China expansion still key for foreign carmakers
Foreign carmakers continue to plough money into factories in China, the world's largest car market, even as the economic slowdown crimps sales growth.
Foreign carmakers continue to plough money into factories in China, the world's largest car market, even as the economic slowdown crimps sales growth.
Market leaders Volkswagen and General Motors show no sign of letting up on their planned investments, while Toyota and Ford are also pursuing new China expansion plans.
That is in spite of the economic slowdown further depressing the car market in January-March, when sales grew only 3.9 per cent, compared to 9.2 per cent a year ago and way below the 7 per cent growth that the China Association of Automobile Manufacturers predicts for this year.
Foreign carmakers, many of which are expected to unveil new products for China at this week's Shanghai auto show, including Ford's redesigned Taurus sedan, are not fretting over the first quarter slowdown.
But if the fallout from the broader economic slowdown bleeds into the rest of the year, global carmakers may need to reconsider their China expansion plans, said James Chao, Asia chief of IHS Automotive.
A handful of foreign carmakers are still outperforming the market, with Ford, for example, posting 9 per cent sales growth in the first quarter.
"It's still a tale of two worlds, with domestic manufacturers probably hovering around 60 per cent capacity and the international joint ventures at 80-85 per cent. It's a big difference," Chao said.
Anthony Lau, Shanghai-based research director for consultancy TNS Sinotrust, said even strong single-digit growth in car sales in China was much better than in markets elsewhere.
China accounted for more than half the total industry spending on new or expanded capacity last year, with plant investments worth US$12.7 billion, according to an annual Canadian study of carmakers' outlays.
Foreign carmakers are likely to hoover up more idle capacity from smaller domestic firms, said Chao as Ford did in acquiring a factory from Harbin Hafei Automobile that will add 200,000 vehicle per year capacity when upgrades are finished in 2016.
That follows Ford's launch last month of a new factory in Hangzhou, with annual capacity for 250,000 vehicles.
