ecns [expanded by feedex.net]: Taking a rough ride to growth

ecns [expanded by feedex.net]

ecns

Taking a rough ride to growth
http://www.ecns.cn/business/2014/01-27/98844.shtml
Jan 27th 2014, 01:45

2014-01-27 10:45 China Daily Web Editor: qindexing


At a time when foreign automakers are planning to further consolidate their presence in China, their Chinese counterparts are looking to boost exports to newer destinations such as Africa and Russia this year.


The decision to boost exports also comes at a time when domestic sales are flagging because of vehicle purchase restrictions in big cities and renewed nationwide efforts to reduce pollution.


With these two aspects expected to reduce sales and profits this year, Chinese automakers are looking to offset losses through higher exports to emerging markets.


That decision also seems to be buoyed by the growing demand for utility vehicles and small and medium-sized energy-efficient vehicles in the emerging markets.


According to data provided by the China Association of Automobile Manufacturers, vehicle export volumes dropped by 7.5 percent from 1 million to 977,300 in 2013.


The association, however, did not provide details on the exact number of vehicles shipped by Chinese companies to Africa.


John Zeng, head of the Shanghai-based consulting firm LMC Automotive, says part of the reason why exports remained weak for most of last year was because of the depreciating Japanese yen and the appreciating Chinese renminbi.


"Africa and Russia have become major export destinations for Japanese carmakers, especially for second-hand cars because the currency fluctuations have increased the demand for Japanese cars in Africa," Zeng says.


This, however, should not deter Chinese automakers from further expanding their presence in Africa. According to CAAM, many Chinese automakers are hastening plans to build factories in Africa this year so that they can reach out to more local customers.


Lifan Industry (Group) Co, one of the first Chinese automakers to operate in overseas markets, has been one of the early movers in Africa. The company entered the African market in 2007 and has made Ethiopia its main base for the continent.


Most of Lifan's vehicle exports to Africa are in the form of semi-knocked down kits that are later assembled locally. In this process, the company exports major parts of the car such as the engine, chassis, gear box and body separately and then assembles them.


The company plans to move to a knocked-down model of manufacture later, so that they can ship all parts for local assembly plants. Company officials say that this process helps reduce the final costs in Africa, because of the lower customs duties.


By the end of last year, Lifan had moved its assembly lines in Ethiopia to a new location in the China Eastern Park, an industrial park developed by a Chinese private company. The shift helped Lifan raise its vehicle production capacity in Africa to 5,000 vehicles a year from 1,000.


Later this year, the company will add another production line and an inspection line in the new factory. Its most popular brands such as Lifan 520, 530, sports utility vehicles and minivans will all be assembled in Africa.


Lifan, however, is not the only company betting big on Africa. Foton Motor Co Ltd, the largest commercial vehicle manufacturer in China in terms of sales volume, has shipped more than 20,000 vehicles to Africa, including vans, pickups and light trucks. Major sales destinations in Africa include South Africa, Algeria and Egypt. Foton currently exports its vehicles to more than 80 countries and has units in more than 20 countries.


Two years ago, Foton established a company in Kenya with an initial investment of $50 million. When the factory reaches its full capacity, it is expected to make 10,000 cars every year.





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