Jiangling Motors' sports utility vehicles debuted in Belgium in early July, becoming the first Chinese cars for sale in Western Europe. Meanwhile, Honda's Guangzhou joint venture with Guangzhou Auto Group and Dongfeng Motor Group said it would build some 10,000 compact cars exclusively for European export this year. This follows June's announcement by GM that it would make Chevrolet Aero cars for overseas markets in Shanghai.
The Jiangling SUVs, costing about half as much as their nearest competitors, spell bad news for European carmakers already struggling with weak consumer spending, rising raw material costs and falling prices. But Chinese carmakers are by no means pulling in the profits themselves.
January-April earnings in China's auto sector fell 57% year-on-year, due to high costs and increased competition. Two of China's largest carmakers, Shanghai Automotive Company, the listed arm of Shanghai Automotive Industry Corporation (SAIC), and Chongqing Changan Auto recently warned that their first-half profits could fall by more than 50% from a year ago.
Still, vehicle sales remain high, growing at 9.4% in the first half of this year. Sales of passenger cars alone grew 48.7% in June from one year earlier.
Meanwhile, foreign automakers still are charging in, with Hyundai Motor recently announcing its US$1.24bn commercial vehicle joint venture with the Guangzhou Motor Group. Hyundai said the latest Chinese venture was a key step towards achieving its ambition of boosting vehicle production in China to 1m units-or 20% of its global output-by 2010.
With more investment expected, the industry's annual capacity is expected to more than double from 3m cars now to 8m by 2008.