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Who is trying to block up China's auto exports gate
Last Updated(Beijing Time):2004-12-30 16:35

By Pang Jianxin

On October 20, 2004, Beijing Hyundai Motor Co. declared its plan of exporting 19,000 Sonata entire cars to Russia was at risk of abortion. It also disclosed that the causation rested on its car model supplier—Hyundai Motor Co. in South Korea (HMC).

Russia is one of the main exporting destinations for HMC but the export of Beijing Hyundai products to Russia is surely to bring a tremendous impact on a series of HMC's current products. Compared with HMC, the labor cost of Beijing Hyundai is much lower, and its price enjoys an absolute advantage in comparison to HMC's similar products.

There are three lows for joint venture automobiles in China: low labor cost, low expenditure and low material& purchasing cost. Once technically measuring up to the export standard, automobiles made in China undoubtedly boast advantages in their prices. If China becomes a world auto export base, China's auto industry will no doubt become another successful mode after those of Japan and South Korea.

But the export incident of Beijing Hyundai indicates that the reality is far from dulcet.

The development of China's auto industry is obviously lacking in clear thinking and that of joint venture automobiles is even more at a loss after baptisms of "Brazil storm" and "Japan& South Korea storm".

Some experts hold that China is a big power in consumption and its future development is certainly to resemble that of current developed countries, with coexistence of "Brazil mode" and "South Korea mode", i.e. independent brands and joint venture brands coexist and develop together.

In China's joint venture automakers, the financing ratio is basically half and half in equity capital. HMC and Beijing Auto take respectively 50 percent in equity capital; Changan-Suzuki has an equity capital ratio of 51 percent for China and 49 percent for the foreign part; Brilliance Auto and BMW respectively account for 50 percent in Brilliance Auto-BMW; the ratio in China First Auto-Toyota is a little complicated, but generally speaking, China First Auto takes up 51 percent of its stocks, with Toyota 49 percent alongside.

Normally speaking, the Chinese part enjoys more authorities in decision-making when coming down to the material interests of the Chinese side. But actually in issues relating to exports, the Chinese part already lost its right of speaking at the same time the joint venture auto company was set up.

Li Zhenqi, vice general manager of Changan-Suzuki, disclosed that Changan-Suzuki had no exports plan and as early as the signature of their agreements, there was a term: no permission for exports. This predicates that the company is only allowed to take up the Chinese market instead of going abroad, regardless of the car's quality or whether the domestic market is already saturated.

Brilliance Auto-BMW has no exports plan either, with BMW taking a fancy on China's huge consumer market. The same situation occurs in First Automobile-Toyota with their auto sales market targeting on China's numerous consumers.

Just like the revelation made by Xu Changming, director of Economic Consultation Center under the State Information Center, the foreign part, in a view of protecting its global market profits, will insist on its accredit sales scope when signing the joint venture agreements and thus ultimately confine the joint venture to sell solely within the country. The objective of foreign capitals establishing joint venture companies in China is to take up the Chinese market rather than massively exporting from China's joint venture companies.

Therefore, there is little trace of exports in China's joint venture automakers except 600 units of Shanghai Volkswagen's POLO to Australia and a proportion of Shanghai GM's GL8 to the Philippines.

Brand is the most valuable virtual assets of enterprises to withstand market risks. What China's automobile manufacturers need is not just OEM (made-in-China), but brands of their own (made-by-China).

Chery Automobile Co. is another representative of breaking the only-in-no-out complexion of Chinese sedans with homemade independent brands.

In recent years, Chery has become a major player of China's sedan exports, accounting for 92 percent of China's sedan exports last year. Just because most of domestic automakers are joint venture brands and have no self-determination in exports, Chery achieves its status with nobody conscious. 
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