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pay attention to other Asian markets and provide an first report on the emerging automotive in-dustry in Vietnam.

The October edition also starts with a special sec-tion on upcoming events in China and show new spy-shots of the SAIC Rongwei R75 together with the new JAC SUV Rein 2.0l.

CAM Research team has done extensive research on OEM Chang’an Auto and provide valuable in-sight information in a spe-cial report (see OEM sec-tion).

As monthly magazine, CAM offers useful analyses and up-to-date and on the spot information. A subscription is a quite simple task: Just drop your e-mail & com-pany address to: [email protected] subject: “New CAM reader”

Hope you enjoy this up-graded October edition!

Michael Sikora Editor-in-Chief

Dear Reader !

Recently Chinese OEM have tested the water in France and Russia as exi-hibtors at the Paris and Moscow International Mo-tor Show.

Despite the serious set-back of Jiangling Land-wind’s SUV at the 2005 Frankfurt IAA, Chinese car-makers have learned their lessons and took a second run. Great Wall Motors (GWM) exhibited the Hover 4x4 luxury CUV together with the Hover TC diesel. This car passed front and side collision tests at the China Automotive Re-search Center (CATARC) in Tianjin in March this year. According to GWM, the car received a Euro NCAP four-star rating. With its new INTEC 2.8TC diesel engine it currently satisfies Euro III emission standards.

Even Landwind displayed variants of its X6 SUV and two models of the new Fengshang (Fashion) MPV. Although the X6 success-fully passed a second crash-test carried out by TUV Institute in Frankfurt, some doubts remain. For the SUV series it is a com-plete different story as this multipurpose family vehi-

cle (see CAM 7/06, p.8) was jointly developed with the design and engineer-ing company I.D.E.A. Insti-tute, Italy. Its 2.0l petrol engine has been “respi-rated” by German FEV, an internationally-recognized leader in the design and development of internal combustion engines.

Brilliance received a set-back as its first European importer Euro Motors Ltd., with HQ in Gibraltar ceased to exist. In Septem-ber, Germany's E.H. Harms GmbH & Co signed an trading agreement with Brilliance to import and sell the M1 Zhonghua, the M2 Junjie (Splendor) and the future M3 Coupé. The company is confident to win more than 50,000 European customers in the next years.

Brilliance M2 (Splendor, the “Chinese 3er BMW”) attracted more then 10.000 satisfied customer in China (see CAM 9/06) and is currently sold out with a two months waiting list, some Chinese ana-lysts predict that Brilliance is catching up fast and may rejoin join the first league of Chinese OEM.

For the very first time, CAM

H i g h l i g h t s 10/06

Brilliance M3 Coupé

2

SAIC R75 Roewe reborn

2

SAIC postpone export plans

3

JAC 1st SUV Rein 2.0l

4

Chinese Beatle hits market

4

New Car export policy license

5

New Vehicle Scrap Policy

5

OEM Profile: Chang‘an Auto

6

Letter-to-Editor 8

Chery may team up with DC

11

Geely goes Indo-nesia

12

C.P. Logistics open Shanghai

13

Automotive In-dustry in Vietnam

13

Nissans new Thai sourcing plant

14

Used-car market influences prices

15

Hella China: reve-nue surges

16

Upcoming Events Statistics

1719

October 2006 Issue 4

C h i n a A u t o m o t i v e M a g a z i n e 中国汽车杂志

© Automotive Business Consulting Ltd.

GmbH & Co. which, in turn, in-formed press that the company plan to export 3,000 Zhonghua sedans to Europe.

For the very first time, the Chine-se carmaker also mark to launch a Coupé targeting overseas mar-kets.

Spyshot Brilliance M3 Coupé

But to attract European and A-mercian customers which are cu-rently dominated by German car-makers such as BMW and Audi, this is a quite challenging task. In the case that Brilliance suc-ceeds to design and assemble cars which meet both the quality, design and sporty driving style ex-pectations of Western car buyers, the company may gain a foothold

Shenyang-Brilliance Jinbei Automobile, is the joint venture part of Germany's BMW A.G. This year the

company sold already 13,800 M1 Zhonghua and about 7000 M2 Grandeur cars in the first half, up 254 percent from 3,900 cars in the same period last year, said vi-ce president Elsie Chan during a recent press confernce.

Sales target for 2006 is set at 40,000 units and should be com-pared with 5800 Zhonghua se-dans sold in 2005.

In March 2006 Brilliance launched the Zhonghua M2 Splendor (骏捷) for a very compe-titive price, starting at 8,600 Euro up to 12,900 Euro in China. The Splendor shall be soon equiped with the 1.8T engine co-developped by German FEV.

Brilliance recently has signed an agreement with the auto trading unit of Germany's EH Harms

in a market segment which also helps to establish a brand value.

Spyshot M3 Roadster Coupé

As for the M3 cockpit, CAM has i-dentified another internet source which makes a good impression on interior design.

A lookup in our OEM database in-dicates that start of mass produc-tion (SOP) is set to Q4/2007 with an initial volume of about 5,000 vehicles. The Brilliance M3 Coupé is another milestone as it introdu-ces a new platform to broaden the companies product portfolio.

Source: ABC Ltd. Research

New German importer for Brilliance sedans and the new Coupé

NEW PRODUCTS

The new reborn SAIC R75 Roewe see the light of the day

tual property rights from the failed British carmaker last year.

The markt introduction of the

Roewe 荣威 is expected at the Beijing Auto Show (17.-28.11.)

The car has undergone some mi-nor modifications and redesign such as its enhanced length com-pared to the old European Rover 75. This led to an increase in the wheelbase of 103mm.

It pays tribute to Chinese cus-tomer which are more demanding in terms of interior space and co-syness then British car drivers.

SAIC’s "Rover 75" had been renamed to

Roewe after having lost the bid to buy the Rover brand to Ford.

SAIC Motor Manufacturing Co. Ltd., the subsidiary of SAIC as well as the major car making unit with SAIC’s own technology, is said to christen the new model,

dubbed R75, as Rong Wei (荣威) in Chinese.

The 750E sedan is SAIC’s first self-owned model, based on the Rover 75 model following the company’s purchase of intellec-

Comparing the old Rover with the new SAIC version one can see the exterior did not change much from the R75, mainly some ad-justment have been carried out on the front.

The grille is bigger and some de-sign change has been done with


NEW PRODUCTS

the lights and the lights. We also have spied out that the front bumper has been changed too.

The 1.8L model uses the 18K4G turbocharged engine in combina-tion with with the SH78Z 5-speed gearbox, co-developed by the SAIC Gearbox company and the German GF company.

The high-line version shall be equiped with an electric sun roof, 8-ways electric driver-adjustable seats, electric rear mirrors.

From the above photo one can see the difference in the sun roof and the wheels. Both of these adopt 16 inch wheels with 215/55 R16 tyres. The 2.5L model uses the 25K4F engine together with the AW55-51SN type 5 manual/semi-automatic gearbox.

The highline version is equipped with DVD system, Xenon lamps, Bluetooth connectivity for mobile phones, rearview radar/parking sensors.

Visually, the standard version has the same 16 inch wheels and 215/55 R16 tyres as the 1.8L, whereas the highline has 17 inch wheels and 215/50 R17 tyres. SAIC competitors in this segment includes VW Passat, Buick La-Crosse, Toyota Camry and Honda Accord. The price tag of these cars ranges from 18.000 Euro to 25.000 Euro.

But the Roewe R75 has a strong position as it can argue that it is within the "British royal bloodline" however produced now by an in-dependent Chinese OEM. CAM assume that Roewe 1.8T will be priced around 18.000 to 25.000

Euro and the 2.5L about 23-26.000 Euro.

However these findings are esti-mates from our research without taking into consideration any early marketing promotion pro-grams of SAIC in China.

CAM hopes that SAIC will grab onto this opportunity to establish a real independent brand.

As to our Chinese OEM database and insider information, we assu-me that mass production has been already began.

The target production volume for this year is set to about more then 26.000 units.

Good Luck revived Shanghai Phoenix!

