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Sun April 29, 2012
Auto Manufacturing Gears Up For Chinese Consumers
Originally published on Mon April 30, 2012 12:31 pm
DAVID GREENE, HOST:
Let's stay in China now. With its growing population and economic rise, that country has become the world's largest car market. It's a distinction China has held for several years now. And it's an auto market that's becoming increasingly important to American companies. All that is on display at the Beijing Auto Show, which opened this past week. The big emphasis at the show this year is luxury cars with big chrome grilles and also very big price tags.
NPR's Frank Langfitt used to cover the auto industry in the United States in the city of Detroit. And he is now our Shanghai correspondent and he joins us from there.
Frank, how are American companies doing in this huge China auto market these days?
FRANK LANGFITT, BYLINE: Pretty well, especially GM. You know, they're the top foreign brand here and they're really well-regarded. You can't walk around Shanghai and not see a Buick - they're all over the place. And it's really interesting because, you know, the image in the States is not that great. But here, it's a very high status car.
Ford is well behind GM but they are making a big push there. They're opening a new factory. They're working on it in Hanzhou, just west of Shanghai. And overall, foreign brands here have about 70 percent of the market. So they've been doing very well.
GREENE: And, Frank, I guess one question I have, I mean, the United States and China don't always have the smoothest diplomatic relationship. I mean, has the welcome mat really been out for American car companies in China? Or do they face some real challenges getting a foothold there?
LANGFITT: I think in the beginning, when you go back to the '90s, they were very, very welcome here because they had all the technology. And they had, comparatively speaking, really good vehicles. There weren't many Chinese companies that made cars at all and the cars weren't very good. The Chinese consumers still really like foreign cars and the government really wants to build its domestic industry.
And so, what they've started doing is they've said, hey, no more investment incentives, no more special deals for car companies from the outside. And they've also said they're thinking about having the government not buy foreign cars anymore, and buy Chinese domestic cars, which is definitely a signal to the foreign carmakers that things are probably going to get more competitive and tougher in the future.
GREENE: Well, Frank, I mean we've said that this auto market is now the biggest in the world. It has been for the last few years. But how big are we talking, and what's really driving this growth?
LANGFITT: Well, last year, about 18.5 million vehicles were sold here. And there's heavy car ownership in Beijing and Shanghai, but the vast majority of Chinese don't own cars. So a lot of companies see this still as a great place for growth.
And I was talking to a guy named Michael Dunne. He's an auto analyst. He's covered China for years. And this is what he said.
MICHAEL DUNNE: No end to the demand for cars, Chinese people love cars. They're already the biggest market in the world. There is just that much crazed demand and pent-up demand for cars here.
LANGFITT: Now, where is that demand?
DUNNE: It's been concentrated along the coast where the affluence is. But increasingly growth is coming from the west, cities like Chengdu, Kunming, Chongqing where the new wealthy are arising.
LANGFITT: And, you know, what he's talking about is the market is in China's interior and these used to be pretty poor places. But some of the cities now are really booming. And you're seeing more foreign car companies opening factories out there. Shanghai-GM, that's a joint venture here. They're opening a new plant in Wuhan, that's in central China. And VW is opening up a plant in Urumqi; they're planning to - it's so far west, it's actually closer to New Delhi then Beijing.
GREENE: Frank, with car ownership growing at this pace, I guess I wonder about traffic. I mean is there actually room for all of these new cars on Chinese roads?
LANGFITT: Well, not anymore in a place like Beijing. I mean, even people who came to the auto show in Beijing this week, they were complaining about the traffic. There's a guy named Ai Zhong, he's in his 40s, and here's what he said.
AI ZHONG: (Foreign language spoken)
(SOUNDBITE OF LAUGHTER)
LANGFITT: What he's saying is the traffic is really, really bad. It's getting worse and worse. And in the old days, you could park anywhere we wanted. But now there's nowhere to park. And, you know, this guy, Mr. Ai, he's right.
In the '90s, Beijing was really a bicycle town. I used to drive there. People parked on the sidewalks around Tiananmen Square. Now, the roads are jammed with cars. It's like a parking lot and it's also really shrouded in pollution.
GREENE: So that's the capital, Beijing. You live, as I understand it, in Shanghai now. I need you get around in that city in a car? Do you have a car?
LANGFITT: I don't. And, you know, the reason is I can't afford it. They have a license requirement here and now they sell them through auctions. It's about 9,500 bucks and this was something that came in over time to actually control the traffic. And it's worked. And also, the pollution is a lot better here than it is in Beijing. But I'll give you an example.
When I take a cab to work now, it's only 15 minutes. It's not that bad at all. So it's a pretty easy city to get around in and it doesn't have the heavy traffic of Beijing. And, frankly, living here, I don't really need a car.
GREENE: Frank, thanks so much.
LANGFITT: You're very welcome, David.
GREENE: That's NPR's Shanghai correspondent, Frank Langfitt. Transcript provided by NPR, Copyright National Public Radio.