FOREIGN CAR COMPANIES IN CHINA

FOREIGN CAR COMPANIES IN CHINA

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Smart Car in China
Foreign-origin brands, most of which are manufactured in China through joint ventures, accounted for 64 percent of total sales in 2010, according to the China Association of Automobile Manufacturers. As of 2009, foreign car companies held 85 percent of the Chinese car market. GM was the No. 1 auto maker in 2009. Volkswagen was No. 2. GM sold a record 1.83 million units in 2009

In the 1980s, foreign automakers were allowed to form joint ventures with state-owned Chinese partners with foreign ownership limited to 50 percent. The goal of the government was to develop a car industry quickly, learning from the foreign companies how to make cars while maintaining control of the car industry. Volkswagen and American Motors were the first. VW came and built the Santana model to serve the envisioned need for taxis. American Motors came and built Jeeps. Originally, they thought that this would be a good model given China's rural infrastructure. The American Motors/Beijing Auto Works #3 was the joint venture that formed the basis of China's Joint Venture Law. Every one made out well in part because competition was strictly controlled.

Volkswagen was the first foreign company to build a plant in China. Now it seems like every major auto company as a presence in Chinese. Mercedes-Benz, Ford, General Motors, Suzuki, Daihatsu, Honda, Subaru, Citreon Toyota all have plants in China. The majority of them have partnerships with one of China's "Big Three” automakers

Initially the market in China was still too small for economical high-volume production and many components had to be brought in because components made by local manufacturers are not very good quality. These problems are no longer the case. Still, there are laws prohibiting the sale of foreign cars on the same sales floor as domestic cars. In the early days the general feeling was invest heavily or be left behind. Most companies have tried to carve out a market share and position themselves for the future. Competition is expected to fierce with more losers than winners. So many foreign car companies have entered the fray that even for the winners profits have been cut to the bone. The companies hope to make the most profits by selling compact cars priced between $12,000 and $16,000.

Rules for Foreign Car Companies in China

Foreign car companies in China are required to former a partnership with a Chinese company to do business in China. Before making a deal for a joint venture, Chinese insist on a willingness to transfer technology to China and employ Chinese in upper management. Many companies initially balked at the idea of transferring technology but have since gone along with the scheme to enter the Chinese market.

Beijing requires foreign automakers in China to operate in joint ventures, in hopes their local partners will learn and grow. But communist leaders have been disappointed with the results: Today, China's market is dominated by General Motors Co., Volkswagen AG and other foreign brands. Local producers such as Chery Automobile Co. and Geely Holding Group, the new owner of Sweden's Volvo Cars, are growing fast but are far behind.

Websites and Resources

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Audi Sports Car in Hangzhou
Good Websites and Sources: China Car Forum Automaker List chinacarforums.com ; China Car Forums chinacarforums.com ; Chinese Automobile chineseautomobile.com ; China Car Times chinacartimes.com ; China Motors. Ru china-motors.ru ; Analysis of Globalization of Chinese Automobile Industry glgroup.com/News/The-Path-to-Globalization ; Wikipedia article on Automobile Industry in China Wikipedia ; U.S. Commerce Department Information by Industry for China on the Transportation Industry buyusa.gov/china Book Kelly Sims Gallagher of Harvard’s Kennedy School is the author or book on Chinese automakers.

Industry in China: China-Made Products made-in-china.com ; U.S. Commerce Department Information by Industry for China buyusa.gov/china ; Wikipedia article on Industries of China Wikipedia ; U.S. Commerce Department’s Office of China Economic Area (OCEA) export.gov/china

Links in this Website: ; CHINESE FACTORIES AND MINES Factsanddetails.com/China ; AUTOMOBILE INDUSTRY IN CHINA Factsanddetails.com/China ; FOREIGN CAR COMPANIES IN CHINA Factsanddetails.com/China ; AUTOMOBILES IN CHINA Factsanddetails.com/China ; DRIVING AND OWNING A CAR IN CHINA Factsanddetails.com/China ; LABOR-INTENSIVE INDUSTRIES IN CHINA Factsanddetails.com/China ; LABOR-INTENSIVE INDUSTRIES--TOYS, CHRISTMAS STUFF AND FIREWORKS Factsanddetails.com/China ; LABOR-INTENSIVE INDUSTRIES--TEXTILES, FURNITURE, SPORTING GOODS Factsanddetails.com/China ; TECHNOLOGY INDUSTRIES IN CHINA Factsanddetails.com/China ; PIRATING AND COUNTERFEITING IN CHINA Factsanddetails.com/China ; SHENZHEN AND THE PEARL RIVER DELTA Factsanddetails.com/China ; ZHEJIANG PROVINCE Factsanddetails.com/China ; SHANGHAI Factsanddetails.com/China

