China's Geely Automobile Holdings Ltd said it plans to step up car exports this year after testing overseas markets in late 2003, with an eye to selling 30 per cent of its output abroad by 2010.

Automakers in China plan billions of dollars worth of new capacity over the next few years, prompting fears of a glut and leading some to look to exports as a growth outlet, analysts have said.

Just a tiny fraction of China's car output is now exported.

Geely, based in East China's Zhejiang Province, plans to export its homegrown sedans this year to South America and North Africa, and is also looking to the US market, executives said.

Sport utility vehicle maker Great Wall Automobile Holdings Co Ltd, which exports vehicles to the Middle East and South America, also said last week it wants to export to the United States.

The company did not provide other details.

"The export market is important to us," Lawrence Ang, executive director of Hong Kong-listed Geely, said.

"If we can sell our brand overseas, it will also help domestic sales and give us an economy of scale."

Alex Fan, head of China research at Daiwa Institute of Research, said Chinese car exports would be targeted mainly at lower-income markets for the foreseeable future.

He said it will take longer for China to develop export markets for cars than it did for smaller-ticket white goods, such as refrigerators.

"There is still a technology gap between domestic and international carmakers," Fan said.

Cheap cars

Geely, which makes some of the cheapest cars in China, plans to export 5,000 vehicles to the Middle East, South America and North Africa this year after shipping 1,000 cars to Syria in the fourth quarter of 2003 at US$4,000-$6,000 each, Ang said.

Last week, Geely exported 320 cars to Syria, 200 of which were priced at US$10,000 each.

Geely is looking for a US partner to import its cars, said Xiong Jingguo, Geely's project manager for its export division.

"Yes, we have this plan," Xiong said. "The exact number and time frame has yet to be decided."

Geely has yet to meet US emissions standards, he added.

Few cars are exported from China, with manufacturers saying they are busy meeting booming domestic demand.

Exports are also limited by the cost of making cars in China.

Foreign manufacturers say it costs them roughly 20 per cent more to make a car in the Chinese mainland, as many parts must be imported.

Top carmaker General Motors Corp exports a small number of Chinese-made GL8 executive wagons to the Philippines, but says it has no plans to turn China into an export base.

Volkswagen AG has said it wants to increase exports from China to nearby countries, but off a low base.

Analysts say multinationals, which are investing a combined US$13 billion to produce 6 million cars annually in China by the end of the decade, may one day turn the country into an export base to offset slowing domestic sales.

Car sales in China almost doubled, to around 2 million units, last year, but are expected to only grow 10 to 20 per cent this year. That has prompted fears of a price war that will sap profit margins.

Overproduction fears have dragged down shares in Hong Kong-listed automakers in recent months.

Geely aims to make 200,000 cars this year, rising to 1.2 million in 2010.

"For us, all markets around the world are our targets to achieve high growth," said Geely Chairman He Xuechu.

Geely has two car ventures that make low-priced sedans under the brands Maple, Merrie and Uliou, and the Beauty Leopard sports car.

It also makes the Haoqing minicar, the cheapest on the Chinese market, at just 32,000 yuan (US$3,867).

(Business Weekly June 29, 2004)