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What's the trend of China Auto Industry?

China wants more auto production to be in China

Published on Detroit Free Press, Dec 1, 2012, Chinese government officials said they want more vehicles that are sold in China to be built there, a policy that has major implications for the U.S. auto industry.

Chinese Ministry of Commerce officials told Western journalists in Beijing they want to boost domestic auto brands and encourage further collaboration between Chinese companies and foreign automakers.

"The proportion of vehicles made in China will be increased," said Shen Danyang, a Commerce Ministry spokesman. "We will try to strengthen the domestic brands."

The comments came before General Motors announced it would invest about $1 billion (6.6 billion yuan) to build its third China manufacturing plant in Chongqing, a city of about 29 million people in southwest China.

The plant is part of GM's longstanding joint venture with Chinese auto companies SAIC and Wuling Motors — a partnership that is expected to sell more than 1.3 million vehicles this year.

About 60% of vehicles sold in China are assembled there, according to the Ministry of Commerce, which did not cite a percentage target for its production goals. China already has hurdles designed to discourage the import of vehicles from other regions. Cars imported to China face a tariff duty of at least 25%.

"China and the U.S. auto industry are highly complementary to each other and they are cooperative," said Wang Xu, deputy director general of the Ministry of Foreign Affairs. "I believe there is huge potential for further cooperation between the auto companies in our two countries."

The decision to keep pushing toward more domestic production means U.S. and European automakers will have to grow through their joint ventures just as the overall rate of economic growth is slowing. China's economy grew at 7.4% in the third quarter, a pace the U.S. envies, but for China it is the smallest increase in more than three years.

The slowdown also comes amid signs that the trade relationship between China and the U.S. is strained.

The Pew Research Center reported in October that the percentage of Chinese who say their country's relationship with the U.S. is cooperative declined from 68% in 2010 to 39% in 2012. Some 26% of Chinese say the country has a hostile relationship with the U.S., up from 8% in 2010.

GM, the largest U.S. auto company in China, had 14.4% of the new car market in China in the third quarter, led by Buick and domestic brands like Wuling. The company sells more cars in China than it does in the U.S.

Ford is spending heavily to expand production in China. Chrysler is considering building Jeeps in China again after previous owner Daimler halted production during Chrysler's financial crisis.

But to make vehicles in China, foreign companies must establish partnerships with Chinese companies and share the profits.

Western manufacturers such as GM and Volkswagen have succeeded in China because consumers perceive their vehicles as reliable and of high quality.

Indigenous Chinese carmakers such as Geely, Chery and Great Wall Motor are working to close that perceived quality gap. There are opportunities to sway consumers like Yunnan Province resident Wong Paul, who owns a Toyota Camry and Nissan Tiida.

"The Chinese car companies are getting better and better," said Wong. "Of course in the beginning, the quality was not so good."

GM offers "a high-class motor. You can use it for a long time," he said.

Commerce Ministry spokesman Shen said China believes the industry will sell 20 million vehicles per year "in the future," up from about 18 million this year.

Some analysts say annual new-vehicle sales could surge to 30 million by 2020.

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