China the Hot Market for Foreign Car Companies

American, European and Japanese care markers are increasingly looking to China as well as India and Russia to save their companies as demand for vehicles in the United States and Europe starts to shrink. Foreign auto companies are increasing were expected to one of the big winners after China joined the WTO, with tariffs being reduced from as high as 100 percent to 25 percent on cars and from 50 percent to 10 percent on parts in 2006.

Many Japanese, American and European auto makers are skipping the auto shows in Detroit, Tokyo and Frankfurt to show off their latest models at the Shanghai show.

Japanese, American and European automakers are increasingly designing their cars with Chinese buyers in mind. Nissan, for example, has designed the Teana sedan with a conservative but upscale look and relatively low price tag. Unveiled at the Beijing Auto Show in 2010, it is aimed at Chinese middle class consumers. Nissan CEO Carlos Ghosn told AP, “The Teana is a Chinese product. Without any doubt, the Chinese consumer now is becoming a big target for a lot products that we are developing.”

Luxury car makers are giving cars a longer wheel base and stronger suspension for a smooth ride on China’s rough roads. Sedans and minivans are being scaled to suit lower-income families.

Foreign Automobile Sales in China in 2011

Though they have been counting on faster growth in China and other emerging economies to help make up for slack growth in their traditional markets, Japanese, US and European car makers have fared better. Foreign brand vehicles enjoy a reputation for higher quality and brand value compared with most local competitors. Automakers are also beginning to sell China-made vehicles elsewhere, taking advantage of lower costs and proximity to other developing markets.

Sales of GM-branded vehicles by the company and its Chinese partners rose 8.3 per cent in 2011 to a new record of 2.5 million vehicles. GM reached the 2 million milestone in 2011, in October two weeks ahead of the previous year. Ford's sales for the year climbed 7 per cent to 519,390 vehicles.

Volkswagen's sales rose nearly 18 per cent, to 2.26 million, including deliveries of cars in Hong Kong, the company said. After expanding in southern China the company is shifting its focus to rural and western regions, Karl-Thomas Neumann, president and CEO of Volkswagen Group China said in a statement. ``We see a great potential for an expansion in China's rural areas where millions of people will benefit from better mobility,'' he said.

Volkswagen in China

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Volkswagen Taxi
Volkswagen AG, Europe’s largest car maker, for a long time was the largest car manufacturer in China. It has two join ventures: one with Shanghai Automotive Company, producing Santana and Passat models, and another with First Automotive Works in Changsan in the northeast, producing Bora and Jetta models. Volkswagen also produces Polos, Golfs, and Audis . Volkswagen was the No. 2 auto maker in 2009. GM was No. 1.

China is Volkswagen’s largest market. Volkswagen began producing cars in China in 1985 with Shanghai Automotive Company, which controls about half of China's car market. They set up a factory on Changchin, Some of the tooling came from a failed plant in Westmorland, Pennsylvania. It produced Golfs and Jettas. The latter became the bestselling cars in China.

By 1995 the German car manufacture produced 50 percent of the cars in China. In 2002, it reached the half million cars a year mark, producing 4 out of every 10 passenger cars sold in China and selling more cars in China than it did in the United States. It hopes to reach the 1 million sales mark by 2007.

Volkswagen invests about $600 million and $1.2 billion a year in China. In 2003, it had a capacity up produce 700,000 cars a year. It announced plans to open a third production site, in Yizheng City, and began exporting cars from China. In 2004, GM and Volkswagen were given permission to offer car loans through their financing arms.

In 2003, Volkswagen had a 25 percent share of the Chinese market. Volkswagen sales in China dropped 6.1 percent in 2004 with the sale of 655,118 vehicles. Volkswagen’s share of the market was 18 percent in June 2005, with each of units with less than 10 percent.

