CHINA: AUTOMOTIVE OVERVIEW
( Nov 2001)
1. Historical Development
China’s automotive industry developed slowly after the foundation of the People’s Republic in 1949. China’s first automotive manufacturing plant, known as First Automobile Works (FAW), was officially founded in July 1957. The State Council identified in 1987 Changchun, Shiyan, and Shanghai as China’s three automotive manufacturing bases. In less than 10 years, China has tripled its output to 1.5 million units, switched principal production from trucks to cars and drawn billion of dollars in investment from the world’s leading auto makers and suppliers.
2. General Information on the Industry
· There are altogether 125 automotive manufacturers in China. Only 10 manufacturers produce over 100,000 units. They are Shanghai/VW, FAW, Changan, Dongfeng, Beijing Auto, Harbin Aircraft, Wuling, FAW/VW,Changhe and Tianjin Auto.
· In general China’s automotive industry is 15 years behind the world, which is shown by –domestic high price, small capacity and little research & development.
· WTO will open up the market considerably, hence Central Government's strategy to transform the existing 125 manufacturers into three groups, consolidating expertise and ensuring that there is growth after WTO.
Impacts of China’s WTO on Industry
China will cut tariffs from the current 100% or 80% level to 25% by 2006, with the largest cuts in the first years after accession. Auto parts tariffs will be cut to an average of 10% by 2006. Auto quotas will be phased out by 2005. It is expected that imported vehicles will have little impact on domestic manufacture as long as the import tariff is higher than 40%.
Requirements imposed on new auto businesses on the percentage of domestically made raw materials and auto parts will be removed. Rules on equity that set barriers for investors may also be modified.
The survival of China’s automotive industry will heavily rely on restructuring of the industry and setting up joint ventures and co-operative ventures with foreign companies. China has more than 120 independent automotive plants. Competition after China’s accession will take due toll on small and technically poor ones.
Foreign Investment is sought from domestic manufacturers which is seen as necessary for survival post WTO
5. WTO impact on existing foreign JV's
5.1 Current restrictions regarding the category, type and models of vehicle produced will be lifted within 2 years, leaving the car-maker free to make such decision on a purely commercial basis ;
5.2 Provincial authorities alone will be able to approve investments in the sector up to $ 150 million (ceiling raised from $ 30 m), substantially reducing red-tape for car manufacturers;
5.3 For the manufacture of engines, China’s joint-venture requirement will be removed, allowing wholly foreign owned production.
8. Investment
· From 1996 to 2000 China makes a total investment of about US$1.3 billion in the automotive industry. By the end of 1998 China has set up more than 600 foreign wholly-owned/joint venture/co-operative venture enterprises with more than 20 countries/regions. Foreign car companies have invested more than US$20 billion in China.
· At the moment foreign auto makers are not allowed to take stakes of more than 50% in their Chinese joint ventures. The government still requires the ventures to use at least 40% of domestically made parts.
· From January to April this year China has received foreign investment of 10.9 billion yuan, up 12.4% over the same period of last year.
9. China’s Big Three
China has three major automotive manufacturers known as “ Big Three “. They are First Automotive Works, Dongfeng Motor Group and Shanghai Automotive Industry Corporation. The Chinese government has identified that the Big Three would receive support including loans and priority in setting up joint ventures with foreign counterparts to attract more investment and advanced technology and management expertise.
9.1 First Automotive Works (FAW )
83 Dongfeng Street, Changchun (Jilin province) 130011
Tel : 0431 5902146
Fax : 0431 5909944
President : Mr Zhu Yanfeng
· Established in the 1953, FAW is the oldest automotive manufacturer in China. FAW has 100,000 employees and it has 94 fully-owned/holding subsidiaries and partially-owned enterprises. And it also has 18 joint ventures, of which FAW/VW is the biggest one. FAW has fixed assets of RMB50 billion in control. Its main products include trucks, buses , “ Red Flag” car, Jetta and Audi cars.
9.2 Dongfeng Motor ( Group ) Corporation (DFM)
(previously known as Second Automobile Works)
Shiyan Hubei 442001
Tel : 0719 226987
Fax : 0719 226815
President : Mr Miao Wei
· Established in 1969, DFM has a workforce of 100,000, with a national network of 21 specialised manufacturing factories and 54 wholly-owned / holding subsidiaries. It has a total assets of RMB 28.4 billion. DFM has set up its three vehicle manufacturing bases in Shiyan, Xiangfan and Wuhan in Hubei province. Its annual capacity is 300,000 units of vehicle, of which 200,000 are heavy duty trucks and medium duty trucks.
9.3 Shanghai Automotive Industry Corporation (Group) (SAIC)
390 Wu Kang Road, Shanghai 200031
Tel : 021 6433 6892
Fax : 021 6433 0518
President : Hu Maoyuan
· Shanghai Automotive Industry Corporation (SAIC) was established in January 1990. As of today, SAIC has produced 1.15 million units of Santana, which takes a half of China’s car market. In 1998 SAIC’s sales and profits were separately RMB 74.9 billion and RMB 5.5 billion, which rank them the first both in China’s automotive industry and in Shanghai’s industry. Its profits account for 80% of the figure of the nation’s automotive industry.