Source: ABC Ltd. Research


Car Model LUCHENG CSA7180 LUCHENG CSA7250 ROVER 75 1.8T ROVER 75 2.5TLength (mm) 4865 4865 4747 4747Width (mm) 1765 1765 1778 1778Height (mm) 1422 1422 1424 1424Axle distance (mm) 2849 2849 2746 2746Engine model 18K4G 25K4F 18K4G 25K4FDischargement (ml) 1796 2497 1796 2497Whole vehicle weight (kg) 1487、1503 1583、1598 1415 1505Total weight (kg) 2000 2000 1940 2000Maxium speed (km/h) 205 220 205 220

SAIC puts brake on export plans

SAIC plans to postpone exports of its self-branded cars from the end of next year to 2009, aiming to first build a stronger position on the domestic market.

"The Chinese auto industry will witness sustained growth within the next 20 years, and we are strongly convinced there will be expanding potential for Chinese car brands," Chen Hong, presi-dent of SAIC Motor Corp Ltd, told Shanghai Daily in an interview yesterday.

The company's first model, the Roewe was developed from the Rover 75. SAIC’s engine has been retooled to meet Euro 3 and Euro 4 emission standards, and other major parts including the chassis, steering system and interior deco-

ration have been redesigned.

SAIC, the domestic partner of General Motors Corp and Volks-wagen AG, said product differen-tiation will help it stand out in the competition against its two joint ventures.

"The time is ripe for our own brand," Chen said, who added that the company's new model will allow SAIC to have a bigger say in operating a car brand within the Chinese auto industry.

The next model, the W261, will be assembled on a completely new platform, established by en-gineers in Britain, Shanghai and South Korea, according to Chen.

SAIC Motor will debut its first model this month, and mass pro-

duction will begin by the year's end. The company will start tak-ing orders through 55 dealers across the country in the initial stage.

SAIC Motor plans to launch 30 models in all mainstream market segment, based on a 13.6 billion yuan (US$1.7 billion) investment in its self-branded car program over the next five years.

It will produce 120,000 cars in 2007, and production should reach 300,000 by 2010. Source: Shanghai Daily 17.10.06 p. B3

NEW PRODUCTS


JAC is said to launch ist first SUV Rein 2.0l

Anhui Jianghuai Auto-mobile Co., Ltd. (JAC) was founded on Sep-

tember 30, 1999. Today the com-pany employs more than 7000 people with total asset 530 mil-lion Euro, covering an area of nearly 4.05 million square me-ters. JAC is listed on Shanghai Stock Exchange since Nov. 2001 (code: SH600418) and has been recognized as a blue chip com-pany.

Although the main products of JAC commercial vehicles, JAC has entering passenger car market segment with its Refine MPV se-ries. In 2006 the annual produc-tion capacity has been increased up to 200,000 vehicles.

The 2005 turnover surpassed 950 million Euros with a profit rate of 21.96 per cent. JAC is one of the rare carmakers in China

which has been maintaining an appropriate profit growth for the last sixteen years. JAC’s manufac-ture base has become the na-tional biggest MPV manufacture base.

JAC has relied on the concept of precision in production and ad-vanced CRM to establish a com-plete purchasing, logistics, manu-facturing, sales and after-sales service network and a quality management system. Since 1998, JAC has obtained a series of important certifications such as ISO9001 QMS, ISO14001 Envi-

ronmental MS.

JAC will launch its Rein 2.0L SUV in Q4/2006, following the model

抯 debut appearance at Auto Guangzhou 2006 in late July. The timing of the launch will depend on when JAC receives a car pro-duction license from the govern-ment. The Rein will likely sell for around 15.000 Euro in China.

The company has already estab-lished a design house for this car manufacturing in Turin, Italy. Con-struction of its car production base is expected to wrap up later this year, with car production slated to begin in 2007. It has also established an R&D arm in Japan that will develop engines for an upcoming C-Class sedan, but the company has yet to set a launch date. Source: ABC Ltd. Research

Chinese Beatle hits the market

Chery’s new QQ6, dub-bed the “Chinese Bee-

tle”, was launched on September 19th in Shenyang, Liaoning prov-ince.

The city car is loosely based on the Daewoo Kalos and is develo-ped on a new Chery platform.

The QQ6 will be available with a 1.1-liter or 1.3-liter engine. It is the only notchback model avai-lable in China that is less than 4 meters long while being able to generate as

much as 60 horsepower. It also benefits from a design that allows for a more spacious interior. The QQ6's V-shaped front end with its triangular grille flanked by pairs of oval headlights is a start at a visu-al identity for the automaker.

The QQ6 also has a few items ge-nerally only embedded in luxury sedans, such as power mirrors.

The sister model of Chery’s popu-lar QQ3 is powered by the com-pany’s independently developed ACTECO 1.3L engine.

QQ6 is available in three variants priced from 4,600 € to 5,200 Euro in mainland China.

The model will be launched na-tionwide shortly after its debut in Liaoning Province. CAM plan to visit a Chery dealer soon and fol-low up in one of the next editions. Source: ABC Ltd. Research

LAWS & REGULATIONS


BEIJING - Export automakers will soon be required to qualify for official licenses as the authorities attempt to reign in explosive growth and regulate the vehicle export sector more effectively.

The Ministry of Commerce (MOFCOM) recently held a presi-dent’s conference to discuss the Notice on Regulating China’s Auto Export Order, which is based on new motorcycle export guidelines introduced at the beginning of this year.

The document requires qualified export automakers to obtain com-pulsory quality control and prod-uct certificates (ISO9000) and gain official recognition from the State Development and Reform Commission.

Companies hoping to qualify for the export business must also meet other conditions, such as

having an after-sales service sys-tem, maintenance capacity, do-mestic sales records for the previ-ous year and export sales records for the previous two years.

Production capacity now stands at more than eight million units per year, and domestic manufactur-ers are increasingly turning their sights to overseas markets.

The country’s vehicle exports sur-passed imports for the first time in 2005, but the market has not been effectively regulated over the past several years.

Over 11,000 companies through-out China exported automotive products during the first half of 2006, with an average export value of less than $1 million. Of the 1,025 whole vehicle exporters last year, over 600 shipped less than 10 units and 160 of them only exported one.

But the country’s export sector will only continue to flourish if it is regulated more effectively and companies continue to offer quali-fied auto products and after-sales service systems overseas, says Zhang Ji, deputy director of MOF-COM’s Office of Import and Export of Machinery and Electronic Prod-ucts.

The regulatory document also recommended setting a minimum domestic sales requirement for automakers that want to export.

"This won’t harm auto exports as a whole, and most automakers will be granted auto export li-censes. Perhaps only about three percent of the companies will be banned from the export business for failing to meet these require-ments,” said Zhang.

Source: CAR10/2006 p.26

New compulsory vehicle scrap policy

A new motor vehicle scrapping policy will likely be enforced later this year to replace the current standards, according to informa-tion revealed at the International Conference on China Motor Vehi-cle Scrap Management held on December 9, 2005 in Beijing by the Ministry of Commerce.

The new standard will have three major changes compared with

the existing one.

First, the requirement on the number of years before a vehicle must be scrapped for small and mini passenger vehicles will be abolished.

Second, the extended period for other vehicles types before they are scrapped will be adjusted. Third, mileage of use will change

to reference index instead of compulsory scrap index.

The guidelines in setting up the new scrap standard are to em-phasize factors such as vehicle technical status, safety, energy saving and emission level while giving less importance on the time limit and mileage limit of scrap. Source: ABC Ltd. Research

MOFCOM to release new auto export license policy

Guangzhou sets Euro III emission standard Guangzhou implemented the Euro 3 emission standard for all new cars, becoming the 2nd mainland city after Beijing to en-force the standard before the na-tional deadline next year.

Only 10 petrol stations were ini-tially able to supply clean fuel for use in vehicles with Euro 3 stan-dard fuel-injection systems, but Guangzhou Environmental Pro-tection Bureau deputy director Ding Hongdu said new cars

would still be able to run on exist-ing fuel.

An Environmental Protection Bu-reau official said it was co-coordinating with relevant au-thorities to ensure that the supply of clean fuel would be sufficient. State media quoted Mr. Ding as saying fuel supply was “not a ma-jor problem as vehicles can sill use No93/No97 grade petrol”.

He admitted that cars fitted with Euro 3 systems using inferior grades of fuel would not make a difference in cleaning up air pollu-tion. Guangzhou has 5,000 lo-cally produced cars using Euro3 engines.

The new standard was expected to cut carbon monoxide emis-sions by half or a total of 42,000t as to Mr. Ding.

Source: ABC Lt.d Research

Western car experts know Chery and Geely which are typical inde-

pendent car manufacturers. How-ever, only some of them know the ambition, endeavors and achieve-ments of a centennial company - Chang’an Auto — which located in Chongqing city, in South-Western part of P.R. China.