Audi s the only global luxury car maker making cars in China. It build the A4, A6 and A8 models at the FAW Volkswagen Automobile, a venture in northwestern China with Volkswagen and China FAW Croup, the country’s biggest automaker. Audi owns 10 percent. Black Audi 100s have been made in China since 1992.

In September 2009, VW said it would invest $5.8 billion over three years in China as part of its effort to stay ahead of the competition.

Volkswagen and BMW Chalk Up Record Profits Thanks to China

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Police Volkswagen 3000
in Shangri-La
In March 2011 the Wall Street Journal reported: “Volkswagen AG and BMW AG reported record 2010 profits and signs of a strong first quarter on the back of surging Chinese auto sales, underscoring the outsized role China is playing in German car makers' bottom lines...In China, Volkswagen's local auto-manufacturing joint ventures---which produced most of the nearly two million cars Volkswagen sold in that country---generated an operating profit of “1.9 billion ($2.63 billion) up “1.1 billion from the previous year, the company said. Volkswagen now sells nearly one in three of its cars in China, after a 37 percent increase in sales there last year. [Source: Vanessa Fuhrmans and Christoph Rauwald, Wall Street Journal, March 10, 2011]

That result, though, doesn't include the cars that Volkswagen exports to China, nor the 600,000 German-made gearboxes and engines it sold there in 2010. Thanks to a weakened euro in the first half of last year, those sales helped contribute to a “1 billion profit boost that Volkswagen said it gained in 2010 from exchange-rate effects. The key role China is playing in auto makers' bottom line signal how little mass-market car manufacturers like Volkswagen are likely earning in their European home markets. Though Volkswagen doesn't break down earnings by region, analysts say few mass-market manufacturers are generating a profit in Europe amid the overcapacity and stagnant growth that plagues the industry. [Ibid]

General Motors in China

General Motors is the No.1 automaker in China and China in General Motor’s second largest market after the United States. It produces Buicks and Chevrolets and has great success in China which have offset roubles it had at home in the United States. For a long times GM was the No. 2 automaker in China behind Volkswagen. GM sold more than 2 million cars in China in 2010 and 2011. In April 2011, GM said it hoped to double sales in China by 2015 to 5 million vehicles, in the process passing Toyota as the world’s No. 1 automaker.

While GM was going through bankruptcy proceedings in the United States it was racking up record sales despite the economic down turn in China. While it was laying off thousands of American workers and shutting car divisions it was preparing to open new factories and roll out new models in China. The situation for GM was so different in China than it was in the U.S. Time magazine described it as “GM’s alternative universe.”

China could soon be GM’s largest market. By selling two million cars in China in 2010, it reached reach its goal four years earlier than expected, and could sell more than 3 million cars by 2015. By contrast it sold 2.1 million cars in the United States in 2009.

General Motors has a long history in China. Buick set up its first dealership in China in Shanghai in 1929 and was regarded as a prestige car before the Communist Revolution. Its first joint ventured was launched in 1991, struggled for years and closed down n 1996 after producing only 300 vehicles. I n 1996, GM set up main operation in China, a 50-50 partnership with Shanghai Automotive Industry Corp. (SAIC). Today General Motors has 50-50 partnerships with two Chinese automakers: Shanghai Automotive and Wuling Automotive.

After slow start in China GM has recently made up for lost time. Sales doubled in 2002 and reached 492,014 vehicles in 2004. In 2005, GM passed Volkswagen to become the No. 1 automaker in China, with the sales of 782,368 vehicles, a 48.7 percent increase from the year before. It achieved the millstone through the success of it Wuling Sunshine minivan. Sales rose 32 percent more in 2006 when it sold 876,747 vehicles and had an 11.8 percent market share. In 2007, GM sold more than 1 million vehicles in China for the first time in 2007.

GM makes more money in China, despite all the competition, than it does in it other Asian operations. Its GM operation in China is almost the opposite of the GM in the United States. It has made healthy profits by producing small, inexpensive economical cars, minivans and pickups. By contrast GM in the U.S. has its biggest profits from gas guzzling SUVs like the Chevy Suburban and the Hummer.