10. Major Car Manufacturing Joint Ventures
China's open-door policy has brought several foreign vehicle (especially car)
manufacturers into joint ventures in China. These foreign investment have played a leading role in achieving the recent momentum of passenger car development in China. Among those investors the most important are world auto giants including German Volkswagen AG and American General Motors (GM)
·
10.1 FAW-VOLKSWAGEN Automotive Company (FAW/VW)
· A car manufacturing joint venture, set up in Changchun, Jilin province in February 1991, with a total investment of RMB 11.1 billion, by First Automotive Works of China (60% share) and Volkswagen AG of Germany , started production at the end of 1996. The annual capacity is 150,000 cars ( Jetta and Audi ).
10.2 Shanghai Volkswagen Automotive Company Ltd (SHANGHAI/VW)
· A 50-50 JV set up by Shanghai Automotive Industry (Group) Corp and Volkswagen Group of Germany in March 1985 to produce Santana model. The annual capacity is 300,000 cars. The annual output surpasses 230,000 cars. The local content can reach 90%.
10.3 Shanghai General Motors (Shanghai GM)
· A 50% to 50% joint venture set up in Pudong, Shanghai in March 1997 by Shanghai Automotive Industry Corp (Group) and General Motors is the largest Sino-American joint venture in China. The total investment is US$ 1.521 billion.
10.4 Dongfeng-Citroen Automobile Co., Ltd (Dongfeng Citroen)
· A joint venture was set up in Wuhan in May 1992 between Dongfeng Motor Corporation (DFM)( 75% stake) and Automobiles Citroen, France (25% stake). The total investment amounts to RMB 10.358 billion including 4.82 billion French Franc.
10.5 Guangzhou Honda Automobile Co., Ltd (Guangzhou Honda)
· Established by the Guangzhou Automobile Group and the Honda Motor Co of Japan in Guangzhou in May 1998, the 50-50 joint venture, with a registered investment of RMB 1.16 billion (US$ 141.3 million ) , produces 30,000 newly developed Accord series cars yearly. They hope to achieve a designed capacity of 50,000 cars annually. 40% of the Accord’s components are Chinese made.
10.6 Tianjin Toyota Automotive Co., Ltd
· A potential 50-50 joint venture to be set up by Tianjin Automotive Xiali Company and Toyota, Japan needs a total investment of RMB 750 million. The 30 year long joint venture will produce NBC series cars. The joint venture project has been approved by the State Development and Planning Commission (SDPC).
10.7 Ford / Chongqing Chang'an Automotive Co
· Ford, which suffered a setback in bidding for a luxury sedan project four years ago, has finally established a car joint venture on 25 April 2001 with Chongqing Chang'an Automotive Co., the fourth largest auto maker in China. It is a 50-50 JV with the total investment of US$98 million at the first stage. It will take 24 months to complete construction of the plant. The first year's output will be 50,000 units.
Annex I List of 14 Producers
1st Category ( Annual output of 190,000 – 200,000 units )
1. First Automotive Works (FAW)
2. Shanghai Automotive Industry Corporation (SAIC)
3. Dongfeng Motor (Group) Corporation (DFM)
2nd Category (Annual output of 60,000 – 100,000 units)
4. Tianjin Automotive Industry (Group) Co., Ltd
5. Chang’an Automobile (Group) Liability Co., Ltd.
6. Liuzhou Wuling Automotive Co., Ltd.
7. Changhe Aircraft Industry Co.
8. Beijing Automotive Industry Group Co.
9. Yuejin Auto Group Corp.
3rd Category (Annual output of 8,000 – 20,000 units)
10. Harbin Hafei Motor Co. Ltd.
11. Qingling Motor (Group) Co., Ltd.
12. Anhui Jianghuai Auto Co., Ltd.
13. Jiangling Motors Group Corp
14. China National Heavy Duty Truck Group
Annex II Main Contact Details - Government bodies
The State Economic & Trade Commission (SETC)
26 West Street Xuanwumen, Beijing 100053
Tel : 6319 3206
Fax : 6319 3145
Contact : Mr Zhou Jianping, Deputy Director General, Dept. of Technology
Advancement & Equipment
Mr Zhou is the Chinese Co-chair of China – UK Joint Working Group.
Tel: 6319 3488
Fax: 6319 3543
Contact : Mr Yang Zhensheng, Dept. of Industry Planning
Tel: 6319 2817
Fax: 6319 2812
Contact : Mr Li Wanli, Dept. of Industry Policy
China Council for the Promotion of International Trade (CCPIT)
Sub – Council of Automotive Industry
46 Sanli Road, Beijing 100823
Tel : 6859 4784
Fax : 6859 5076
Contact : Mr Jiang Lei, Executive Vice Chairman
Tel : 6859 4731
Fax : 6859 5076
Contact : Mr Chen Yuanzhi, Deputy Director, Department of Trade & Technology Co-operation
China Federation of Machinery Industry
46 Sanlihe, Beijing 100823
Tel: 6859 4968
Fax: 6851 3867
Contact: Song Xiaogang, Deputy Secretary General
Tel: 6859 4970/71/72
Fax: 6851 3867
Contact: Wu Qijin, Division Chief, Foreign Affairs Office
Produced by the Commercial Section of the British Embassy, Beijing
Nov 2001
Every effort is made to ensure that the information given herein is accurate, but no legal responsibility is accepted for any errors, omissions or misleading statements in that information caused by negligence or otherwise and no responsibility is accepted in regard to the standing of any firms, companies or individuals mentioned.