The new president of Chang’an Group, XU Liuping arrived recently at Shangri-La hotel from Chongqing to release Changan’s development strategy of inde-pendent brand cars in public on 12th July 2006. The director of Chang’an Group, YIN Jiaxu who had begun to work in Beijing after this Spring Festival, attended to the meeting too.

CEO YIN Jiaxu

The strategy of Chang’an is to fo-cus on developing two lines of mini cars and economical cars in order to become the leader in economical cars segment, and to enter middle class segment later on.

By 2010, the production and sales volume of independent brand cars shall be 250,000 units with the market share of over 13%. In the next five years, Chang’an will introduce 15 types of independent branded cars to market including 1 to 2 variants to be exported to Europe and US.

But all this did not happen in one night. XU Liuping said, since the end of last century, Chang’an had begun preparatory work to start independent brand development. After around 10 years’ accumula-tion and development, Chang’an already formulated a compara-

tively complete set of cars devel-oping strategic plans. The blue-print of Chang’an independent brand cars is getting clear now.

On August 2006, the first style of cars code-named as CV6 shall roll off production line. The car is go-ing to compete with Chery QQ. But it will no longer use the Changan’s logo (see above) but instead use as new brand logo. The new em-blem in the shape of shield em-bedded with a shape of spear which was finally confirmed after one year brewing.

The designer explained that there are three meanings about the new emblem. First, it has the im-plication of letter A which is the first Chinese letter of the Chinese word “An”. Second, “the cusp of spear” implies that Chang’an Auto is brave to face with difficulties with belief of success. Third, it im-plies the progressive trend, and indicates the active and progres-sive attitude of Chang’an inde-pendent brand cars.

CV 6 BenBen Citycar

Since then, Chang’an Auto is go-ing to implement dual brand strat-egy and cars shall to use the new emblem. But the badge for mini vehicles will not be changed. Thus, the brand image of cars will not be influenced by mini vehicles so that it will be operated at a higher beginning.

In November 2005, the sales force of Chang’an cars develop-ment was set up and began evaluation of setup of an inde-pendent cars sales company and conduct works of seeking distribu-

OEM PROFILE: Chang‘an Auto

tors. The general manager of Chang’an Auto, ZHANG Baolin told press that Chang’an is the only company setting up 4S shops in the mini vehicles field.

Chang’an has totally now 20 4S shops. And these 20 shops are certainly included in the sales net-work of Chang’an cars. In order to help sales of Chang’an cars, they plan to set up 150 4S shops in China lather this year.

The management of Chang’an Auto believe that independent brand cars shall accelerate the growth of the company. And it is a good opportunity to build up brand of independent brand cars.

Though the final success will be determined by concerted actions , Chang’an auto already has opened the gate to a generation of new cars. On the other side, Changan’s announcement of its strategy to develop cars and fol-lowing steps came unexpected, even for Chinese Industry Ex-pects. So far, Chang’an has been always seen as the No. 1 manu-facturer of mini vehicles. XU Liup-ing told CAM that Chang’an has spent 380 million Euro in setting up research and development fa-cilities during the current “The Tenth 5-Year Plan”.

Early Investment plans

The investment in overseas coop-eration projects has been exceed-ing more then 100 million Euro . And another 100 million Euro has been spent which represents a 4.5 percent of total sales revenue in 2005. During the period of “The Eleven 5-Year Plan” Chang’an plans to invest 60 million Euro to into independent product devel-opment, involving more then six types of new cars including mini vehicles, economical cars and middle class cars.

XU Liuping also indicated, since Chang’an had conducted some research projects in October 2002 to obtain the agreement of the company president office to


OEM Profile: Chang’an Auto


enter the realization phase in Oc-tober 2005i.

In addition, Chang’an is expected to be listed in China by October 2008 on the stock exchange.

The detailed plan of Chang’an in-dependent researching and devel-oping is as follows:

From David to Goliath

ZHU Huarong still clearly remem-bered what had happened at the night in 1999. At that time, YIN Jiaxu who had been delivered new products plans to its joint venture partner Suzuki in Japan and had received several calls from ZHU Huarong’s home. Mr. YIN had kept asking Mr. ZHU, who was the dean of Chang’an Auto Engineer-ing Academy graduating with ma-jor of Engine, whether Chang’an could produce independent re-search and development vehicles by itself.

At that time, the president of Chang’an Auto Group YIN Jiaxu was feeling hopeless about the strategy of obtaining more new products or improving the re-search and development ability of technicians through collaborating with Suzuki.

In the joint venture of Chang’an Suzuki, Chinese technicians could only get some simplex two-dimensionally structured sketches like the sketch about assembling positions of accessories. And as for the model 6350 which was commissioned Suzuki to develop (It is popularly known that it is the former model of Chang’an Star), Suzuki did not let Chang’an even participate in the design process.

The vice-president of Chang’an Group ZHU Huarong further elabo-rated that in the process of coop-eration with Suzuki the Japanese company did not ask his Chinese partner to cooperate in the proc-ess of car design and the compa-nies involvement was very limited because of Changan’s inferior po-sition. Furthermore, Suzuki did not want to let them know the de-tailed methods and technology about car design process.

Early 1995, Chang’an Auto Engi-neering Academy had been founded with the authority of na-tional administration department.

But researchers weren’t in posi-tion until YIN Jiaxu took the posi-tion of president in 1998. 130 ex-perts moved from the old Chang’an Auto Academy and Ji-ang Ling factory’s engine develop-ment conducted to the auto re-search and development under the direction of ZHU Huarong. The foremost research and develop-ment was only focused on some minor modification of old car models.

However, when ZHU Huarong got the call from YIN Jiaxu, he imme-diately indicated that they could do it better and build up car de-sign competences in near future. His confidence was derived from an interview with US company VENTURE Design.

When he had discussed the car design issue with VENTURE in that interview, they told him that they were doing a project for one big car manufacturer in America. And Chang’an needn’t to do research and development all by itself, but could utilize the technical re-sources of them worldwide.

This way of thinking enlightened ZHU Huarong. However, he had no clear idea of how to use those resources and how to organize development. And then the call from Yin Jiaxu made him decide to find it out.

Joint Car Design kicked-off

In 1999 Chang’an held the first product planning meeting which had not been ever hold in Chang’an’s history. Because they were cautious about the cars de-velopment, Chang’an decided to start to develop in the familiar field of mini-vehicles in 2000. The company they planned to develop first the mini-vehicle CM8. In Sep-tember 2000, ZHU Huarong was promoted to the vice general manager of Chang’an Auto Group to take charge of the research and development. In 2001, CM8

project was formally started. Chang’an found a cooperation partnership with an Auto Design Company named as IDEA, located in the town of Torino, Italy.

CM 8 Mini Bus

In mainland China at that time, Huachen Auto already produced Zhonghua Cars by cooperating with a foreign designing com-pany. YIN Jiaxu thought Zhonghua Cars were new cars without inde-pendent developed technology but only with property rights. He hoped Chang’an develop soon in-dependent development ability and produce independent vehi-cles through collaboratively devel-oping with utilizing the interna-tional third party’s designing re-sources.

So Chang’an demanded in the service contract with IDEA that Changan’s research and develop-ment team has to take an active role and participate in the design project, and Chang’an must be involved up the whole develop-ment process

ZHU Huarong said that the coop-eration with IDEA had the goal to gain experience from the whole development process. In Novem-ber 2001, the first team of Chang’an Auto departed to Europe to participate in the CM8 project designing and developing, while he had repeatedly admon-ished them the important thing was training stuff to build up a complete set of development pro-cedure and design tools and methods.

To drive the research and devel-opment personnel’s enthusiasm, Chang’an had increased the sal-


ary of Academy’s personnel up to 2000 Euro per year.

Because of the young age of most employees, the average annual salary of research and develop-ment technician was around 980 Euro and much below the entire company’s average annual salary of 1000 Euro. This average per-sonal salary level was later in-creased.

Nevertheless, YIN Jiaxu particu-larly set up some social insurance programs and transportation sup-port for the Academy people in order to make them more happy and dedicate more time to car de-velopment, so that type of pri-vates expense could be claimed inside of the Academy.

Generally speaking, 36 months are needed to design a new car. But at first ZHU Huarong did not have a clear idea about the time schedule and cost involved. So he hoped to spend only 28 months to run research and development of CM8. Finally, it took him 33 months to finish. On 16th Novem-ber 2004 MPW Chang’an CM8 was introduced into the market.