GM owes much its success to Phil Murtaugh, who helped negotiate the agreements that allowed GM to open its first factory in Shanghai and then ran the company and quickly outhustled and Toyota, Honda, Nissan, DaimlerChrysker, and finally caught Volkswagen. Although he speaks little Chinese Murtaugh became a celebrity in China the same way Nissan’s Carlos Ghosn did in Japan. He left GM in 2005 and now is working with SAIC and helping them develop their own cars.

General Motors Production in China

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Buick in LaCrosse in China
GM was the No. 1 auto maker in 2009. Volkswagen was No. 2. GM sold a record 1.83 million units in 2009, up 66.9 percent from the previous years when it sold 1.09 million. In 2009, GM held a 13.4 percent share of the car market in China thanks to brisk sales of Buick, Chevrolet and Wuling vehicles. GM predicts robust sales for 2010.

As of 2008 GM had eight joint ventures and 20,000 employees in China. As of 2006, GM had five joint venture assembly plants that produced nearly all of the GM vehicles sold in China It also has an engine plan and an autofinacing venture and is expanding os dealerships. GM’s biggest venture is with Shanghai Automotive Industry Corp (SAIC) The venture sold 252,868 vehicles in 2004. Some of its plants use robotics technology not even used in America.

GM invests more than $1 billion annually in China. Over $1.5 billion was spent on a new plant in Pudong Shanghai in the 1990s that builds Buick Regals and Centuries and a Chinese version of the Pontiac Montana minivan. Workers at the factory get paid $3.70 an hour, a large sum in China, plus health and pension benefits and performance bonuses, which add another 89 cents an hour.

GM produces the Chevrolet Spark with SAIC and Liuzhuou Wuling Automotive at the Wuling factory in Liuzhou in southeastern China. Another GM-SAIC plant, in Yantai, an industrial town just across the border North Korea, is expected to produce 200,000 Chevrolets a year. Many workers there never heard of Chevrolet until they started working at the plant. In May 2005, Shanghai GM completed construction of a new plant in the Pudong district of Shanghai that will double Pudong’s annual capacity to 320,000 vehicles. The new plant will produce Buick Excelles and Cadillac CTS luxury sedans. In August 2009, GM launched a joint venture with FAW Group to produce light duty trucks and vans.

GM eventually plans to export Chinese-made cars to the United States. One Chevrolet factory in China makes engines that are installed in Equinox SUVs sold in the United States. In 2011 SAIC-GM-Wuling, a General Motors Co. joint venture, announced plans to assemble autos in Egypt from kits made in China, competing in the same markets targeted by Chinese domestic car exporters.

General Motors Vehicles in China

Popular cars include the Buick Excelle HTV compact hatchback and Chevrolet Spark minicar. It also make the Buick Regal sedan and GJB minivans. The new plant in Yantai it produces the Chevrolet Sail compact sedan, the slightly larger Aveo compact sedan and hatchback and the considerably larger Chevrolet Epica,

Prices begin at $35,000 for the Buick Regals and Centuries and $41,000 and for the Pontiac Montana minivan. Many thought GM had little chance of success in China with such expensive vehicles. But the company has proved the naysayers wrong.

Buicks are regarded as cars of the elite. Many have been bought bureaucrats and are driven by chauffeurs and have been designed with prestige backseat riders in mind. The radio and air-conditioning controls, for example, face the back seat. The cars also have a stronger chassis and suspension than their American counterparts as an adaption for the bad Chinese roads.

In 2001, GM begin selling the Buick Sail, based in Opel Corsa, starting at $12,000 and equipped with dual airbags and anti-lock brakes. A venture with China Brilliancie produced a version of the Chevy Blazer and S1-10 pick-up.

The Wuling Sunshine minivan that has been one GM’s top sellers. Selling for less than $5,000, it has a top speed of about 80mph, about a quarter of the horsepower of American minivans. and gets 43 miles per gallon in city driving. It was surprise that GM---known for it gas guzzling Cadillacs and Hummers---would build such a vehicle and the executive that pushed the product was forced to quit.

GM started selling Chinese-made Cadillacs in China in 2005. The cars start at $62,000. GM introduced its first hybrid model built and sold outside North America---the Buick lacrosse Eco-Hybrid---in China.

GM and Chery, See Above

DaimlerChrysler in China

Jeeps have been produced in China by Chrysler since 1984 through a venture with Beijing Automotive Industry Corp. The venture has produced several vehicles, beginning with Wrangler-like SUV called the BJ2020.

