Analysis of the eye-catching auto events

In accordance with conventional logic, the end of year is always the period when big event frequent occur. But throughout the history of China’s automobile industry, it is the first time so many events come out within one month like this year. November 9th, message came that Volkswagen was building a new plant in southern China; November 10th, Changan announced to a reorganize China Aviation Industry Group in the Great Hall as well as a plan of an annual output of 2 million, striving to become the top three among the “big giants”; November 12th, also in the Great Hall, BMW Group and BMW Brilliance published their most important business strategy since JV was established, that was to increase 5 billion to launch a second factory. Besides, heavyweight new models would appear at next year’s Beijing auto show in April.

Everything has its root. Currently in the Chinese automobile market, the leader of mini-car is SAIC-GM-Wuling, the king of middle-class and high-class cars are Japanese “Three Musketeers” and the throne of luxury cars is certainly Audi. Facing such a market situation, the vehicle companies referred above apparently is not willing to be long-term repressed. Their action have reflected their resistance:, straight entering into the stronghold of Japan by building a new plant in southern China, Volkswagen is aim at become the king of middle-class and high-class cars; Changan announced to a reorganize China Aviation Industry Group with the intention of rewriting the history of mini-car and winning the mini-car king; BMW Brilliance increase capital for new plant to produce new models so as to replace Audi to become the emperor of luxury cars. Citing an undisclosed saying of West China City News, Thus, a series of sensational coups occurred surprisingly and logically.

　　Volkswagen is to build a new plant

November 9th, the new “Volkswagen will build a new plant in southern China” is madly reproduced in major medias.

Over the years, southern China, especially Guangzhou has been a Japanese stronghold. Accord, Camry, Teana have become formidable “Three Musketeers” in the middle-class and high-class car market. However, to Volkswagen, the southern China market which is too hard to occupy for a long time has been a pain.

Besides products and marketing, Volkswagen attributes their disadvantage in southern China market to the lack of production layout. According to related statistics, new car sales in the southern China market accounts for more than 35% of the national sales. What’s more, about a third of sales of domestic major automobile enterprises are completed in southern China market. However, the average share of Volkswagen’s three brands in China is only 10%, which is far less than the Japanese brands. As to sales performance, the entire southern China market has less than 9% contribution to Volkswagen.

However, to Volkswagen, the southern China market does not simply mean sales figures or market share, but absolutely a strategic position. Jia Xinguang has a analysis that being the current largest mature market, southern China market can be seen as a national benchmark market. If Volkswagen can not pin down the Japanese brands there and allow them to attack its market freely, it will be difficult for Volkswagen to maintain the powerful position in China.

In face of the south China market, Volkswagen will probably resort to the ultimate trump card, which is to invest in a new plant with its subsidiary JV FAW-Volkswagen in southern China, setting the fire directly to the Japanese brands’ stronghold. And the result of the war will be revealed at the Guangzhou Motor Show at the end of this month.

　　Changan announced to reorganize CAIG

To Changan Automobile, production and sales performance of its mini-cars is actually the basis to establish it the most important status in domestic automobile industry. As one of enterprises to start mini-car business earliest, the mini-car production of Changan hold a leading position in China in the initial phase. However, later for various reasons, the mini-car of Changan could not continue to grow. Time and time again, it was beaten by SAIC-GM-Wuling go-ahead and fall behind to the second place. More frustrating, the gap between the two was so huge.

Although Changan has been struggled to catch up with SAIC-GM-Wuling in recent years, it is exceptionally hard to short the wide gap, which is about hundreds of thousands of vehicles.

However, the auto analyst holds the opinion that after the reorganization this time, the effect can be very obvious with the division bell that: in this integration route, the amplification of this business will. Among the three mini-car bases, Changhe is in the middle of China, Hafei in the northern and Changan exactly in the southwest corner. The most important micro-car zone of Chinese auto market will emerge after lining these three geographic nodes. Therefore, this reorganization will strategically enhance the value of the micro-car plate of Changan Automobile.

After the reorganization, on the base of present existing capacity of 1.5 million, the new Changan Group will increase a production capacity 400,000 motor vehicle and 450,000 engines of Hafei as well as 300,000 motor vehicles and ten thousands of engines of Changhe, which will make 9 major vehicle production bases 21 vehicle plants and 27 subordinate enterprises. What’s more, this will enable the production capacity of vehicles and engines to reach 2.2 million.

In view of this, the determination of Changan to regain the throne of mini-car is very strong. The latest data from the Automobile Association show that presently the sales volume of the mini-cars of Changhe and Haifei is annually 150,000 units. From January to September this year, the sales volume of Changan mini-cars is 414,000 units while the target is 600,000. In the same period, the sales performance of SAIC-GM-Wuling is 688,000 units, which means after the reorganization, the sales Changan min-cars is very close to or even will be probably exceed the Wuling. By then, the dream of Changan to become king of mini-car will come true.

　　Brilliance BMW increase 5 billion for new plant

In China, the luxury car market has been long occupied by three major brands of Germany Audi, BMW and Mercedes-Benz. Since the three major Japanese brands Lexus, Infiniti and Acura come into China late, and don not have demotic products, they can not be the mainstream in the auto market so far.

The process of localization determines the position of the Germany’s “Top Three” in China. The sales volume of Audi, which is the first to localized, exceeded 100,000 units early in 2007. As to the sales growth from 2009 January to September this year, Audi has the highest sales volume but the lowest growth (20%). Mercedes-Benz sales gets a growth of 40%, which is strongly related to the introduction of its new models. The eye-catching performance of Audi and Mercedes-Benz performance have caused a great pressure to BMW.

In July, the E-Class cars of Mercedes-Benz officially were listed in China. In October, Audi released Q5 and announced to start the process of localization next year. To BMW, there are competitors both forward and behind I that it will fall behind if can not go ahead. Therefore, to BMW, the large-scale expansion of production capacity and the introduction of new models cars are imperative. It was at this critical juncture that BMW suddenly speeded up its catch-up plan. In November 12th, Brilliance BMW announced in the Great Hall that the two sides to increase 5 billion capitals to build a second plant, directly aiming at Audi, the king of luxury cars.

In fact, all time along, the competition among BMW, Mercedes-Benz and Audi have never stopped. Once Audi introduced longer-model of A6, successively BMW introduced longer-model of 5 Series and Mercedes-Benz showed its longer-model of new E-class; when Q5 of Audi emerged, immediately Mercedes-Benz took out their GLK. This time the BMW invested 5 billion in a new plant and announced to introduce new models at the Beijing auto show in April of next year, it is obvious that the second plant of BMW will produce newly X3 in order to beat the presently popular Audi Q5. By then, a fierce war between the two car giants will be inevitable.（translator：Yalong/ Jessie）

　　See original Chinese report Please click