Price emphasis hurts auto markers - ResearchInChina
Date:2007-07-18
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CHINESE auto makers could see their plans to set up production facilities in Russia put on hold as the country gives preference to companies with more mature technology.
Russia's unwillingness to deal with Chinese companies is just the latest proof that competing strictly on prices instead of working to improve quality could become a major obstacle for mainland auto makers looking to expand overseas.
Four Chinese companies - Hebei Great Wall Motors, Zhongxing Automobile, Chongqing Lifan Automobile Co Ltd and Beijing Automotive Industry Holdings Limited - had expected approval to set up factories in Russia this fall.
But the Russian Economy and Trade Department and the Energy Department recently said they will postpone approval for those projects. The Russian government has given several other overseas auto makers, including Nissan Motors and Volkswagen AG, approval to set up manufacturing plants.
The Russian media says the country hopes to learn from foreign companies, so officials are far more eager to approve deals with mature companies from Japan, Europe and the United States, than work with China's much younger and less-developed companies.
The four Chinese companies were planning to invest US$380 million in Russia, which is one of the biggest export markets for mainland car firms. Domestic auto makers hope to set up plants in Russia to cut production costs and give them a price advantage is one of the quickest growing auto markets on the planet.
Market analyst said since Toyota, General Motors, Volkswagen, Nissan and other international auto giants have shown growing interests in Russia, the country has set high standards for choosing its overseas partners.
"Compared with matured technology from global competitors, Chinese auto enterprises are on target to be eliminated from the market," said Jia Xinguang of China Automotive Industry Consulting and Development Corp.
Last year, Russian car makers sold 760,000 units in the country, compared with 1.02 million imported models, including localized assembly of 250,000 units.
Ford was the biggest winner among overseas car makers, selling 120,000 units in the Russia market, followed by GM, Toyota and Hyundai, which sold a combined 215,000 vehicles.
Shang Yugui, a spokesman for Great Wall, said the Russian's are afraid of cheap competition from China.
"The only reason for the block is they are afraid of Chinese auto makers' price competitive models."
Emphasis on low prices over improved technology is already being blamed for problems Chinese car makers are facing in Europe. Several Chinese vehicles, including the Landwind SUV made by Jianglin Automobile Co Ltd (stock code: 000550), and the Zunchi from Brilliance, failed to pass crash tests in Europe. News of those failures has greatly added to overseas buyers' concerns about Chinese-made models.
"They are hurting the brand image of all Chinese car makers," said Rao Da, the secretary general of the China Automobile Marketing and Information Association.
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