The study “The Automotive Industry in South China: Opportunities for Belgian Automotive Part Suppliers” has been published by the Consulate General of Belgium in Guangzhou. The Chinese automotive industry rebounded in the middle of 2012 with production and sales figures topping 19 million units, even with MOFCOM canceling incentives for this pillar industry, in favor of incentives for R&D and high-tech car part production. Manufacturers faced with overcapacity or stalling demand are starting to refocus on exporting to the ASEAN, the Middle East, India, and other developing markets. Last year, the Southern Chinese provinces of Guangdong and Guangxi together produced 17.2% of China’s domestic car production.
Demand for high tech automotive parts is high, while low tech parts are faced with strong competition from low-tech, labor-intensive local players. Due to significant import taxes, most foreign car part manufacturers operating in China produce locally, with the exception of some Japanese brands that import directly from Japan. The production of high-tech car parts is one of the key industries to be developed in the coming years, together with New Energy Vehicles (NEVs). Many regional authorities are investing heavily in these fields, but consumer demand still lags behind. This has not prevented car makers to start catering to this market, such as Volkswagen with its China-tailored electric Lavida, SAIC with its Roewe brand and BYD with its hybrids and EVs. Guangdong is one of the major automobile manufacturing regions in China, with important new greenfield investments by Volkswagen and Peugeot-Citroën.

The 24-page study (PDF-format) is available by sending an e-mail to info@flanders-china.be.

Buyers of luxury cars on the mainland seem to be getting a much better deal than those in Hong Kong. A Mercedes-Benz owner in Hong Kong gets just a two-year or 80,000-kilometer warranty – whichever comes first – on major components including the engine and gear box. Mainland buyers, however, get a three-year warranty with no cap on mileage. The terms for Mercedes owners in the United States and Canada are even more favorable. Buyers there receive warranties for four years or up to 80,000 km, according to dealers’ websites. The Canadian warranties do not just cover major components but also wear-and-tear items such as brake pads and discs, for two years, while the U.S. warranties cover the same for one year. Warranties for Hong Kong buyers of BMWs are also the least favorable. A local BMW sales agent said buyers are given one year of warranty on major components. According to BMW sales agents in mainland China, buyers get two years and unlimited mileage. According to BMW websites in the U.S. and Canada, new cars there come with warranties of four years or 80,000 km. Zung Fu, the sole distributor of Mercedes-Benz in Hong Kong, said the warranty terms are decided by the carmaker according to the market environment. Its Chief Executive, Michael Lee, however, told the South China Morning Post that there is no free lunch, as car prices also vary between markets. The basic version of Mercedes’ ML350 SUV, for example, sells for CNY899,000, excluding tax and insurance, on the mainland – compared with HKD699,000 in Hong Kong. The SUV is cheaper in the U.S. and Canada, at USD54,941 and CAD59,500 (HKD455,000) respectively. Wesley Wan, a Mercedes owner and President of the Hong Kong Automobile Association, said the small size of Hong Kong’s car market means  usually there is just one dealer for the whole city, resulting in lack of competition. “Hong Kong cannot be compared with vast markets like China and the U.S.,” Wan said.

Nissan Motor expects sales in China to rebound within three months, as demand for Japanese-branded vehicles recovers, and despite the ongoing dispute over the Diaoyu islands. “We’ve seen growth in retail year-on-year in March and year-to-date,” Andy Palmer, Executive Vice President of Nissan Motor said in late March. “When we are seeing retail growing, we can be pretty sure that within three months we will see wholesale coming back to a position better than the previous year.” Nissan sales in China, its largest market, fell 17% to 110,000 units last month and declined 5.3% in 2012, as anti-Japanese sentiment deterred consumers from buying cars made by companies including Toyota Motor. Nissan is more affected than other Japanese carmakers by a slump in China because it has the largest proportion of sales there among its peers, selling about one in four of its cars in the country. Chinese consumers have shunned Japanese products since tensions flared in September over disputed islets, known as Senkaku in Japanese and Diaoyu in Chinese. Nissan sales slumped by more than 30% in the fourth quarter of last year in China. Palmer is more bullish than Nissan Chief Executive Carlos Ghosn, who has warned the dispute may lead it to review its future investment plans in China.

Cancer-causing substances have been found in mass-market brands of cars sold in China. Four foreign brands, including General Motors’ Chevrolet, and a Chinese make, were found with toxic materials in locally-produced or imported models, China Central Television (CCTV) reported. Polycyclic aromatic hydrocarbons (PAH), a highly poisonous compound which can damage human genes if breathed in or is in contact with the skin, was detected in steering wheel and headrest samples of five car models among around 40 by Center Testing International, a third-party laboratory officially recognized by the China National Accreditation Service for Conformity Assessment. The affected models were the Chang’an Yuexiang with 23.5 mg/kg PAH found in the surface materials of its steering wheel and headrest, the Mitsubishi Outland with 6.8 mg/ kg, Hyundai Santa Fe with 5.4 mg/kg, Shanghai GM Chevrolet Aveo with 7 mg/kg, and Chang’an Suzuki Alto SX4 with 6.4 mg/kg. Xiu Yu, who oversees an auto website in China and initiated the testing project, said he had received many reports about people feeling unwell and dizzy after driving, which was what prompted him to look into the in-vehicle contamination issue. Currently, China has no official limit for the amount of PAH in vehicle interiors while Europe and the U.S. have strict standards. The Chevrolet Aveos and Suzuki Alto SX4s sold in Germany were not found to have PAH in their steering wheels according to a test initiated by CCTV. China’s only guideline for limiting harmful substances inside cars is optional, which means manufacturers are not obligated to ensure a clean environment inside the cabin, and consumers don’t have the right to seek compensation for any related health problems. Sources of pollution can be materials such as leather, textiles, plastics and other parts processed with poisonous chemicals. Glue, paint and diluting agents can also be the source, the Shanghai Daily reports.

Despite strong government support for new-energy vehicles, fewer than 20,000 have been sold over the past two years, according the latest figures from China’s Ministry of Science and Technology. A major cause for low sales is the nation’s scarcity of electric charging facilities, say industry experts. In Beijing, a map of the capital’s stations shows the city now has just 14 in operation, most of them in the suburbs outside the Fifth Ring Road. They mostly service electric buses, with just a few designed to accommodate privately-owned cars. At one station near the Third Ring Road, where construction began at the beginning of last year, work
gradually slowed to a halt. Beijing Electric Power Co is the main builder of the city’s electric vehicle charging stations. The company said it built 60 charging stations with 1,080 charging stalls by the end of 2012, but few are now operational. The Beijing municipal government calls for 256 stations and 42,000 charging stalls by the end of 2015. Some densely populated cities are now promoting pure electric and plug-in hybrids to ease increasing environmental pressures, but it was very difficult to get land for charging facilities in high-density cities. Building stations in residential communities also faces challenges. Moreover, standards for charging equipment and vehicles are not unified and different brands may have different specifications. Despite the difficulties, support for new-energy vehicles remains strong. The Beijing government recently drafted a new policy to support new-energy vehicles that exempts electric cars from the license plate lottery and offers a combined subsidy of up to CNY120,000 from the central and municipal governments, said Chen Guiru, Deputy Director of the Beijing New-Energy Vehicle Development Promotion Center. Detailed implementation measures for the new policy will be released this month. Similar incentives were adopted in Shanghai. 25 pilot cities for new-energy vehicles now have 27,400 such vehicles on the road, but 23,000 are used for public services including buses and taxis. The central government has set a goal of 500,000 new energy vehicles sold by 2015, the China Daily reports.