Beating out Chrysler and Ford in the mid-1990s, Mercedes Benz won a lucrative $1 billion contract to build minivans in China, the single largest automobile deal of the decade. The project was expected to produce 60,000 minivans and 100,000 engines a year.

In the 1990s, Chrysler shut down its China offices. It pulled out of deal to make minivans after the Chinese refused to promise they would not steal the car company's technological secrets.

DamlerChryser has plans to build Mercedes-Benz sedans and has a deal with Chery to build a subcompact in Anhui. It also paid $105 million for a share of China’s Beiqi Foton Motor. After the deal DaimlerChrysler had a 24 percent stake in the Chinese company.

DaimlerChrysler began making cars in China in 2005. In January 2007, Chery agreed to build cars for Daimler-Chrysler to sell worldwide.

Daimler AG and Beiqi Foton formed a joint venture in 2008 to produce medium-size and heavy duty trucks in China, with plans to sell them overseas.

Ford in China

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Ford Fiesta Girl at the 2008 Beijing Auto Show
Ford first arrived in China in 1913, selling Model-Ts. After losing a deal to Daimler-Benz to make minivans in China, Ford bought a 30 percent stake in China's Jiangling Motors. Beginning in 1997, Ford began producing a commercial-passenger van, the Transit, and other small trucks with Jiangling Motors.

Ford sold around 65,000 cars in China in 2004. It markets Mondeos and Fiestas. Ford began producing Fiestas in 2003. They sell for between $10,000 and $15,000. In 207, Ford dales increased 30 percent to 216,324 vehicles, boosted by the popularity of the Focus model.

Ford-owned brands sold in China include Ford, Lincoln, Volvo, Jaguar and Land Rover. Ford’s largest partner in China is Chongqing Changan Automobile. It makes the Mondeos and Fiestas with Ford. In December 2004, ir announced it would combine with Ford’s other partner Jiangling Motors.

Many feel that Ford has moved too slowly and unaggressively into China to make much of a mark there. Even so it has invested $1.5 billion between 2001 and 2006 and sales rose 87 percent in 2006. It sold 166,722 vehicles including Mondeo sedans, Transit vans, and imported Land Rover, Jaguar and Volvo vehicles.

Ford-owned Jaguar plans to build luxury cars in China. In September 2007, Ford and Mazda opened a $510 million plant in Nanjing.

In September 2009, Ford announced it would begin construction on its 3rd plant in China---a $490 million factory in Chongqing---that will make Focus cars starting in 2012. The plant will make 150,000 vehicles a year boosting Ford’s annual production to 600,000 vehicles

Japanese Car Companies in China

In the early 2000s, Japanese car companies began moving into China, where production costs are about 20 percent lower and labor costs are about 50 percent lower than what they are in Japan China has been slow giving Japanese companies permission to enter the Chinese market, in part because of bitter memories from World War II.

In the early 2000s, all of Japan’s five largest automakers announced plans to expand aggressively into China. Nissan Motor president Carlos Ghosn said, “China today is our No. 1 geographic priority in terms of market development. Over the next 5 to 10 years, China will have the highest growth in all our markets.”

Some wonder why Japan is bothering. After China joined the WTO, the duties on importing foreign cars dropped from 100 percent in 2002 to 25 percent in 2006. Shipping cost are relatively minimal from Japan to China because they are so close. Cars cost 20 percent to 30 percent less in China than Japan bit the profit margins are about half those in Japan. There are also concerns that the Chinese will steal production techniques from the Japanese.

Japanese car companies have a strong presence in the Guangzhou area. Honda, Toyota and Nissan all have factories there. The automakers chose to set up shop there because there is good car market, positive view towards outsiders, a large pool of skilled workers and a bustling economy.

