World Automobile Giants' China Strategies in 21st Century (Part Two)

Part One

Part Two

  • Volkswagen (Germany): Biggest Winner


    • Cards in hand

    The 80s saw foreign auto groups' entry into the Chinese market and the birth of three joint ventures, Beijing Jeep, Guangzhou Peugeot and Shanghai Volkswagen, marking the beginning of cooperation between Chinese and foreign carmakers. Shanghai-Volkswagen was set up in 1985 and FAW-Volkswagen in 1991. Since then the two ventures have recorded an annual sale of more than 300,000 vehicles, keeping a market share of over 50 percent.

    VW is trying to gradually stagger the products of its two ventures. The First Automobile Works (FAW, Changchun) put out Audi A6 (C class) in 1999, with Bora (A class) expected in 2001 and mini cars (A class) in 2004. While Shanghai produced Passat (B class) in 2000 and family cars (A0) are to be launched in 2002. All these models almost keep pace with the international market and then VW will have its top five models of biggest production all manufactured in China. Besides, VW is studying for a new model to be developed and then sold both in China and overseas market, and may choose China as the base for export production. With increasing general utilization of accessories VW has established a strong platform in China for future product production.

    In 15 years VW has invested DM3bn (RMB13bn) in China, followed by another DM3bn for upgrading equipment and expanding production capacity for FAW and Shanghai 1999-2005 to keep its competitive edge.

    Scheme for the game

    VW intends to introduce most advanced manufacture techniques and product technologies into China, and bring its two Chinese ventures, as well as accessory systems, into its global orbit of purchase, product R&D and marketing. Making most of all advantages, it will continue to strengthen its research and development capability in China.

    Comment

    VW entered China quite early, which gave it plenty of time to plan products and make money. Its two partners are the strongest in China and VW has good reasons to set up its Asian production base here. Its major opponents in China may be chiefly from Japan.

    French Car: unlucky years

  • PSA


    • Cards in hand

    PSA began to enter the Chinese market in the late 80s.

    Its sedan project in Guangzhou, for various reasons, only yielded 100,000 cars in 10 years' cooperation. Then PSA withdrew its funds, resulting in the total failure of the vehicle project and leaving the success to its substitute Honda (Japan).

    Its Shenlong-Citroen with Dongfeng Motor also experienced many setbacks and missed many opportunities for development, spending 10 full years to complete the process from confirmation to operation of the project. While a latecomer, Shanghai GM used only 23 months to finish the project at an earlier time, a fact deserving both parties of China and France to ponder over carefully.

    Last September Shenlong added 3.41bn yuan to its registered capital, thereby making the sum total 6bn yuan via 2.34bn yuan debt-to-equity transfer. Meanwhile, the French shareholders of Citroen added an amount equivalent to FF1.023bn, keeping its share at 30 percent, while Dongfeng's share declined to 31 percent.

    Scheme for the game

    From a long-term point of view, upgraded and follow-up products and models have been put out or decided for Shanghai VW, FAW-VW and Tianjin Auto, while Citroen offers only a few choices for Fukang. Besides, negotiations on introduction of "Picasso" have been slow, with limited sales predicted even if produced in China.

    Comment

    On Shenlong project Chinese and French parties had seemed to have been on different tracks in project funding, production scale, product introduction, model choice and market strategies. As a result, both parties were affected quite a lot adversely, and therefore, both sides, not one side, should be responsible for this.

  • Renault


    • Cards in hand

    Renault is cooperating with Sanjiang (Hubei province) to assemble Trafic light bus, a project unaffected by Sanjiang's announcement of withdrawal from the light vehicle market.

    Scheme for the game

    Renault has been seeking cooperation with Beijing Automotive Industry Group to produce "Scenic" sedan, but progress has been slow. And talks are going on with Dongfeng on trucks.

    Comment

    Dongfeng has been outdistanced by FAW on heavy vehicle sales, and the latter may enter into cooperation with Chrysler on heavy truck production. While Dongfeng's project with Nissan (Japan) has been troubled by Nissan's own performance. Therefore alliance between Dongfeng and Renault on heavy vehicle is well grounded.

    (To Be Continued...)





    By PD Online staff member Li Heng


    People's Daily Online --- http://english.peopledaily.com.cn/