Chinese automakers need new export model
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China Daily, July 21, 2011
China's auto makers should switch to exporting technology and capital rather than vehicles to get into foreign markets, according to a senior Chinese industry figure.
"This is an inevitable change for Chinese auto makers who want to go global," Xu Heyi, chairman of China's fifth largest automotive group, Beijing Automotive Group (BAIC Group), told Xinhua in a recent interview.
He said he expected Russia, for example, to adopt more policies to raise the threshold of foreign auto makers' entry. "This is an inevitable choice to develop the Russian domestic auto industry," he said.
"So, against such a backdrop, products export is a short-sighted behavior," Xu said.
The Beijing-based BAIC Group announced here Tuesday the establishment of a joint venture with Russia's AMS Auto. It is the first joint venture formed by Chinese and Russian auto makers since the global financial crisis.
"The cooperation between BAIC Group and AMS is a long-term, strategic decision. I believe this is an interest-oriented, mutually beneficial decision for both sides," Xu said.
"The two sides could complement each other under favorable policies adopted by the Russian government, and localization of production would absolutely lower costs and facilitate expansion of market share," Xu said.
After China and India, Russia is the fastest-growing auto market in the world and is expected to become the largest new vehicle market in Europe this year.
"Russia's industrial foundation is solid, which could help facilitate cooperation in the auto industry between China and Russia," Xu said, adding the Russian auto market had "particular characteristics."
"Russia's high-end market and low-end market are mature, so Chinese auto makers should identify market positioning and define their opponents in competition," Xu said.
"Russia's heavy trucks, for instance, are internationally known for their good qualities, but its light trucks and medium trucks still need to be developed," Xu said.
"However, BAIC is competitive in light trucks and medium trucks, that's why we started our cooperation in commercial vehicles," he said.
Under the deal, two BAIC Group companies -- Beijing Automotive Works (BAW) and BAIC International Corp -- and BAW Motor Corp (BMC), an AMS affiliate, have entered a joint venture to produce light, medium and heavy cargo trucks to be sold under the BAW brand in Russia.
The BAIC Group said the total investment for the joint venture, BAW-RUS Automotive Co Ltd is about $176 million, with registered capital of $20 million.
Xu also spoke about the sharp drop in Chinese vehicle exports to Russia after the 2008 global financial crisis.
"On one hand, the Russian government has adopted many policies to protect domestic auto makers and markets. On the other hand, the Chinese auto industry's brand construction is still in its infancy," Xu said.
"A little change in the external environment can lead to instability in the domestic market, so we still need to exert more efforts in our own brand construction," he said.
However, the global financial crisis also brought opportunities for Chinese auto makers to develop their own brands, Xu said. "That's why Chinese vehicle exports to overseas markets have recovered steadily."
The BAIC Group, established in 1958, sold 1.5 million vehicles and had revenues of 158.4 billion yuan ($24.5 billion) in 2010.
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