ZHU Huarong said, one can see that more work had been done by the foreign partner in the first round of co- development. CM8’s design therefore looked more like an European vehicle because nine design proposals were pro-vided by the foreign partner while Chang’an technician only did some assisting works with a roghly 20 percent contribution. “We couldn’t even recognize good

parts or bad parts at that time” he told CAM.

The Long March to become an equal partner

On the basis of first development on CM8, Chang’an Auto already acquired some technologies and process understanding on car de-sign. In October 2002, the com-pany decided to start a research and development project for the styling of a new vehicle, code-named as CV9 (Landwind Feng-sheng) that should became a brand-new MPV family car.

The CV9 was actually based on the platform of another car model cars, belonging to a foreign com-pany. This new cars platform had been chosen in 2000. As the company has gained some experi-ences from CM8 development, Chang’an began to start MPV de-velopment. They thought it would be feasible to research and de-velop a style of new cars based on MPV with CM8’s successful ex-periences.

Though the final success will be determined by joint efforts, Chang’an Auto already opened the gate for new car development. On the other side, Chang’an Auto’s unexpected notice of their strategy to develop cars based on own independent research and development, astonished the car industry in China, as Chang’an was always known as the No. 1 in mini-vehicles field.

Development a new style of vehi-cles normally should begin 12

months in advance. Meantime, the instruction of Chang’an was— on consider the small production and sales volume of this style of vehicles in future — there was no need to particularly develop en-gine for it, but purchase an engine from outside. Having evaluated price and integration capabilities, Chang’an decided to purchase engines from Ford Auto.

As to ZHU Huarong’s expectation, there was a high risk approaching Chang’an that the company wanted an engine without an ex-haust system, but Ford was not willing to disassemble the exhaust system from their engines. As to Mr. ZHU, Ford had said that it was not prepared to change the en-gine design only because of Chan-gan’s problems without charging an extra amount of money.

Chang’an then started the re-search and development project of 1.8L engines without choice, almost at the same time they started the CV9 project. Then pro-ject CV9 became the genuine new cars development project. In addi-tion, the development of this style of vehicles indicated that Chang’an vehicles research and development entered into a new cooperative stage from the follow-ing up foreign partners’ stage.

On this stage, Chang’an transited from relying on others to depend-ing on itself. For instance, as for project CV9, its foreign partner took responsibility of the produc-tion of vehicle’s exterior, vehicle body and first prototypes whereas Chang’an contributed almost 50


LETTER TO THE EDITORLETTER TO THE EDITOR

„From the last three editions of China Automotive Magazine we received plenty of up-to-date market infor mation. As we have recently started to work with Chinese car manufacturers, i hope that our business shall be more successful due to specific information such as in the „New Product“ section or the „OEM profile“ part. We hope that you can further enlarge your publication in future. Best regards“ Axel Blasko, General Manager, FLABEG GAM Automotive Mirrors (Shanghai) Co. Ltd.

„Gratuliere zu der guten Entwicklung ihres China Automotive Magazine. Habe ihr CAM an Branchenkollegen und intern weiterempfohlen.“ Max Basler, Tool Manager, TCM China Tool Consulting & Management Ltd., Shanghhai

„Interesting publication, can you pls. send me also the previous versions, Best regards !“ Michael A Hague,General Manager, Autoliv (Shanghai) Inflator Co. Ltd., Shanghhai


percent.

In December 2005, the CV9 has been renamed as to Landwind Fashion. And they were off line after accomplishing to start batch production at Landwind’s north-ern production base in Nanchang city, Jiangxi province, which was owned by Chang’an Auto. The Landwind Fashion car was intro-

duced in mainland China on May, 18th 2006.

When Chang’an introduced this new car series, it also said that they gained much experience on independent development from CV9 development, which provided the stable basis for company’s

strategy of independent develop-ment.

We can say that Chang’an CV9 is a symbol of successful coopera-tion between Chang’an R&D and a foreign partner. However, an-other more important symbol was the Chang’an Auto Overseas Technology Center, which was founded in late 2003. CV9 could not have been successfully devel-oped if the Overseas Technology Center had not been set up.

On August 23th 2003, the subsidi-ary of Chang’an Auto in Italy has been founded. One month later, Chang’an Auto Overseas Technol-ogy Center was opened in Torino Italy. Until now, Chang’an has in-

vested over 79 million Euros for setting up the Italian design sub-sidiary. Chang’an has become the locally top 4 investor two years ago.

For the sake of convenient opera-tion, the representative of Chang’an Auto agent in Italy, TONG Furong told CAM that the agency and Overseas Technology Center are two different institu-tions but owned by the same com-pany. Now there are about 700 persons working here. These peo-ple are cooking for themselves in their apartments, which is differ-ent kind of fun.

The foundation of Italian Over-seas Technology Center played much important role in Chang’an Auto independent research and development. In March 2004 the second representative of Over-seas Technology Center, YU Wenlong, said, when he was asked: On the one hand, he hired some foreign technicians to work together with Chang’an stuff; On the other hand, with responsibili-ties of managing Chang’an over-seas businesses, he had been in touch with various auto manufac-turers and auto R&D companies in order to combine global auto resources including the best Ital-ian designing resources and Ger-manic engineering technical re-sources to be utilized by Chang’an Auto.

All of these were started basing on the operation of project CV9. Now the CV9 project is no longer headed by foreign partners any more, as the research and devel-opment has been carried out un-der the supervision of Chang’an Oversea’s Technology Center with utilizing European auto R&D re-sources.

For example, the model was de-signed in Italy while the engine was developed with FEV Company in Germany. In the process of run-ning the project, Chang’an em-ployees further improved their re-search and design skills by con-tributing more then 50% to new car design.

Chang’an realized collaboratively developing and designing vehicles worldwide, through building up the dedicated data lines to con-nect all three research and devel-opment centers Chongqing, Shanghai and the Italian city Torino. Today, Chang’an auto has introduced simultaneous develop-ment capabilities to do research and development starting from design, testing and validation up to continuous product design and development (FMEA).

Spending at least seven to eight months per year in Europe, YU Chenglong was frequently travel-ling across countries. YU Chen-glong is in charge of research and development, risk scheduling, project quality and cost control. He said, he is not only for the Torino operation responsible , but also for whole Europe including Belgium, Holland, France, Spain, UK and Austria where they also have some research and develop-ment projects.

33 years old Dr. YU Chenglong’s twins will be born this summer. During his stay two years in Italy, he already participated in almost ten national or departmental dele-gations.

He is gratified to see that Chinese Government officers gave suffi-cient affirmation to Chang’an Auto’s overseas stratagey about founding technical development center in developed countries and developing independent property rights technology.

70 % independent R&D as target

All the sample vehicles of project CM8 and project CV9 were pro-duced abroad. Producing one sample vehicle cost 270 million Euro. Then Chang’an produced sample vehicles in some other



projects in China which cost 80.000 to 120.000 Euro per pro-totype, which also shows the im-provement of Chang’an research and development capability. Pro-ject CM8 and project CV9 can be regarded as the way to accom-plish training a group of research and development stuff, establish a complete set of developing pro-cedure and enrich the establish-ment of software and hardware needed by domestic research and development.

In the late of 2004, Chang’an set up a Sub-Academy of Auto Engi-neering in Shanghai in order to attract more local talent with the superior geographical situation of Shanghai. In March 2005 Chang’an Auto Engineering Acad-emy moved to the new building in Yubei district of Chongqing.

Chang’an Auto Engineering Acad-emy has more than 1000 sets of widely three-dimensional model-ing design workplaces right now, analysis and management soft-ware, 400 CAD graphic worksta-tions, 50 servers and over 500 testing facilities.

In addition, they summed up 12 aspects & 36 fields about prod-uct development procedure and near 500 specifications about design, test and method to found the Auto Developing Test Ap-praisal and Analysis System.

Moreover, there are 805 techni-cians including 214 system mod-ule technicians working at Chang’an Auto Engineering Acad-emy. There are over 60 senior de-signers and technical managers among those 214 core techni-cians with 3 to 5 years training experiences in Italy, Germany and Holland etc. They have develop-ing experiences on 3 to 6 models. Chang’an also hired 38 experts from overseas to undertake works of developing and testing.

