Honda website

NOVEMBER 24, 2004

The Chinese are coming!

The Chinese automobile industry is booming and, according to the latest predictions from VDA, the German automobile industry union, this year Chinese production will outstrip that of Germany, to become the world's third biggest manufacturer of automobiles after the United States and Japan. According to the estimates the US will build 12.09m units this year, Japan will produce 10.29m and China will be third with 5.73m, displacing Germany which has traditionally been the world's third biggest car-builder. Although many of the Chinese cars are being built by joint ventures with Japanese and western manufacturers, there are signs that China is going to start building more of its own machinery, now that it has a solid understanding of how it is done. The Chinese government-controlled car-maker Shanghai Automotive Industries Corp (SAIC) is China's second largest automaker and has joint ventures with both General Motors and Volkswagen. SAIC chief executive Hu Mao Yuan says he is "interested" in producing cars that will carry only the SAIC brand name and the company says that by 2010 it wants to become one of the world's top six car manufacturers. There has already been trouble because of the Chery QQ model which GM claims was a straight copy of its Chevrolet Spark four-door hatchback, which is produced by a company which is in partnership with SAIC.

The International Metalworkers Federation recently issued a report suggesting that China will be exporting vehicles to Europe and North America by 2007.

SAIC recently bought control of Korea's Ssangyong Motor Co and is in the process of agreeing a partnership with MG Rover to give the firm a manufacturing base in Europe. SAIC has already agreed to put up more than $1.8bn of funding to replace all four of MG Rover's current models and is reported to be looking at taking a 70% stake in MG Rover.

The next problem will be selling the cars because there is more production than demand in the major car markets at the moment. The car companies are pushing to create new markets and to win customers from one another, a situation which is helping manufacturers to look at F1 as a good investment.