The company, which entered into partnerships with Volkswagen AG in 1985 and then General Motors in 1997, has established itself as China's largest auto maker but has yet to sell any vehicles under the SAIC name. This is set to change as SAIC begins producing luxury cars this year based on designs for the Rover 75 it bought from the collapsed UK car maker MG Rover. Family sedans and various smaller models are set to follow by the end of 2009.
In addition to stirring up trouble with domestic rival Nanjing Automobile, which claims it bought the rights to all MG designs in a US$92.2 million deal in 2005, SAIC's export plans will put it into direct competition with VW and GM.
The company wants to start selling cars in the UK next year and expand into the rest of Europe by 2009. The Americas, Russia and the Middle East will come later. It has targeted own-brand sales of around 200,000 units per year, over 45,000 of which will be exported. More than US$1 billion has been earmarked for the project.
"This is a turning point for China's market," said Wang Xiaoqiu, general manager of the SAIC Motor Manufacturing. "We want to create our own path."
China's vehicle exports exceeded imports for the first time last year, as 172,800 vehicles, including 31,100 saloons, went overseas. This accounts for just a small proportion of the 5.7 million units produced every year by an auto industry suffering from massive oversupply in its domestic market. As a result, Chinese manufacturers are desperate to start selling abroad, with Chery and Geely both targeting the US while Jiangling Motors has started shipping vehicles to Belgium.
However, the EU and US are reluctant to see China access their auto markets when they claim there are significant barriers to foreign manufacturers making headway in China. Beijing agreed to enter into dispute settlement consultations after the EU and US lodged a complaint with the WTO at the end of March, claiming that China was violating its WTO agreements.
Under Chinese rules, auto parts making up more than 60% of the value of a car are subject to a 28% tariff, which is the same duty imposed on complete new cars.
Components making up less than that share of the vehicle's value are charged 10%. The EU and US say this forces manufacturers to source substantial amounts of components within China. If a resolution is not found within 60 days, the two sides can ask a WTO panel to rule in the dispute.
Sales rise in first quarter
Government reforms to boost the use of small cars saw vehicle sales rise 36.85% in the first quarter, compared to the first three months of last year. Sales reached a record high of 1.73 million units during the period, largely thanks to a surge in passenger car sales which were up 66.97% year-on-year to 855,300 units. China Association of Automobile Manufacturers spokesman Zhu Yiping said the rise was due to a central government notice urging local authorities to remove restrictions on low-emission cars such as the ban on access to city center roads. The reduction in the price of steel and a rush to buy larger vehicles ahead of the luxury car tax due to take effect on April 1 also boosted sales.
VW to boost exports
German carmaker Volkswagen was said it would sign contracts to increase exports of Chinese car parts from just US$100 million to US$1 billion by the end of the year. This fits in well with the government's goal of increasing exports of auto parts from US$5 billion to US$100 billion by 2010. But VW is expected to draw flak in Germany, where it is currently in talks with its trade unions about its production facilities, many of which have been earmarked for sale or closure. Last year the company put in new management at its joint ventures with First Auto Works and Shanghai Automotive Industry Corp in a bid to turn around the loss-making enterprises.
Luxury car tax introduced
The government will increase taxes on larger cars to 20% and target other luxuries in an effort to curb pollution and close the widening income gap. The Ministry of Finance announced that the levy on autos with an engine capacity of more than 2 liters would increase from 8% on April 1. Tax on cars with engines between 1 liter and 1.5 liters will be cut from 5% to 3%.
ABB in Shanghai move
The world's largest power network maker ABB has moved its robotics headquarters from Detroit to Shanghai to take advantage of China's emergence as a major auto market. Company chief executive Fred Kindle told a press briefing that autos were the most important market for robotics. "China has more than 120 vehicle plants and investment of US$25.5 billion in new manufacturing by [next year] will bring the capacity to 15 million units," he said. ABB has invested US$700 million in China in 25 companies and 30 offices with 8,500 employees.
Volvo to make cars in China
Ford Motor's Volvo Cars unit is to manufacture vehicles in China for the first time, the company confirmed. The Sweden-based carmaker will start producing the S40 sport sedan between June and August with partner Changan in Chongqing. After an initial startup phase, annual production will be 10,000 units – nearly double the sales of imported Volvos in China last year. The S40 will have to compete with models from manufacturers that have already established production in China, including DaimlerChrysler's Mercedes-Benz, Volkswagen's Audi and BMW.
Great Wall expands to Russia
Domestic car maker Great Wall Motor said it planned to build a plant in neighboring Russia. The company announced the construction of a full-cycle facility with an annual capacity of 50,000 units in a free economic zone in Yelabuga, Tatarstan. Russia's car market was estimated at 1.84 million units last year by auditors Ernst & Young. Sales of new foreign cars rocketed 60% to 563,400 units.