Narrowsense Passengercar export into crisis

American decided to impose punitive tariffs on tyres imported from China for a period of three years on 11th. September. China launched anti-dumping and anti-subsidies investigations into some automobile and chicken products originally produced in the United States, the Ministry of Commerce announced on 13th. Both focus on the export trade of the vehicles and parts products.

Cui Dongshu wrote that the international financial crisis had brought up the contraction of international trade and also trade protection. Under these circumstances, Chinese narrow sense passenger cars face a severe crisis, which is total against the Chinese structural adjustment of export products and the long-term goal to improve the trade structure. This is not a simple economic and trade factor, but the influence of the factors of political and trade protection, and so on. China should consolidate the export of narrow sense passenger cars, otherwise the new trading pattern of international narrow sense passenger cars is extremely disadvantageous to China after the economic crisis.

First, the export crisis of Chinese narrow sense passenger cars is very severe.

1. There is a huge contrast between domestic and overseas market of Chinese narrow sense passenger cars.

There's a big difference between the trends of narrow sense passenger cars in domestic and overseas market. According to the statistics from Joint Advisory Committee of China Passenger Car Market, the retail sales of domestic market is 4,94 million units from January to August in 2009, up nearly 41 percent from one year ago. On the other hand, there is just 61.000 units, down 71%. This trend is still continued in August, which the retail sales rose by 81%, but the export fall 58%. The crisis of export is continuing, which the negative growth rate of commercial vehicles is less than the narrow sense passenger cars.

The General Administration of Customs released the statistics in September 11. The number showed the total foreign trade volume 1.33866 trillion dollars from January to August, decreasing 22.4% compared with same period last year (the same below) . The export volume is 730.74 billion dollars, down 22.2%. The export of narrow sense passenger cars declined far more than the overall standard.

2 The difference of domestic and overseas markets in India are also obvious.

According to the Indian Association of Automobile Manufacturers releasing on 8th April, the total domestic sales was 9.723 million with an increase of 0.71% in the 2008-09 fiscal year (from April 2008 to March 2009). India exported a total of 1.531 million increasing 23.61% in the fiscal year 2008-09. The export amount of the passenger cars was 336,000 (including 332,000 units of cars), and the growth rate were as high as 53.73%.

3. The export of narrow sense passenger cars in India are far more than China.

In the first 7 months, the India's export volume was much higher than Chinese export volume, and the passenger cars were the great contrasting point of the export. Statistics shows, the auto export volume has dropped to 164.800 down 60 percentage from January to July this year. There were only 54000 units of narrow sense passenger cars dropping 71%. On the contrary, India exported nearly 230, 000 kinds of vehicles, increasing of 18%, of which were 200,000 pocket-sized cars and hatchback.

Second, China needs to turn the narrow sense passenger cars into main exporting force.

1. There is relatively low proportion of the export of narrow sense passenger cars.

Comparing with the statistic from Joint Advisory Committee of China Passenger Car Market, the export of narrow sense passenger cars in China took up of only one-third of the total vehicles. And the same number in India was 90%.

The automobile export in Japan and South Korea put on narrow sense passenger cars, like cars and SUV.

2. Exporting the narrow sense passenger cars means significant for improving the structure of Chinese export .

For many years, the exported goods focus on the low value-added products, which are labor-, and resource-intensive, and the large high-value consumer goods including narrow sense passenger cars are not in a dominant position. Although we say, own-brand vehicles is 50 RMB/kg and a lot of brands of the joint ventures is 100 RMB/kg, the increasing value of the export from the steel into car are still nearly 10 times, which is the important strategic product that are many times expensive than the parts and components export. Taking wheel for example, the export price of wheel is 1.10 dollars/kg in July 2009, while the focused rubber tires for 1.80 dollars/kg, and the export of own-brand cars are about 6 dollars/kg. The most of the adding value are profits, salary and tax, and so on.

