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Domestic auto makers foray into overseas market
Last Updated(Beijing Time):2007-08-31 15:02

By Wang Weiwei

"Compared with the 6th rank in 2005, Russia was the biggest overseas market of China's auto export in 2006. This situation continues this year. According to statistics from January to June of 2007, Russia was still the biggest auto exporting county of China". News from the 2007 China-Russia Auto Trade Cooperation Forum indicated that Russia was surpassing traditional auto export markets of China such as the Middle East and Africa, and was gradually becoming the new growth point in China's auto export market. What should China's auto industry do in the face of such an active market?

"China's auto export to Russia grew pretty fast in a short time. One important reason lies in the short supply in Russia and the multi-level demands in the market". Zhang Xiaoyu, Vice-President of China Machinery Industry Federation, analyzed.
According to statistics, the auto sales volume of Russia, which was 2.4 million in 2006, is anticipated to reach 3.3 million in 2010. But Russian brands are not able to fulfill the market demand. Among the 2.06 million passenger cars sold in Russia market in 2006, local brands took up only 0.76 million. In the first half of this year, sales volume of foreign brands in Russia has exceeded 0.72 million, far beyond 0.42 million at the same period of last year and up by as much as 70 percent. As Zhang Xiaoyu introduced, except for the huge demand for cars of different grades, Russia market also needs multi-function vehicles such as PICA and SUV. Russian auto market is gradually turning into a new arena where world auto manufacturers are competing.
In 2006, China's auto export to Russia saw a high-speed growth, and the export value was amounted to US$ 350 million. 38,000 vehicles were exported to Russia, up by 300 percent year-on-year. Both the volume and value accounted for more than 11 percent of China's total auto export of the year. Zhang Xiaoyu predicted that China's auto export to Russia will reach 60,000 this year.

Fu Peizhao, Deputy Secretary-General of China Chamber of Commerce for Import & Export of Machinery & Electronic Products, Automobile Branch, introduced that according to statistics from January to June of 2007, in the first half year, Russia was still the biggest auto export market of China. China exported 38,600 vehicles to Russia, increasing by 355.8 percent compared with the same period of last year; the volume has reached and surpassed the total volume of last year, accounting for 16 percent of China's total auto export in the same period of time. The export value of vehicle was US$450 million, up by 477.6 in comparison with the same period of last year and higher than the total export value to Russia last year, accounting for 16.7 percent of China's total export value at the same period of time. The proportion of both export value and volume to Russia in the total auto export of China has exceeded the level of 2006.
China's auto export to Russia is of great varieties, most of which are our independent brands. Looking at the export value, business cars accounted for 53 percent, passenger cars took up 47 percent. As for export volume, passenger cars accounted for 69 percent, while business cars accounted for 31 percent. Among the passenger cars, lightweight passenger car was the dominator as well as the major auto product exported to Russia in recent two years.

What needs more attention is that Russia becomes the biggest overseas market of China's auto export at the background that the overall export of China's auto industry grew up quickly. China's auto export has been increasing rapidly for three successive years. In 2006, China had achieved an export volume of 343.5 thousand and an export value of US$3.134 billion, increasing by 97.2 percent and 97.8 percent respectively year-on-year. There were 7 countries (previously 3 countries), to which China's export value was above US$0.1 billion, including Russia, Iran, Belgium, Syria, Algeria, Kazakstan and Angola. In the first half of this year, China exported 241 thousand vehicles, increasing by 71.2 percent in comparison with the same period of previous year and accounting for 70.1 percent of the total export of 2006. The export value in the first half year was US$2.7 billion, increasing by 110.7 percent year-on-year and accounting for 86.2 percent of last year's total value. While the export is growing quickly, the grade and quality of export products is also improving, the average price per vehicle has amounted to US$11,200, increasing by 23 percent year-on-year.
Since 2003, some Chinese auto enterprises began to export vehicles to Russia, almost all capable enterprises like SAIC Chery Automobile Co., Ltd., Great Wall Motor Company Limited, China National Heavy Duty Truck Group Co., Ltd, Beiqi Foton Motor Co. Ltd, Beiqi Motor Co. Ltd, China Faw Group Corporation, Zhengzhou Yutong Group Co., Ltd, Yuejin Vehicle Company Limited, Harbin Hafei Automobile Industry Group Co., Ltd., Shenyang Brilliance Jinbei Automobile Co, Ltd, Suzhou Golden Dragon Bus Co., Ltd, Zhongtong Bus Holding Co., Ltd and Hebei Zhongxing Automobile Manufacture Co.Ltd exported to Russia and gained certain achievements. Relying on good price performance, China's auto products have developed a preferable market space in Russia.

As for the changing market environment, Xu Hai, GM Assistant of FAW Import & Export Co., said that with great varieties of products, FAW could adjust its strategies in time when changes happen so as to spread risks. FAW has basically determined the market strategy: take heavy-duty business cars and economic cars as the main direction in Russia market; take middle and light trucks, passenger cars, and micro cars as the supplementary; make the whole product family as a collaboration, take SKD assembly as the main, set up a joint venture production base, build sales service network, and launch products in the market as soon as possible. At present, the market development of FAW in Russia has entered substantial execution phase, large-scale knock-down export and local assembly will start this year. Next year there will be more assembly items, cars and passenger cars will start assembly in succession. This year, vehicle and KD export is predicted to hit 10,000 vehicles, and in the future 2 to 3 years, passenger cars will realize transition from SKD assembly to CKD assembly. FAW is targeting at a sales volume of 40,000 in Russia in 2010, and a sales value of US$0.7 billion in 2011.

No matter what kind of way is adopted to compete in Russia market, insiders said that the most important thing to do right now is to lay a solid foundation. Harbin Hafei Automobile Industry Group Co., Ltd, Zhengzhou Yutong Group Co., Ltd, China Faw Group Corporation, China National Heavy Duty Truck Group Co., Ltd, North Benz Co., Ltd and Great Wall Motor Company Limited all regard the improving of quality and brand recognition and the building of perfect after sales service system as the advantageous conditions of competing in Russia market. 
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