Japanese Automakers Losing Ground in China

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Hyundai police car
In January 2011, the Japanese newspaper the Yomiuri Shimbun reported: Japanese carmakers are in a tough fight for shares of the skyrocketing Chinese auto market. Despite the explosive growth of the Chinese market, sales of Japanese cars have failed to expand, with market share actually dropping from 25.7 percent in 2008 to about 20 percent in 2010. Nissan Motor Co. was the only Japanese firm to sell a million cars in China last year. [Source: Yasushi Kouchi and Makoto Fukumori, Yomiuri Shimbun, January 12, 2011]

Japanese firms face two major disadvantages: their relatively high prices and a scarcity of models on the Chinese market. While Nissan sells its March compact for about 80,000 yuan in China, General Motors Co. of the United States has had major success selling models priced at 30,000 yuan to 50,000 yuan under a joint venture with a Chinese firm. Only Honda models with engines 1,600cc or less sold in China are the Fit and the City. "Japanese carmakers emphasize performance," Japan Automobile Manufacturers Association Inc. Chairman Toshiyuki Shiga said, "which pushes prices up and has caused the desperate struggle [in China]." [Ibid]

Some have even said Japanese cars lack "something special" that goes beyond price and reliability. Japan Brand Strategy Inc. conducted a study of popular cars in China last year. According to the study, Mazda Motor Corp.'s Mazda 6, called the Atenza in Japan, was the best-ranked Japanese car at 10th, while German cars held the top nine spots. "Japanese cars are high quality, but they lack a sense of luxury and aren't fun to drive. [Chinese consumers] think of them as ordinary," a company official said. [Ibid]

Japan's carmakers are trying to respond to the realities of the Chinese market by producing brands to suit local tastes. In December, Guangqi Honda Automobile Co.”a Honda production and sales joint venture---announced a compact sedan called the Li Nian S1, the first model to be produced by the joint firm's Li Nian (Everus) brand. The car is to hit dealerships in spring. "We want to go on the offensive by putting out a car for the younger generation and first-time car buyers," said Seiji Kuraishi, Honda's chief operating officer of regional operations in China. [Ibid]

A Nissan joint venture has announced it will market a mass-produced model under the China-specific Venucia brand in 2012. Also, Toyota Motor Corp. established a research and development base in a Shanghai suburb to develop a cheap compact model it plans to sell for less than 1 million yen as early as 2012. Despite these efforts, observers said Japanese automakers face an uphill battle in reclaiming market share in China, as GM and French automaker PSA Peugeot Citroen have already announced plans to produce original brands for sale in China. [Ibid]

Honda in China

Honda was the first Japanese company to manufacture cars in China and is said to be the most profitable car company in China. It has a 50-50 partnership with Guangzhou Automobile Group, which it paid $100 million to obtain. The joint-venture is known as Guangzhou Honda.

Honda entered the market in China relatively late, but made up quickly for lost time and quickly became a major player there. In the first three months of 2005 Honda was the No. 2 car seller in China behind Hyundai. It sold 45,000 cars, a 58 percent increase from a year earlier. Honda sold 117,130 vehicles in 2003, making it the fifth largest automaker in China, with a 6 percent share. Sales grew by 31 percent in 2007.

In 2004, Guangzhou Honda made and sold more than 200,000 vehicles, nearly double what they sold in 2003, In 2001 they sold to 50,000 vehicles. In 1999 they sold 30,000 vehicles.

Honda has made an effort to work with its Chinese host rather than simply manage them and use them as a platform for its operations. Of the senior management team, two are Japanese and two are Chinese. The Chinese workers earn $240 a month, a good salary in China. Honda uses 110 Chinese suppliers, many on the Guangzhou area, and used local suppliers for 40 percent of its parts right from the start. .

Honda has two ventures in China: with Guangzhou Automobile Group and . Hong Kong-based Denway Motors. It has been marketings it cars the Western way through dealerships. As of 2004, it had dealerships in every province of China except for Tibet.

Honda says it aims to produce electric cars in China as early as 2012.

Honda Production in China

Honda has an annual capacity of 650,000 cars and minivans in China, like Jazz subcompacts for export to Europe and Accord sedans for the Chinese market. The prices for Honda’s vehicles in China are similar to those in the United States.

Honda has three plants in the Guangzhou area of Guangdong Province and one in Wuhan, Hubei Province . According to J.D. Power & Associates, China accounts for 17 percent of Honda’s global sales and the ranks fifth in unit sales.

Honda makes the Accord sedans, Odyssey minivans, CR-V vehicles, and Fit compact cars. In 2005 it began producing a small hatchback called the Jazz for export to Europe.