3. The narrow sense passenger cars are the main export products for Europe, the United States and Japanese.

Although the automobile industry was born hundred years ago, no country treats auto as a sunset industry, and even the Obama government doesn't dare to lose their auto industry. The Japan's export to China used to be almost all kinds of durable consumer goods, and now the exporting force is only the cars.

Third, the narrow sense passenger cars in China are becoming the rejected child.

1. The multinational corporations treat China only as the rich market.

China has become one of the largest narrow sense passenger car markets in the world, and also one of the most lucrative markets for the profits of the multinational corporations. Reports are often been seen that the profits of Chinese enterprises of multinational corporations become the backbone of its global profits.

2. The multinational corporations don't want China to become a export base of narrow sense passenger cars.

So far, we have not heard of any specific statement that multinational corporations take Chinese joint ventures for the export base of whole vehicles. The reasons are very complex. There is the regime control factor which is the unavoidable topic. China is the country that cannot be controlled. Multinational corporations don't want to regard joint ventures in China as their global supply center. India is on the other hand more relieving country for them considering the system and other elements.

According to New American general plan, it will be additional investment of 500 million dollars to India in the next seven years for the construction of new factories and gradually to make India into GM's global export bases. Hyundai of South Korea has also invested a lot amount of money to develop the India's export base and put a large effort on launching of small cars.

3. Some countries intensify the spiteful trade protectionism aiming at Chinese narrow sense passenger cars

The development was very rapid in the earlier period that China's narrow sense passenger cars were exported to Russia, other former CIS countries. And then the Chinese export was suffered the spiteful trade protectionism, and even the minimum tariff measures of Chinese imported cars, which led to lose the just exploited emerging market overnight.

Due to less impact of the competition in the domestic industry, the export of commercial vehicles perform slightly better. However, owing to the difference of the market capacity, the main force of China's future export are narrow sense passenger cars, rather than trucks and other current main products.

Fourth, there is a giant increasing space of international low-price narrow sense passenger cars.

1, The international trend of small low-price cars

Due to the pressure of energy and environment, the global automotive market has grown up the cheap, energy-saving, mini trend, particularly the drastic growth in emerging markets.

2. India is already leading China.

India is likely to become the world's market leader in small car market in the world. The Chinese export strategy of the narrow sense passenger cars are facing the crisis. Profiting from cheap labour costs and changes in the international consumer market, India will exceed in 2009 China, Thailand and even South Korea to become the largest car export base in Asia.

India in 2009 will be more than China, Thailand and even South Korea to become Asia's largest car export base.

3. The new pattern of international export is gradually formed.

After a doubling rapid growth for consecutive years, the export of narrow sense passenger cars in China has came to a critical stage of development. There are a certain amount of number of automobiles in China in many of the early market. The loss of the market will definitely bring up the degradation of the service and other systems, and cause even more difficult to reenter in the future.

Suzuki Motor Company, Hyundai Motor Co. And Nissan Motor Company transfer India into the overseas sales center of small cars. Benefiting from cheaper labor and the rising local market, India exceed China in the auto export this year, and begins to challenge Thailand and South Korea to become the alternative manufacturing center in Asia.

With the restructuring changes of American auto industry and the upgrading of South Korea's export competitiveness, the layout of export base and the pattern of competition in emerging market are all in rapid change. China lies in the crisis of sudden dropping overseas system. If China doesn't solved this problem in time, would cause huge danger.

Fifth, we should strengthen the export support policies of narrow sense passenger cars soon as possible.

The revival and adjustment plan of automobile industry point out clearly: The export of own brand vehicles should account for 10% of the total vehicle, while is estimated only more than 1% in 2009, which is far away from the goal of the industry. The strategic guidance and support of export must be strengthened in 2010. In 2009 busy on domestic, 2010 must focus on strengthening the exports. Otherwise after the multinational corporations complete production layout of the low-cost cars in the emerging markets, it would restrain severely the export of China's own brand passenger cars. (Jianfei)