Automakers Target Chinese Buyers at Shanghai Show

Global and Chinese automakers showcased family-friendly sedans and SUVs targeting coveted urban buyers at China’s biggest auto show Saturday as competition intensifies in this huge but crowded market.

China’s vehicle sales rose 13 percent in March, blistering growth by Western standards but down from 45 percent in 2009. With sales weak elsewhere, global companies that see China as a key part of their future are pouring money and technology into fighting for market share, squeezing each other and new but ambitious local automakers.

“It is a very, very competitive market,” said Bob Socia, president of General Motors Co.’s China arm.

The Shanghai auto show, held in alternate years, has grown into one of the global industry’s most prominent events, especially after China passed the United States in 2009 as the biggest auto market by number of vehicles sold.

Organizers say exhibitors at this year’s show, which opens to the public after Saturday’s press preview, will display more than 800 vehicles, from mass-market compacts to minivans to hand-built sports cars with price tags of more than $1 million.

GM is displaying 53 models from its Buick, Cadillac and Chevrolet units as well as its local Baojun and Wuling brands. GM says it will launch 17 new and refreshed models in China this year and wants to expand Cadillac’s share of the country’s booming luxury market.

Ford Motor Co. unveiled a new version of its Mondeo sedan and the sport model of its smaller Focus ST aimed at prosperous, family-conscious Chinese buyers. Marin Burela, the president of Ford’s main Chinese joint venture, said the Mondeo is aimed at luring Chinese buyers with “affordable luxury.”

The Mondeo “rivals vehicles priced well beyond this segment,” Burela said.

Italy’s Fiat SpA, trying to catch up after launching its first China venture just three years ago, unveiled a version of its Viaggio sedan, and an SUV, the Freemont, based on the Dodge Journey. Fiat said the Viaggio, with a smaller 1.4-liter engine than models sold elsewhere, was its first vehicle designed for the China market.

China’s auto sales last year topped 19 million. Industry analysts and automakers say they expect rapid growth to continue, rising to annual sales of as much as 32 million vehicles by 2020 – the equivalent of the United States and Europe combined.

“China really is in the infancy of industry development,” said David Schoch, Ford’s president for Asia and the Pacific. Ford expects 60 to 70 percent of its sales growth to come from the Asia-Pacific region in coming years, he said, “and most of that is driven by the China engine.”

Schoch said Ford plans to double the size of its China dealership network to more than 800 outlets.

Despite rapid sales growth that has left Beijing, Shanghai and other major cities choked on traffic and smog, competition has been brutal, forcing fledgling Chinese automakers to merge in hopes of competing with bigger global rivals.

Ford’s local partner, Chang’an Automotive Group, swallowed rivals Changhe and Hafei and a series of smaller producers. Shanghai Automotive Industries Corp., which assembles vehicles for GM and VW, absorbed Nanjing Automotive.

Still, the market is fragmented among more than 100 brands, and some domestic producers have sales of just 1,000 to 2,000 vehicles a year.

Germany’s Volkswagen AG is China’s biggest single auto brand with a 14-percent market share. GM is second with 7 percent for cars, plus its truck and minivan sales. Ford, Honda Motor Co. and leading Chinese brands such as Chery Inc. and Geely Holding Group, which owns Sweden’s Volvo Cars, have shares of 2 to 4 percent.

The squeeze on independent Chinese brands has worsened as global automakers target their core low-cost market with new economy models.

Chinese automakers were stunned last year when GM unveiled a version of its Sail sedan priced at just 56,800 yuan ($9,100). GM says it also exported more than 60,000 Chinese-manufactured Sails last year to other developing markets.

Chery’s sales plunged 10 percent last year. It responded last week by announcing an overhaul that will eliminate two of its three brands and slim down its product range from 20 models to 10 or 11.

“It’s already survival of the fittest,” said analyst Namrita Chow of IHS Automotive.

One Chinese brand that has bucked the trend is Great Wall Motors Co. Its profit jumped 65 percent last year, driven by sales of its popular SUVs, which are exported to 80 countries including Australia, Italy and Russia.

On Saturday, Great Wall unveiled two new SUVs, the H6 and the H7, as well as a sedan and a pickup.

On the strength of those new products, CEO Wang Fengying said this year’s sales might rise 30 percent.

“We put a lot into research and development – really, a lot,” said Wang, the only female chief executive of a major Chinese auto brand. “We hope we know just what customers want and trust.”

Also Saturday, Japanese automakers that are struggling to come back from a sales slump displayed models they said were restyled to suit Chinese tastes.

Toyota Motor Co. showed a Yaris sedan and other models it said were modified for China after market research. Honda and Nissan Motor Co., which have hired Chinese designers, showed models they said were created to meet local demand.

Sales of Japanese brands plunged last year during a dispute between Beijing and Tokyo over a group of uninhabited islands in the East China Sea, and continue to wane even though the tensions have abated.

Japanese automakers suffered a combined 17.8 percent sales decline in March, according to Alec Gutierrez, senior analyst at Kelley Blue Book.

Speaking at the show, Toyota vice chairman Takeshi Uchiyamada stressed friendship with China. He noted that Toyota has produced its hybrid Prius in China since 2005, the first manufacturing site for the vehicle outside Japan.

“For me, China is a cherished neighbor,” he said.

China’s failure to follow its neighbors Japan and South Korea in creating at least one global auto brand has frustrated communist leaders.

They see auto manufacturing as an industry that will create higher-paid jobs in fields from electronics to chemicals. They have spent two decades giving producers subsidies and other help.

Despite that, industry analysts say China is years away from creating a globally competitive brand.

Already, a handful of foreign automakers, including VW and GM, are developing such a commanding market position that they will be hard to dislodge, according to Yale Zhang, managing director of Automotive Foresight, a research firm.

Five years ago, eight automakers had vehicles among China’s 10 most popular, according to Zhang. Last year, the Top 10 group had shrunk to just three brands – VW, GM and the Korean duopoly of Hyundai and Kia.

“The next five years really will be the last window of opportunity for local carmakers” to develop competitive brands, said Zhang.

“Only one or two probably will be successful,” he said. “Most of them will really see serious trouble within five years.”