In June 2005, on the basis of ac-complishing procedure founda-tion and internal hardware ad-vancement, the leadership of Chang’an thought it was the good opportunity to start domestic in-

dependent research and develop-ment. ZHU Huarong said that Chang’an Auto already realized independent research and devel-opment with a 70 percent partici-pation.

The development of Chang’an middle class cars, CV8s, is one of the current projects. And this style of cars is planned to be intro-duced to market in June 2008. On 6 June 2005 the project team of CV8 - to be developed at Shang-hai operations - arrived at EDAG Engineering and Design GmbH Company in Ingolstadt, Germany. Every participant took out their design plans and confirmed the model of CV8 in less than one year. Chang’an took already 75 percent workloads in engineering and the interior body design was conducted in the Shanghai re-search center. Chang’an has been more than 75 percent responsible for CAE analysis whereas proto-typing were independently accom-plished by Chang’an Auto Acad-emy.

In the process of independent re-search and development, Chang’an Overseas Technology Center in Italy was officially re-named into Chang’an European Design Center dedicating to model design. And things related to core engineering were basically

relocated to China.

Except the headquarter of Chang’an Auto Academy in Chongqing, Chang’an Auto set up several departments of whole ve-hicle, vehicle body, internal and external decoration and electrical design.

Yufeng Concept SUV

In Chang’an European Design Center some journalist recently met the technical supervisor of Chang’an headquarter, Miss LI Yalan, who is also in charge of

foreign personnel. She said, Chang’an leadership thinks Italy is still the city of global design. So Chang’an has to set up a base there to do model design, which will be for the benefit for the com-pany as to get access to interna-tional design trends. People of Chang’an headquarter are often come to Italy to work some time there.

48 years old design supervisor of Chang’an European Design Cen-ter, Luciano D’Ambrosio, is a de-sign expert with abundant experi-ences who used to work for Ford, Toyota and Honda etc. When he received an interview, he said all of his designing and developing projects are assigned by Chang’an headquarter. “We can only combine European design concept and Chinese culture into production so that products will be welcomed by Chinese custom-ers” he told CAM.

Chang’an European Design Cen-ter is an independent joint-stock enterprise, and it gained revenue through project commission con-tracts.

The personnel include long-term stating people, key members di-rectly hired and temporary work-ing people. They do works with leading of the project manager. YU Chenglong said that its Design Center can assist to do projects not only for Chang’an, but also for some other companies. The char-acter of the center is similar to some other Italian design compa-nies. In the year of the foundation of European Design Center, he had accomplished a research re-port on international modeling trend including 11 important points.

At present, Chang’an Auto Engi-neering Academy can realize col-laboratively developing and de-signing vehicles worldwide, through building up the dedicated network among three research and development centers that are Chongqing, Shanghai and Italian Torino. Research and develop-ment personnel in three places enter the data into a public server



in Chongqing headquarter, so that Chang’an Auto can generally realize 24 hours constant re-search and development starting from creating to designing, test-ing and ending with designing modification and improvement.

The withdrawal of Chang’an inde-pendent research and develop-ment certainly does not mean to

give up foreign research and de-velopment resources, but mean to the greater utilization of re-sources.

Being the administrator of Euro-pean Design Center, YU Chen-glong also takes the responsibili-ties of providing various foreign auto resources supporting to China. But this work of foreign re-

sources supporting is totally done with the leading of Chang’an Auto Engineering Academy.

ZHU Huarong said, their cars re-search and development level will rise to S4/P4 in 2007, and try to attain S5/P5. They already at-tained this level of research and development counting in the for-eign support.

GO INTERNATIONAL


Daimler Chrysler to team up with Chery Automobile DaimlerChrysler (DC) has reached a broad understanding with Chery Automobile o set up a joint venture to export cars to the United States for the first time, according to two auto industry managers.

While some details of the joint venture are still being worked out -- no timelines or prices were dis-closed -- the two companies have begun negotiating with suppliers of auto parts to the assembly line, these people said on the condition that they not be further identified because confidential negotiations were continuing.

The assembly line, to be in Chery's headquarters city of Wuhu, in Anhui Province in east-central China, will produce a sub-compact car slightly smaller and cheaper than the Dodge Neon, which was sold in the United States for about 11,200 Euro un-til it was discontinued at the end of the 2005 model year. The timeline depends on how quickly DC and Chery can set up the assembly line and raise the quality to DC's standards. Though American companies, including Chrysler, have been making cars through joint ventures in China for years, those cars have been sold domestically only. Indeed, this venture could start by selling small numbers of cars in China before any significant exports be-gin to the United States. The arri-val of Chinese-made cars at American ports is likely to upset the United Automobile Workers union, which has been deeply concerned about job losses as

Detroit-based manufacturers lose market share to the non-union American operations of Asian and European companies.

Dieter Zetsche, DC’s chairman of , said at the official opening of a Beijing factory on Sept. 15 that his company was in talks with automakers in China and else-where about building small cars for the North American market but that no agreement had been completed.

The spokesman for DC's opera-tions in China, Trevor Hale, said on Tuesday that Mr. Zetsche's Beijing comments remained the company's position and that he could not elaborate on them. Ru-mors of a DC deal with Chery were flying thick and fast at the Paris auto show last week and have been showing up in the Chi-nese news media as well.

The selection of Chery represents a setback for DC's main Chinese partner until now, Beijing Automo-tive. Daimler and Beijing Automo-tive have built Jeeps for the Chi-nese market and are now starting to jointly build Mercedes, Chrysler and Mitsubishi models for sale in China as well.

Yale Zhang, the greater China ve-hicles forecast director at CSM Worldwide, a big automotive con-sulting company, said coopera-tion between DC and Chery would make sense. ''I think that's a good deal to help Chery improve quality and help Chrysler have a small car,'' he said. With its heavy reli-ance on sport utility vehicles, mi-nivans and pickup trucks in the

American market, Chrysler has been hit hard by high gasoline prices and has been looking for a small car to sell.

Building and exporting a small car from Wuhu to the United States will be a challenging exercise in logistics. The city is on a naviga-ble section of the Yangtze River, about 150 miles west of Shang-hai and well downstream from the Three Gorges Dam.

Car-carrying vessels tend to have very shallow drafts -- Honda has been able to bring such vessels up the shallow Pearl River to Guangzhou to load hatchbacks for the European. The state-owned Chery already has a factory in Wuhu that makes 300,000 cars a year and will complete a separate, similar-size plant across the street from it early next year; it was not imme-diately clear on Tuesday whether cars bound for the United States would be assembled at the fac-tory nearing completion or at an-other factory to be built in the vi-cinity. Chery also has ambitions to sell cars with its own brand in the United States and has a dis-tribution agreement with Malcolm Bricklin, an entrepreneur who has specialized in bringing low-cost cars to the American market. Mr. Zetsche said in Beijing that the company could not manufac-ture small cars competitively in North America for the domestic market.

Source: ChinaCarForum, 4.10.2006

GO INTERNATIONAL


Chinese car face long road to Western markets First it was textiles and consumer electronics. Next may be cars. China is once again seeking to target a key consumer market in the United States and in Europe. Yet US Wharton faculty and in-dustry analysts say it will take some time to reach that goal.

China needs at least another dec-ade, according to these US ana-lysts, to overcome a long list of obstacles, including poor quality, high costs, weak design and a lack of distribution networks, be-fore Chinese companies can com-pete with Japanese carmakers.

"Whether they will be able to get their tentacles out there and do what the Koreans are doing is the question. There's no reason to believe they won't; the question is when," says Wharton manage-ment professor Marshall Meyer. So far, Chinese exports are only trickling out to a few spots in Europe, Southeast Asia and the Middle East, but the chairman of Daimler Chrysler has confirmed that the company is in negotia-tions with Chery Automobile to manufacture DC’s models abroad for export to North America.

And entrepreneur Malcolm Brick-lin has said he will import cars made in China by Chery Automo-tive Co to the US in 2008 or 2009, although that timetable has already been pushed back twice. China's first problem in becoming a major exporter is quality. Last year, the European New Car Assessment Program,

which monitors auto safety for governments on the continent, gave its lowest score ever - zero - to a Chinese SUV.

"I don't really see that the US will emerge as a significant market for Chinese exports in the next five to 10 years. There will be some low-end Chinese imported cars, but these products have to overcome stringent regulatory standards, appeal to a demand-ing US customer base and de-velop viable distribution chan-nels," says John Moavenzadeh, executive director of the Interna-tional Motor Vehicle Program, an industry research consortium based at Wharton and MIT. "On the other hand, I don't see any reason why we shouldn't expect Chinese imports over the long term. We have witnessed a clear pattern of increased imports fol-lowed by increased US production capacity - the rise of the trans-plants - for Japanese and Korean manufacturers."

