China's car market is in a rough patch as recent government data showed collective profits plunging 59% among domestic carmakers in the first quarter.
"There's overproduction and consumers don't know how to choose among the dozens of models out there," says Chen Chuan, editor of China's Auto News Magazine, adding that rising gas prices won't help matters.
Still, braving China's slowing market, carmakers announced more joint venture deals and production targets in anticipation of booming demand ahead.
Ford Motor Co, Mazda Corp and Chongqing-based Chang'an Automotive agreed to launch a car manufacturing joint venture in Nanjing in Jiangsu Province that would produce 160,000 cars by 2007. Kia Motors, owned by Hyundai Motor, signed a US$790m joint venture with domestic carmakers Dongfeng Motor and Yueda to build new production plants, aiming to sell 25,000 mid-sized Ceratos when the model launches in August.
Hyundai, which operates two other car-making JVs in China, said it aims to produce more than 1 million vehicles and seize 20% of the nation's car market by 2010, the year it expects its China revenue to exceed US$20bn.
Hyundai's Elantra model was China's best-selling single model last quarter with 38,500 units. Tianjin FAW Xiali Auto's "TJ7101U" and Chery Auto's "QQ" came in were second and third, according to China Automobile Manufacturers' Association.
European carmakers also made clear their ambitions in China as Volvo Car Corp, the Swedish unit of Ford Motor Co, told China Daily it is considering domestic production, as it aims to double its Chinese market share from 3% to 6% by selling 20,000 vehicles annually over the next five to six years, a near sevenfold increase over the 3,000 vehicles sold last year. While competitors trimmed their selling prices to revive weak demand (BMW by as much as 14%) Volvo maintained its prices, selling 1,000 units, 25% more than last year.
Japanese carmakers, contending not only with a market slump but rising anti-Japanese sentiment, showed a brave face: "The recent events haven't affected our plans," said Yang Hongjian, a Toyota Motor spokesperson. "We still plan to introduce two new models in the China market this year," she said.