The Hindustan Times Tuesday, June 11, 2002
CORPORATE Japanese Automakers Plunge Deeper Into Chinese Market Tokyo, June 10: Production plans may still be small and substantial profits years away, but Japanese automakers, having got their feet cautiously wet, are now wading into the Chinese auto market. The past week has seen a rash of announcements and reports out of the Beijing International Auto Show, mostly on Japanese automakers' plans or possible plans for new factories to provide vehicles for the world's most populous nation. "What's clear is that Japanese automakers have made China their next strategic focus," said Mr Ryuichiro Inoue, Asia auto analyst at the Mitsubishi Research Institute. "For many of them the initial stage of just penetrating the market is over and they are moving on to expansion." The lowering of tariffs and the lifting of restrictions on models sold that have come with China's entry into the World Trade Organisation have given Japan's car companies the green light they needed to plunge deeper. Like other automakers they face fierce price wars, small sales volumes and a lack of financing for consumers. But although Toyota Motor Corp and Nissan Motor Co have lagged automakers like General Motors Corp and Volkswagen AG in establishing a manufacturing presence in passenger cars, Japanese automakers are, in time, expected to have an edge. Chinese consumers place a lot of value on fuel economy, which Japanese automakers excel at, and they like the fit and finish of Japanese-made cars as well as their reliability. "There is open disdain for Japan from a historical context but Chinese consumers make a distinction when it comes to product. They like Toyotas, Hondas and Nissans," said Mr Michael Dunne, head of market research firm Automotive Resources Asia. Of Japan's big three automakers, second-largest Honda MotorCo was first off the blocks with a passenger car manufacturing base in China and is already profitable there. Turning around a plant it bought from PSA Peugeot Citroen in the late 1990s, Honda has received plaudits for the cautious and inexpensive way it entered the market. Analysts say the Japanese automaker has spent less than aquarter of the $1.5 billion that US giant General Motors first invested when it came to China. In partnership with the Guangzhou Automobile Group, owned by Hong-Kong listed Denway Motors, Honda builds 55,000 units a year - the Accord sedan and from this year the Odyssey minivan - and plans to expand capacity to 120,000 vehicles. "Honda is already earning substantial profits there, has experienced substantial growth and is going from strength to strength," said Mr Takaki Nakanishi, auto analyst at Merrill Lynch. A Japanese media report last week said Honda's plans included a second factory in the southern city of Ghangzhou with capacity for 100,000 units. It would probably build subcompacts and export some vehicles, the report said. Honda declined comment. Toyota, even more cautious than its rival, is now following in Honda's footsteps. Japan's largest automaker will start making compact cars from October with Tianjin Automotive, building some 30,000 a year, and has been reported to be in final talks with China's top automaker, First Automotive Works (FAW), to make luxury vehicles. The new factory would have an annual output target of 50,000 to 60,000 units with a long-term goal of 200,000, the report said. Tianjin Automotive and FAW are in merger talks. Toyota said no decision had been made and declined further comment. Analysts worry that Tianjin in northern China is still very much a state-enterprise-oriented region and may prove a less fertile ground for sales and Toyota's production methods than the wealthier and more free-market Ghangzhou. But they are still upbeat that, over time, Chinese consumers' enthusiasm for the Toyota brand will offset any problems. Similar enthusiasm for Nissan's cars including its Bluebird sedan and Cefiro sedan will also stand it in good stead as it seeks to close a deal with Dongfeng Motor Corp, China's second biggest auto group, to make a wide range of vehicles."China today is our number one geographic priority in terms of market development," Nissan Chief Executive Carlos Ghosn told reporters at the Beijing Auto Show, although he acknowledged that Nissan was a late starter due to its restructuring efforts. (Reuters) © 2002: Indian Express Newspapers (Bombay) Ltd. All rights reserved throughout the world.