Wharton management professor John Paul MacDuffie, who is co-director of the motor vehicle pro-gram, says China's own domestic market should be the focus for now.

Chinese domestic sales in-creased 47 percent in the first half of 2006 over the same pe-riod a year earlier, while sales in the rest of the world were essen-tially flat. "The incredible growth rate for the Chinese industry is in China itself." The speed of inter-

national acceptance will depend on whether China can avoid the same type of quality problems - such as rust and rattling parts - that initially tainted the reputa-tion of Japanese and Korean ex-ports, leading to US consumer dissatisfaction that delayed the penetration of overseas markets for years.

"There was a long period of re-trenchment and rebuilding after leaving that bad impression," says MacDuffie. "The Chinese compa-nies will have to be wary of re-peating that. If anything, Ameri-can consumer standards for qual-ity have only gotten higher."

Another obstacle to China's ex-port potential is a new generation of low-end subcompacts devel-oped by Japanese and Korean companies that are performing well in this traditional entry-level export sector. "Nissan, Toyota and Hyundai have new and terri-fic products," says MacDuffie. "They are not as cheap as the Chinese product, but what they offer in quality and fuel efficiency for US$10,000 to US$12,000 is very high."

According to Meyer, stagnant growth, combined with overca-pacity and consolidation in the global automotive industry, may limit China's ability to push for-ward as an exporter compared to the Japanese and Koreans who came before.

Source: Shanghai Daily 27.09.2006 p.A6

Geely Holding Group, , will start assembling cars in Indonesia after an initial plan to pro-

duce them in Malaysia was re-jected by the government.

Geely will assemble its 1.1 liter, 1.3 liter and 1.5 liter sedans in a plant near Jakarta, said Cam Soh Thiam Hong, group executive

chairman of Alado Corp, a Malay-sian company that holds the sole distribution rights to sell Geely cars in Southeast Asia. It plans to start sales in November.

"The Indonesian market is huge," Soh said yesterday in an interview with Bloomberg News in Petaling Jaya, outside the Malaysian capi-tal Kuala Lumpur. Alado "is in the

final stage of concluding an agreement with an Indonesian partner," he said, declining to elaborate.

Geely, which would be the second Chinese automaker to assemble cars in Indonesia, plans to boost exports to two-thirds of its total sales by 2015.

Source: Shanghai Daily 28.09.2006 p.B3

Geely to assemble in Indonesia

The international transport and lo-gistics corpora-tion cargo-partner

is intending to become one of the leading providers of air and sea freight services linking continen-tal Europe and Greater China re-gion within the next three to five years.

Shanghai Office opened

In order to develop air and sea freight business between the European cargo-partner organiza-tion and China, the new regional HQ Asia Pacific in Hong Kong was opened on the 1st of September 2006.

The office is managed by Mr. Mi-chael Zankel who was previously the executive director air freight of cargo-partner for Central and Eastern Europe.

Michael Zankel: “Inbound and outbound from/to "Greater China" comprise one third of our volume of business already to-day. In contrast to many competi-tors of our company, cargo-partner relies on a strong net-work of partnerships and this is especially true for China. The Western world constantly empha-sizes how much Chinese learn from them. However, with regard

to tradition and interpersonal re-lations it’s us who can learn a lot both on a personal level and in a business environment from the Chinese. This is the reason why we do not believe a minute in “conquering” this market with a purely European mindset.”

Suzhou Office Next

The Hong Kong regional office is leading all cargo-partner activities in Greater China, which at this stage include a WOFE with 12 staff in Shanghai, a team of 17 in Hong Kong, and a well estab-lished company with 30 staff in Taipei. A Suzhou branch of Shanghai Company will be opened soon, expansion in South-ern China is planned for early 2007.

Goal of the regional HQ is to har-monize the company’s related businesses with partnering enter-prises. Additionally, the office will engage in sales activities to Euro-pean corporate clients and will play an active role in strengthen-ing the purchasing power for both air and sea freight.

The goal is to establish a homo-geneous network of partners and wholly-owned ventures in order to offer the customers a standard-ized and transparent solution sat-

isfying their transport and logis-tics needs.

cargo-partner is represented in Europe by 43 offices located in 14 countries. Together with the presently three companies in Asia the group believes in taking a large step towards becoming a major player in air – and ocean freight between continental Europe and Greater China.

Expertise in Automotive Industry

Major commodity markets cargo-partner is involved in with com-prise electronics, the automotive and its supply sector, the gift and textile industry.

Mag. Michael Zankel Executive Director Far East

cargo-partner, established in 1983, specializes in the global transportation of air cargo and sea cargo and furthermore em-phasises its position as system-logistics provider.

PROMOTION / ASIAN REGION


cargo-partner starts Far East offensive

Vietnam began dreaming of an automobile indus-try in 1991 as part

of the country's industrialization and modernization policy. Auto giants such as Ford, Toyota, Fiat, Mitsubishi, Mercedes, Mazda, Daewoo, Isuzu, and BMW were quick to form 11 auto joint ven-tures, turning out 45 models.

The joint ventures make an aver-age of 148,000 automobiles an-nually, of which 43,000 are sold domestically and the rest are ex-ported.

While many people were initially sceptical about whether a car in-dustry could succeed in Vietnam given the low per capita GDP, it is now clear that it can in fact suc-ceed.

With per capita GDP exceeding US$1,000 in 2005 in several large Vietnamese cities, the po-tential for domestic sales of autos as well as exports has en-couraged Prime Minister Phan Van Khai to approve the "Strategy for Development of the Vietnam-ese Auto Industry through the

Year 2010 and a Vision for 2020".

Honda Vietnam Co., Ltd. (HVN), the Japanese automaker’s Viet

Automotive Industry in Vietnam

ASIAN REGION


namese subsidiary, announced in late August this year that it had established its Vietnamese op-erations with the launch of the new Civic. The model was pro-duced at its new manufacturing facility in suburban Hanoi.

"Through our products manufac-tured at the new automobile plant in Vietnam, we look forward to offering world-class quality and state-of-the-art technologies to our Vietnamese customers,” said Honda President & CEO Takeo

Fukui.

The new plant - which has an an-nual production capacity of 10,000 units and could create as many as 700 new jobs - will han-dle welding, painting and com-plete vehicle and engine assem-bly, making it the first such auto-mobile production facility in the country. Honda plans to invest up to US$60 million in its Vietnam-ese operations and sales network by 2010.

HVN’s new Civic four-door sedan comes equipped with a choice of 1.8-liter or 2.0-liter i-VTEC en-gines, and retails for between 495 and 605 million Vietnamese dong ($30,790 to $37,630).

Monthly sales, which will initially be handled through four dealers in Hanoi and Ho Chi Minh City, are projected at roughly 300 units. Source: ABC Ltd. Research, Vietnam News

Nissan Motor Co. Ltd. said in a statement it will set up a factory in Thailand to provide auto parts for its assembly plants globally. The 40,000 square-meter plant will be located about 130 kilome-ters southeast of Bangkok in Laem Chabang and is slated to start operations in January 2007. It plans to export auto parts worth 300 mio USD annually, making Thailand the firm's second-largest auto export base after Japan, the

statement said.

Nissan South East Asia Co. Ltd. – a subsidiary for purchasing and R&D in Southeast Asia – will pro-cure automotive parts for export from about 90 Thai-based suppli-ers. The new facility is said to ex-port body panels and roof assem-blies for its Tiida compact car. This model has also a production base in P.R. China by Dongfeng Nissan (DFK), head-quartered in

Wuhan, Hubei province. The 50/50 joint venture between Nis-san Motor Co., Ltd., and Dongfeng Motor Group Company, Ltd. as-semble passenger cars as well as light trucks. Until 2007 DFL plan to sell 620 000 vehicles annually, whereat half of the volume is dedicated for passenger cars.

Nissan also export in-house parts through a smaller parts export hub located in Siam Nissan Auto-

Nissan New set up auto parts export base in Thailand

SALES & STATISTICS


Foreign automakers are investing more in China's nascent used-car industry than their domestic ri-vals, analysts say. And analysts said foreign companies would speed up their development of the emerging market now that the first batch of automakers are expected to replace their cars and the younger generation starts to buy second-hand.

