Li said. He predicted that the government will likely begin to apply its own pressure on Chinese industry, including automakers, and he contended that automakers need to develop cleaner vehicles if they want to continue to thrive in China.

Even with sales continuing to rise at home, a growing number of Chinese manufacturers are trying to expand into, or grow in, foreign markets. The country exported approximately 1 million vehicles in 2013, he said, but a growing number of domestic companies are building plants in other countries.

Going abroad is the main trend of most of the Chinese independent OEMs, Li said.

Of course doing business elsewhere requires competing with international producers, Li said. Competing at home with imports and joint ventures involving international players has helped prepare Chinese companies for the global marketplace, Li said. Independent Chinese original equipment manufacturers have made progress in their organizational structures, the quality of vehicles they produce and in their general ability to innovate, he said. For example, in 2013 J.D. Power ranked GAC Motor 15th in its quality study of Chinas auto market – the highest ranking for domestic independents. Foreign producers held the top nine spots, followed by joint ventures Beijing Hyundai, FAW Toyota, GAC Toyota and Dongfeng Yueda Kia.

But Li also contended that domestic independents still have significant ground to make up in marketing and global supply chains. Reducing CO2 emissions is also a major challenge for their overseas ambitions. Li estimated that Chinese independents need to reduce fuel consumption by nearly 50 percent by 2025 to compete in some foreign markets.

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