Research (Penizenavic.cz)
Markets  |  August 01, 2012 06:11:13

M.Mobius: Chinese automotive drive


Some tourists from the West can still be regarded China as a country with streets full of bicycles without any signs of automobiles. This notion is odd for several years, residents in China is increasingly changing the handlebars of bicycles per car steering wheels. Sales of motor vehicles in China grows in direct proportion to the growth of its middle class in 2009 is already selling vehicles (by volume) in China reached a level of sales in the U.S., in 2011 China became the production of 18.4 million units in the biggest car producer world.

The local growth while demand for cars continues to grow, in May of this year totaled vehicle sales in China, 1.6 million units, which, compared to a growth of 16% in the U.S. while at the same time sold 1.3 million cars. While the overall performance of China's economy may fall as a high volume of sales of durable goods, including automobiles and are proof that local consumers remain a powerful driving force in the global economy.

Looking to history

77px Arial, Helvetica, sans-serif; WHITE-SPACE: normal; Orphans: 2; letter-spacing: normal; COLOR: rgb (0,0,0); vertical-align: baseline; BORDER-TOP: 0px; BORDER- RIGHT: 0px; word-spacing: 0px; PADDING-TOP: 5px;-webkit-text-size-adjust: auto;-webkit-text-stroke-width: 0px "> The roots of the Chinese automotive industry goes back to the fiftieth years of the last century , but it was the reform of the seventies, eighties and nineties in the life of the government of Prime Minister Deng Xiaoping, that eased the long damped demand for cars. real boom in the automotive industry, however, came up with the entry of China into the World Trade Organization in 2001 and at that time implemented reforms. In the past decade, we were able  be in China witnessed a real boom in the automotive industry.

When I visited China 20 years ago for the first time, I could, along with millions of others chase through the streets of major cities on the bicycle. Today, however, the streets of these cities (including Beijing) congested with cars. The situation has reached even to such proportions that the government was forced to introduce limits on the number of newly issued vehicle registration. But even the introduction of this measure did not lead to   decline in demand for cars in both rural and urban areas. If this continues, we can be witnesses to the increased prices of diesel and other fuels needed to power cars.

Read more posts from the blog of Mark Mobius http://www.penizenavic.cz/clanky-dle-autora/mark-mobius

Today   Chinese market is still dominated by foreign companies  led by European and American brands, closely followed by manufacturers in Japan and Korea. Attractiveness of Chinese market and the effort to save costs associated with the exchange rates then caused many manufacturers to build factories in China directly. Restrictions imposed on businesses owned by foreign firms, however, prevented their manufacturers in establishing wholly owned factories. That is why today we can see in China with production facilities partly owned by foreign firms and partly by the Chinese government-controlled Chinese companies or companies from the private sector. In some cases, even foreign companies decided to collaborate with several local brands and build factories in which they are produced cars such as domestic and foreign automakers.
The market for luxury cars still dominate the European and American brands, which also invest in China enormous resources into the production of accessories for their cars. What a super luxury cars are concerned, they are still imported from factories in the West. But as China becomes increasingly important market for these signs, evidence of the results reported by the producers themselves. One of the European Automobile Manufacturers said recently that as much as 25% of its profits come from China and that in recent months, China sold more cars than in the U.S..

 

During his recent visit to the factory one European carmaker took me three things. First: purity. Second: the emphasis on quality and control. It seemed that quality control is given to the same amount of time as production. Third: elegance with which the assembly line workers completing their tasks. Everywhere was visible careful planning and effort to make life easier job workers. There I saw a lot of robotic equipment and readily available parts. Likewise, I marveled at the level of automation with an emphasis on quality, quality and even greater quality.

77px Arial, Helvetica, sans-serif; WHITE-SPACE: normal; Orphans: 2; letter-spacing: normal; COLOR: rgb (0,0,0); vertical-align: baseline; BORDER-TOP: 0px; BORDER- RIGHT: 0px; word-spacing: 0px; PADDING-TOP: 5px;-webkit-text-size-adjust: auto;-webkit-text-stroke-width: 0px "> The local brands are doing to raise increasingly larger share of market. For example, the largest Chinese producer of parts for sports cars now exports its products to 60 countries. During my visit, I visited a newly built race car and going off the production is truly a breathtaking pace.
Equally interesting is the development of production cars with electric cars or hybrid engines. For this reason, I also visited the factory of one of the local manufacturers of electric cars. During the test drive one of the cars produced, I was really surprised by the acceleration and the absence of noise coming from the engine.

77px Arial, Helvetica, sans-serif; WHITE-SPACE: normal; Orphans: 2; letter-spacing: normal; COLOR: rgb (0,0,0); vertical-align: baseline; BORDER-TOP: 0px; BORDER- RIGHT: 0px; word-spacing: 0px; PADDING-TOP: 5px;-webkit-text-size-adjust: auto;-webkit-text-stroke-width: 0px "> The increase in market share of domestic car manufacturers   is interested in the Chinese government itself, which in 2012 released the list of cars that can use to buy their state organizations. This list contains only cars while local carmakers. According to reports Chinese state media, even the Chinese government is considering the renewal to the   subsidies for the purchase of small cars for residents of rural areas, while it is the domestic automakers, which would support the vehicle sales should benefit most.

77px Arial, Helvetica, sans-serif; WHITE-SPACE: normal; Orphans: 2; letter-spacing: normal; COLOR: rgb (0,0,0); vertical-align: baseline; BORDER-TOP: 0px; BORDER- RIGHT: 0px; word-spacing: 0px; PADDING-TOP: 5px;-webkit-text-size-adjust: auto;-webkit-text-stroke-width: 0px "> In recent months we have witnessed the   Foreign acquisitions of Chinese automakers. This trend would have continued in my particular view of the difficulties which now passes through the euro area. It troubles the European economy would be the Chinese automakers could help uncover interesting acquisition opportunities. The expansion of Chinese automakers in foreign markets has not caused too much commotion, over time, however, China could become a key player in one small foreign market.

Relative to population size is 55px; vertical-align: baseline; BORDER-TOP: 0px; BORDER-RIGHT: 0px; PADDING-TOP: 0px ">   Chinese car market is still in its infancy   and still has room for growth and thus greater importance for the global automotive industry. This is a really exciting development.

Read more posts from the blog of Mark Mobius http://www.penizenavic.cz/clanky-dle-autora/mark-mobius

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Copyright © 2012 by Franklin Templeton Investments. All rights reserved.
The article was translated and reproduced with kind permission of Franklin Templeton Investments, Mark Mobius of blog http://mobius.blog.franklintempleton.com/2012/07/10/china-fueling-auto-sales/

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