Last year, sales of used vehicles reached 1.45 million nationwide, up 10 percent year on year. In matured overseas market, sales of second-hand cars are usually three or four times that of new automobiles. But sales in China have the potential to grow dra-matically after automakers sold nearly 6 million cars last year across the nation.

China introduced new rules on second-hand car sales last Octo-ber, allowing qualified companies to open for business. To date, most foreign carmakers, includ-ing General Motors, Volkswagen, Nissan, Toyota, Hyundai and Kia Motors Corp, have entered the fledging market through their do-mestic joint-venture partners. Other companies, including Honda and PSA Peugeot-Citroen, are expected to jump on board within the year.

Autobuyers can trade their old cars to qualified dealers and buy cut-price new cars in return. It not only helps carmakers sell more of their new cars but also boosts the circulation of cars to meet differ-ent demands.

Boost for overall market

"The second-hand car market in China is still at an early age and new auto sales will become more

prosperous when there's a ma-ture used-car transaction system," said Sun Muzi, an auto analyst from Sinotrust Marketing Re-search & Consulting Ltd.

However, most homegrown car-makers including Geely, Chery, Lifan and Great Wall have not en-tered the market, at a time when they are competing with foreign carmakers in the new car market. "It is better for carmakers to launch second-hand car busi-nesses after its car population has reached a certain amount," Sun said.

Wang Yanhui, vice chairman of Lifan Automobile Holdings Corp, said as a new-car producer, Lifan needed to focus more on produc-tion and sales networks rather than expand to other potential markets. Other domestic makers such as Great Wall, China's larg-est sports utility vehicle maker, said it was adopting a cautious attitude to avoid risks when it en-ters the second-hand market.

Historic Chinese car are in short supply

Without domestic competitors, second-hand car sales of joint-ventures have grown rapidly, helped by their complete sales networks. The system has worked well for some car buyers.

ZHAO Cong, a sales manager with a private company, said it took him three weeks to buy a new ve-

hicle after selling his old Chery QQ compact model. "I spent a lot of time bargaining to sell my QQ on the auto-trading market and the same thing happen during the purchase of my new Peugeot 307 from a dealer."

He was impressed to learn later of the experience of a friend, who in three days sold his old Volks-wagen Santana to a Shanghai General Motors dealer. After pay-ing some more money his friend was able to trade up to a new Chevrolet Lova.

"If Chery also ran this kind of sec-ond-hand car business, it would be more convenient and maybe I would also consider buying Chery's A520 sedan." Shanghai Volkswagen has more than 180 dealers involved in the second-hand car business, while Shang-hai GM has 140 dealers after four years in the market.

A dealer with Shanghai General Motors said about 15 percent of new-car sales was generated by the used-car business.

Shanghai GM, China's first auto-maker to enter the second-hand market, aims to have the busi-ness account for 20 of new car sales, according to Chen Yan-ming, a Shanghai GM spokesman. "The used-car replacement of SGM in the first half of 2005 has surpassed that of the whole of 2004," he said.

Chen Wei, director of business development at Dongfeng Nissan Automobile Corp, said more than 150,000 units of its new models were sold through the replace-ment of old models, accounting for about 6 percent of its total new car sales. Chen estimated

Used car market influence price war

mobile Co. Ltd. vehicles assembly plant. The new Thai export base is part of Nissan’s strategy to ex-pand its global sourcing across a wider range of countries.

Nissan Motor Co. Ltd. established a part export facility in China in April this year. The company also said it plans to set up a similar type of export facility in Indonesia

in August 2007. The statement did not say how much the com-pany would spend on that project.

Source: ABC-Research

SUPPLIER & SOURCING


the proportion would grow to sur-pass 50 percent in the near fu-ture.

The Chinese second-hand car mar-ket used to be conducted through smaller dealers or individuals on the public trading markets. But because those operators lack a unified pricing system, quality con-trols and registration procedures, car buyers now prefer to go to au-thorized dealers. Hong Da Second-hand Car Co Ltd, a used car bro-kerage firm, saw its business drop 30 percent in May this year from a year earlier. "Compared with buy-ing second-hand cars through pub-

lic auto-trading markets, dealers authorized by automakers provide better quality, good aftersales ser-vice and competitive prices," an autobuyer told Shanghai Daily.

A growing number of overseas companies are penetrating the used car market through second-hand car auctions. Sec-ond-hand car auctions cur-rently account for less than 1 percent of total transactions, far below the 23 percent of the North American market.

Manheim Auto Auction Corp, the world's largest

used-car auction company, teamed up with one of China's largest auc-tion companies to form the coun-try's first second-hand auto auction joint venture in Shanghai in this April. Neville Green, chairman of Manheim Guopai, has projected that the market of second-hand cars will reach 6 million by 2010.

Sales Of New & Second-hand Autos In China (unit: Million)

5.76

5.07

4.39

3.27

2.36

1.45

1.34

0.87

0.71

0.37

0 2 4 6 8

2005

2004

2003

2002

2001

Year New Auto

Used Car

Peugeot plans to raise China sourcing PSA Peugeot Citroen plans to dou-ble the value of auto parts sourced from China to 30 billion yuan (US$3.75 billion) by 2010.

Dongfeng Peugeot Citroen Auto-mobile Company Ltd (DPCA), the French carmaker's joint venture with Dongfeng Automobile Group, said it will also buy 15 billion yuan worth of car components in China this year.

At its first strategic global develop-ment conference held in Wuhan, Hubei Province last Friday, DPCA invited more than 90 global auto parts suppliers, including Delphi Corp, and Visteon Corp to work

with it in China.

More than 300 auto parts manu-facturers such as Delphi, Bosch and Michelin now provide car com-ponents to DPCA, which produces the Peugeot 307 sedan, Peugeot 206 compact car as well as the Citroen Triumph mid-level sedan in China.

"Strategic cooperation with suppli-ers and the improvement in core competitive capability of the supply chain are crucial for the company's future development," said Liu Wei dong, general manager of DPCA. With its two brands Citroen and Peugeot, the company has an-

nounced a long-term goal of con-trolling 7 percent of China's pas-senger car market share.

DPCA produced 129,000 vehicles and sold 128,000 from January to August this year, an increase of 47 percent and 35 percent respec-tively.

The company has just announced plans to start construction on its second plant in China. The plant will be capable of producing 350,000 units in China next year and the company aims to turn out 450,000 units a year by 2010.


Car sales speedup good news for Hella Hella Shanghai Electronics said recently it expects its revenues to surge fivefold within the next 5 years thanks to growing demand.

The company forecast that reve-nue will surpass 100 mio Euro in 2010 and 150 million Euro in 2012, compared with 20 mio. € in the fiscal year ended on June 30. Frank Rehfeld, general manager of HSE, a local subsidiary of Ger-many-based Hella Group, said in a statement that "There is big growth ahead of us, and we will increase investment in China to boost revenue."

HSE manufactures and assembles automotive lighting, sensors and lock systems. Its clients include Shanghai Automotive Industry Corp, Shanghai Volkswagen Auto-mobile Co and Chang'an Automo-bile (Group) Co. China's rising car sales have boosted demand for automotive electronics, which ac-count for about 10 percent of a car's total cost. China will replace Germany as the third-biggest maker of cars and vans this year, Xinhua News Agency reported yes-terday. China will produce about 5.9 million cars and vans to Ger-many's 5.38 million in 2006, said

Xinhua, citing a report by Polk Mar-keting Systems, a car market re-search company based in Ger-many. Production in China could reach 10 million vehicles by 2016, it said.

Revenue in China's automotive electronics sector reached 62.4 billion yuan in 2005 and will hit 78.2 billion yuan this year and 199.6 billion in 2010, according to CCID Consulting Co, a research firm under the Ministry of Informa-tion Industry.


SUPPLIER & SOURCING


ArvinMeritor to open new facility in China SHANGHAI - ArvinMeritor, Inc. an-nounced on August 7 that it would open a new wholly owned opera-tion in Wuxi, Jiangsu Province.

The 300,000-square feet facility will initially manufacture trailer ax-les and suspensions for key trailer manufacturers in China, as well as for the export of components to North American and European plants. The company’s board of directors has approved the invest-ment, with production scheduled to begin in the first half of 2007.

Other drivetrain and brake compo-nents will be added to the opera-tion’s portfolio as the company continues to pursue its strategic enterprise model.