Honda obtained an engine plant in Guangzhou---formally used by Peugeot---through it partnership with Guangzhou Automobile Group. It poured $100 million into the plant. Production of Accords there began in March 1999. The factory now has a capacity of 270,000 vehicles. The plan has been export 50,000 cars made at the plant and sell the rest to Chinese markets. In 2006 123,000 Accords were produced at the plant In 2006, opened a second plant in Zengcheng, Guangzhou. The plant will cost $266 million and has a capacity of 120,000 vehicles a year, raising Honda’s capacity to 360,000. It produces Accords, Odyssey vans and Cuty and Fit subcompacts, Honda opened a new plant in Wuhan in Hubei Province in 2011.

Honda Strike, See Labor

Honda Motorcycles in China

Honda has a partnership with Dongfeng Motor to produce motorcycles. They have a plant on Dongfeng in central China. After it began producing bikes there was a big problem with counterfeit Honda parts showing up on the market.

Honda exported 170,000 motorcycles from China in 2004. It hopes to increase that figure to 300,000 in 2007.

In December 2004, Honda won a lawsuit over copycat rival that sold models under the “Hongda” logo. A Chinese court ruled that Chongqing-based Lifan motors, the company that makes Hongda, was require to pay Honda $177,600 in damages and stop sales and export of Hongda motorcycles.

Toyota in China

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Hiace clone found in Beijing 2009
Toyota was the fastest growing automaker in China in 2007. It posted 62 percent growth, sold 400,000 cars, and built its seventh plant, in the Guangzhou area, in 2007. Capacity shortages led executives to consider building a new plant. Toyota sold 709,000 cars in Chinese in 2009. Many predict it will eventually be the No. 1 automaker in China.

Toyota was very slow to get off the mark in China. It opened its first plant in China in 2002. That year it had only 1 percent of the Chinese market but had aggressive plans to expand tenfold and get 10 percent of the market by 2010. In 2003, Toyota had only a 2 percent share. Toyota sold 183,500 vehicles in China in 2005, only 3 percent of the market.

Toyota has a 50-50 partnership with Tianjin Automobile Xiali Corporation. It broke ground in 2001 on a $100 million plant that produces compact cars called the Echo. The company also sells 15 models that it imports from Japan. Toyota also has partnerships with there, FAW Group and Guangzhou Automobile. Toyota makes the Corolla sedan and sports utility vehicles with the China FAW Group in Changchun in Jilin Province. In September 2004, Toyota announced it would build Prius hybrid cars at with FAW in Changchun by the end of 2005 with parts imported from Japan. Toyota produces 3-liter gasoline engines with FAW group.

Toyota began manufacturing Camrys in May 2006 with Guangzhou Automobile Group in China at a 225-acre site in Nasha Economic and Technological development Zone about 50 kilometers outside Guangzhou. Production and sales is scheduled to being in mid 2006, with production starting at 10,000 cars years and expanding to 250,000 cars a year. The factory will employ 3,000 people. The 10 affiliates with add about 7,000 jobs. A third plant opened in Tianjin in 2007 to make Corollas. Toyota also has a plant in Chengdu in Sichuan. In 2009, the company announced it would spend $524 million to relocate the plant in another part of the city so it can increase production. In September 2011, Toyota said ot would manufacture the latest model of Prius in China. Key arts would initially be made in Japan but later made in China as part of Toyota’s strategy to shift production overseas

In September 2010, China fined Toyota’s finance unit for bribing car dealers---a charge the car maker disputes. The “bribes,” Toyota said, were rebates offered to dealers to get customers to take out loans from Toyota rather than banks. In December 2003, Toyota pulled several advertisement because of the controversy they stirred up. See Advertising, Media.

Toyota said that in the early 2010s it will begin marketing a compact with a significantly lower price than cars it already sells. Toyota also has plans to increase the number of dealerships especially in inland areas.

In October 2011, NHK television reported: “Toyota Motor has held a ground-breaking ceremony in Changshu City in China's Jiangsu Province at a new research and development center for low emission vehicle technology. It will be Toyota's first non-jointly run R&D center in China. Toyota President Akio Toyoda told the attendees that the company hopes to begin selling more China-made eco-friendly vehicles by 2015. [Source: NHK, October 22, 2011]

Toyoda said the center will develop batteries, motors and other core parts for hybrid vehicles. He also said 2 joint-venture companies will produce and sell hybrid cars using parts developed in the center. Toyota said the new facility will become a base to make parts for vehicles tailored to the needs of Chinese consumers.

