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A Brave New World At Beijing Auto Show
POSTED: 11:06 a.m. EDT, November 22,2006
Capitalism is taking on brighter shades of red in Beijing as the largest Chinese automaker sets out to update the country's oldest car brand, Red Flag.

First Automotive Works will display the Red Flag HQ3 sedan this week at the Beijing auto show, which will feature a mind-bending assortment of vehicles ranging from Mao-era throwbacks to gasoline-electric hybrids and stretch Cadillacs built exclusively for China's new tycoons.

The world's leading automakers as well as local manufacturers aspiring to global status will be vying for the attention of Chinese consumers at the show, which opens today to the media.

China's market is becoming more crowded and competitive, but just about every major brand will showcase models in Beijing because the potential rewards for automakers are still huge.

With sales up nearly 30 percent this year, China is on track to overtake Japan to become the world's second-largest vehicle market after the United States.

However, it still bears emerging-market characteristics, such as heavy-handed protectionism. Foreign carmakers, for instance, may produce vehicles in China only in joint ventures with local partners.

¡°It's unlike any car market that has ever existed,¡± said Jim Hall, a Troy, Mich.-based analyst with consulting firm Auto Pacific Inc. ¡°It's a controlled economy. It has a huge number of potential buyers, and it's a market that's technically not open.¡±

Among Detroit's automakers, General Motors Corp. has been the most intrepid, establishing the strongest presence in China.

GM and its Shanghai-based manufacturing partner SAIC Motor Corp. have 11 percent of the market, compared with a 16 percent stake for longtime leader Volkswagen AG and its joint ventures, according to data research firm Automotive Resources Asia Ltd.

¡°China has been a saving grace for GM,¡± Hall said.

GM is now stepping up the pace by launching more Cadillac models, including the Escalade sport utility vehicle and a long wheelbase SLS aimed at China's chauffeur-driven executives.

¡°The Cadillac SLS is a very important addition to our lineup in China as it meets very specific market needs,¡± said Jim Taylor, general manager of Cadillac.

So far this year, luxury cars are the fastest-growing segment, with sales up 79 percent in China.

Despite GM's strong showing, Japanese nameplates now outsell American brands in China although most Japanese automakers ventured later into the market.

In the first nine months of 2006, Japanese brands, led by Honda Motor Co. and Toyota Motor Corp., took a combined 27 percent of the market, compared with 26 percent for local brands and 14 percent for U.S. brands, according to Automotive Resources Asia.

Ford Motor Co. was slower than GM to invest in China and sells far fewer vehicles, although it benefited this year from strong demand for the Focus compact.

Ford will show the S-Max minivan in Beijing, as well as the Land Rover Freelander 2 and the new Volvo C30 compact.

In addition to seeing a vast and growing market, Detroit's automakers also view China as a low-cost production base.

On a recent trip to China, Ford executive chairman Bill Ford Jr. said the automaker had doubled parts purchases from China this year.

He also did not rule out the possibility of building a car in China for sale in the United States someday.

A DaimlerChrysler AG executive sparked uproar last year when he raised the prospect of bringing Chinese-built Dodge cars to the United States.

But DaimlerChrysler officials say the automaker is in talks with Chery Automobile Co. Ltd., an aggressive Chinese automaker eager to increase exports.

Auto analysts say Ford and Chrysler are handicapped in China by the lack of an affordable small car. While automakers focus on lucrative luxury car sales, compacts and subcompacts account for more than 60 percent of light vehicle sales in China.

GM competes in those segments by tapping its South Korean GM Daewoo subsidiary to develop and build cars at a competitive cost.

Auto analysts predict Chinese vehicle sales will total 6.5 million to 7 million vehicles this year, with passenger cars and light vehicles accounting for around 4 million. Counting only light vehicles, Japan would still be the No. 2 market.

Toyota will display a new small car in Beijing, as well as the new Camry and Lexus LS460 sedans.

Volkswagen will show two concept cars and the Chinese version of the Passat.

The star attraction at Nissan Motor Co.'s stand will be the Levina Geniss, the first of a new generation of passenger cars that will be sold around the world.

¡°This car is significant as it is the first time we have launched an all-new global model with China being the lead market,¡± said Nissan spokesman Simon Sproule. That's an approach other automakers are likely to follow.

From: Todaynews
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