"As the country’s infrastructure im-

proves, tractor-trailer configura-tions are expected to rise exponen-tially, and we will be ready to sup-port both current and future mar-ket needs with advanced technol-ogy,” said Sergio Carvalho, vice president and general manager of ArvinMeritor’s Trailer Products and Suspensions business.

Investment in the Wuxi operations will include $35 million for new equipment.

The company has identified local sourcing for its components, which furthers its integrated manufactur-ing strategy to bring all aspects of the supply chain within close prox-imity of the facility.

ArvinMeritor, headquartered in Troy, Michigan in the U.S., is the

worldwide market leader for trailer axles. It plans to emerge as a ma-jor player in China’s growing trailer undercarriage market.

The company now has four Com-mercial Vehicle Systems (CVS) manufacturing facilities in China; one is wholly owned and the re-maining three operate as joint ven-ture partnerships. These plants as-semble or produce axles, brakes and related components for me-dium- and heavy-duty trucks, the off-highway and bus and coach markets, as well as the aftermar-ket. All products are made for ex-port or are supplied to leading ve-hicle manufacturers in China.

Source: China Automotive Review October 2006 p.14

Upcoming Automotive Fairs & Exhibitions

October 26-27, 2006: China Auto Suppliers Exposition

Marriott Hotel, Troy Michigan, USA Web: www.dcba.com

October 28-30: 2006 Shanghai International Special-Purpose Ve-hicle and Parts Exhibition

Shanghai Automobile Convention & Exhibition Center, Shanghai, China

Tel.:+86-27-84713037 Web: www.caam.org.cn

November 19-27, 2006: Auto China 2006

Beijing International Exhibition Center & China Agricultural Exhibi-tion Hall, Beijing, China

Tel.:+86-10-64938403 Web: www.autochina.com.cn

November 24-27, 2006: South-east Asia (Guangxi) Auto and Mo-torcycle Parts & Maintenance Equipment Expo

Nanning International Convention Center, Guangxi, China

Tel.: +86-771-2094321 Tel.: +86-771-2094322 Web: www.chinajp168.com

November 30-December 2, 2006: Automechanika Shanghai 2006

The Shanghai New International Exhibition Center, Shanghai, China

Tel.: +86-21-38760488 Web: www.messefrankfurt.com.hk/en/3Auto/AMS/automechanikaSH.asp

May 21-24, 2007: ChinaPlas 2007 Bazhou, Guangzhou, Guangdong

Tel.:+86-21-64273630

Web: www.2456.com/chinaplas/en/general/infol.asp?eid=3619&order=122

September 26-28, 2007: 2007 Auto Parts Shanghai/Auto Manu-facturing Shanghai

Shanghai International Exhibition Center, Shanghai, China

Web: www.adsale.com.hk/cn/index.asp

November 20-26, 2007: The 5th China (Guangzhou) International Automobile Exhibition

Guangzhou International Conven-tion & Exhibition Center: Guang-zhou, Guangdong, China

Tel.:+86-20-26081663 Web: www.autoshow-gz.com

Market research of AC Nielson in Beijing, Shanghai and Guangzhou shows that over 13 percent of con-sumers in the three cities say they plan to buy an automobile in the next 12 months.

In 2004, 6 percent of the surveyed in the three cities said they would buy a car.

The survey also shows that the car ownership in China's three largest Chinese cities reached 19 percent, compared with 7 percent in 2004, meaning that one in five families now have a private car.

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STATISTICS: Chinese OEM, Part I


Make Jun. 06 Jun. 05 YTD 06 YTD 05Bamin Automobile 0 0 0 11 Bamin (SUV) 0 0 0 11BAW Co., Ltd. 533 1.455 4.373 8.118 BJ2032 (SUV) 356 764 2.935 5.946 Leichi/Luba (SUV) 177 691 1.438 2.172Beiqi-Foton 0 0 514 693 Scenic Surf (SUV) 0 0 514 693Brilliance Jinbei 6.126 772 29.652 7.759 Splendor 3.655 0 9.892 0 Zhonghua 1.785 374 12.804 5.815 Granse (MPV) 686 398 6.956 1.944BYD 3.890 648 36.258 5.127 F 3 3.326 0 29.266 0 Flyer 564 648 6.992 5.127Chang'an Automobile 0 0 7.797 9.510 CM8 (MPV) 0 0 7.797 9.510Changfeng 807 1.306 10.704 9.609 io (SUV) 55 38 1.686 150 Liebao (SUV) 752 1.268 9.018 9.459Changhe 1.096 122 13.053 7.947 Ideal 1.096 122 13.053 7.947Chery 13.880 13.468 139.238 82.096 A 520 928 0 5.054 0 Qiyun 4.653 5.265 46.269 22.054 Oriental Son 739 758 7.091 4.265 QQ 6.128 7.005 70.755 53.244 Tiggo (SUV) 1.432 440 10.058 2.533 V5 (MPV) 0 0 11 0Dongfeng 1.006 1.418 11.566 11.427 Future (MPV) 1.006 1.418 11.566 11.427FAW 13.893 16.183 123.707 129.571 Freewind (MPV) 45 8 128 51 Red Flag 687 1.206 4.247 5.290 Vela 2.820 284 12.973 2.768 Vitz 296 577 1.978 1.939 Xiali 9.991 13.847 103.163 117.973 Move 54 261 1.218 1.550Feidie 70 53 451 53 UFO (SUV) 70 53 451 53Fusang Heibao 0 0 0 490 Traveler & Jiri (SUV) 0 0 0 490Geely 13.067 9.201 115.695 78.858 Beauty Leopard 338 203 2.486 2.244 Freedom Ship 4.695 1.409 40.863 4.265 Haoqing 1.060 1.863 15.135 34.090 Jingang 1.602 0 4.551 0 Maple 1.557 1.563 15.874 14.174 Merrie 366 438 4.801 8.525 Ulio 3.449 3.725 31.985 15.560Great Wall Auto 2.729 2.897 20.817 15.432 Hover (SUV) 2.047 1.342 14.011 2.154 Pegasus (SUV) 142 235 900 Safe (SUV) 313 731 2.592 Sing (SUV) 227 589 3.314Guangzhou Longbao 0 0 0 93 Baolong (MPV) 0 0 0 93Guizhou Skylark 0 0 24 9 Skylark (Yunque) 0 0 24 9Hafei 5.688 3.715 41.408 25.802 Dingo 1.111 984 8.844 5.510 Lubao 4.035 2.457 29.316 19.556 Saibao 542 274 3.248 736 *Tico 0 0 0 0Huaxiang Fuqi 88 54 425 219 Fuqi (SUV) 88 54 425 219Jianghuai 2.122 2.837 19.673 18.088 Refine (MPV) 2.122 2.837 19.673 18.088

China Car, MPV and SUV Sales by Chinese Make & Model, July 2006Listed alphabetically by Make and Models are cars unless noted. Sales in units.Chinese

13.278

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November Edition Topics

• OEM Profile: Brilli-

ance • Testdrive QQ6 • New Section:

Sales & Producti-on statistics


Readers Coverage 10/06 852 automotive reader, A-segment (CEO, BDM)

Publisher:

Automotive Business Consulting Ltd.

ABC Ltd. uses reasonable efforts to include accu-rate and up-to-date infor-mation on these Newslet-ter . However, ABC Ltd. makes no warranties or representations as to the accuracy of the informa-tion. ABC Ltd. assumes no liability or responsibil-ity for any errors or omis-sions in the contents of this publication.

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Automotive Engineeringdienstleistungen:

中 Lokales Projektmanagement* (MS-Project) plus Mitarbeitereinsatz („Manpower“)

中 Technische Übersetzungen von automotiven Regelwerken und Projektdokumentation

中 Zwei CAD Arbeitsplätze*, ausgestattet mit Pro/E WF 2.0, Catia V5 R14, Autocad 2006sowie Solidworks

中 Koordinaten chinesischer Entwicklungsabteilungen* (Zeichnungslokalisierung)

中 Methodische Suche nach qualifizierten Sourcingpartner* für Beschaffungs-projekte (QM Audit, Prozesskontrolle vor Ort)

中 Benchmarking* (Standardisierte Lieferantenselbstauskünfte und Angebotsvergleiche)

中 Chinesische OEM-Datenbank* (Modell, Plattform, SOP, EOP, Volumen, Photo, Preise)*) Projektreferenzen siehe Folgefolien

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