Toyota Strike, See Labor

Nissan in China

Nissan makes cars in China with Dongfeng Motors, China’s 3rd largest automaker. Beginning production in 2003, it produces Teana and Tiida sedans and is trying to cut costs in Japan by using Chinese suppliers to produce parts. The Tiida is produced with Dongfend in Wuhan in central China and cost about 20 percent less to build there than in Japan. Nissan has plans to build Paladin SUVs through the joint venture Zhengzhou Nissan Automobile. Nissan sells its Infiniti brand in China.

Nissan has a 50-50 joint venture with Dongfeng, Together they sold 708,000 units in 2008 and hope to sell more than 1 million by 2012.

Nissan sold 545,000 vehicles in China in 2008, an increase of 19 percent from the previous year. The Nissan-Dongfeng joint venture sold 610,00 vehicles in 2007, doubling sales in five years. It hopes to sell 1.1 million annually by 2012. Nissan-Dongfeng have a new factory opening up in 2010.

In 2010, Nissan sold 1.02 million vehicles in China, 900,000 in the United States and 640,000 in Japan. The company has said it hopes to sell 1.15 million cars in China in 2011.

In March 2011, Nissan announced it plans to double production in China to 2 million vehicles a year. Nissan has three factories in China . It will take at a couple years too realize its production goal. Nissan began building a second plant in Guangzhou in May 2010.

Other Japanese Car Companies in China

Suzuki and Mitsubishi also have ambitions in China. Suzuki wants makes subcompacts in China. Mitsubishi has plans to build Pajero SUVs in partnership with Beijing Jeep.

Japan's Isuzu company bought a 25 percent stake in Beijing Light Bus.

In January 2005, Mazda and FAW announced plans for a joint venture.

Hyundai in China

Hyundai was the fastest-growing foreign automaker in China in 2009. Beijing Hyundai is a joint venture between the South Korean car maker Hyundai and Beijing Automotive Industry. It tripled sales in 2004 and was the top seller of cars in the first quarter of 2005. It sold 56,100 cars, up 160 percent from the same period a year earlier.

Hyundai makes Elantra compact cars and Sonata sedans It appears that its timing was good. It appeared on the scene in China with cheap cars just as the market for small cars was really beginning to take off.

In 2004 Hyundai Motors broke off a deal with DaimlerChrysler to make trucks in Asia and struck a deal with China’s Jianghuai Automobile Company to make trucks in China at a new $780 million plant in Anhui Province. The plant is scheduled to open in 2006 and produce 90,000 trucks. 10,000 buses and 50,000 van engines by 2010.

In April 2008, Hyundai opened a second plant in China. The $790 million plant outside of Beijing has a production capacity of 300,000 vehicles a year, doubling its total production capacity to 600,000 vehicles.

In July 2009, Fiat Group signed a $556 million deal with Guangzhou Automobile Group (GAC) to produce cars beginning in late 2011. The venture will produce Lenea sedans in a 700,000 square meter plant in Changsha, Hunan Province.

Other Car Companies in China

Fiat makes cars with Nanjing Automobile Group. It is considering taking legal action against Great Wall Motors for copying the design of the Fiat Panda to make the Great Wall Peri.

Great Wall Motors is China’s largest maker of pick up trucks and sports utility vehicles.

Peugeot and Citreon have joint ventures with Dongfeng Motors

High end car such as BMW and Rolls Royce boast remarkably high sales figures. BMW builds 3-Series and 5-Series luxury cars in China through its partnership with Brilliance China Automotive Holdings.

China is now the No. 3 buyer of Rolls Royce. In 2006,demand from China for the new $381,000 Phantoms was so high that Rolls Royce hired 200 new employees and required existing workers to put in double shifts. Other kinds of luxury brands are popular. Italian luxury goods are especially popular. One woman at a luxury shopping mall in Shanghai told Reuters, “I definitely would not buy any named brand products that are “Made in China “...It’s a real turn off...If you are rich and buy fakes, you would really lose face.”

Image Sources: Wikicommons

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

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© 2008 Jeffrey Hays

Last updated April 2012

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