Our Growth macro trend of the Next Big Thing in action:By KEITH BRADSHER
Published: April 20, 2009
SHANGHAI — After a century in which American tastes largely set the course of the global automotive market, China is poised to increasingly take on the role of global trendsetter.
Automakers say just as car buyers around the world saw more sport utility vehicles and cup holders because that was what Americans wanted, they will probably see more features that the Chinese favor, from greater fuel efficiency to more comfortable back seats.
Vehicle sales in China passed those in the United States in the first quarter, as China has weathered the global downturn much better than other major economies. And there are growing signs that China will become the leading automotive market in the long term.
“The center of gravity is moving eastward,” Dieter Zetsche, the chairman of Daimler, said at the opening day of the Shanghai auto show Monday. “This has, if anything, only accelerated through the crisis.”
China’s emphasis on fuel efficiency is partly a reflection of frugality: income per person in China is still one-sixteenth of American levels. But it is mainly a result of the Chinese government’s strong determination to reduce dependence on imported oil.
Late last year, the government cut to 1 percent its tax on “family vehicles” with fuel-sipping engines no larger than 1.6 liters, while raising the tax to as much as 40 percent on cars, minivans and sport utility vehicles with larger engines.
Sales of cars with smaller engines have surged in response, while sales of beefier models have grown more slowly and in some cases actually fallen. Multinational automakers are responding by transferring their latest fuel-efficiency technology to China, so as to shrink their engines to 1.6 liters or less while providing the best possible performance.
John Parker, executive vice president for Asia, the Pacific and Africa at Ford Motor, said that the carmaker would transfer its “Eco-boost” engine efficiency technology, including turbocharging and very precise fuel injection, to its Chinese joint venture. Ford is also reconsidering its future vehicle development plans after having concluded that the Chinese government would keep insisting on greater fuel efficiency.
“My overall belief is the trend is for keeps,” he said.
General Motors is also trying to expand sales of fuel-efficient models worldwide with a special emphasis on China. It has a 34 percent stake in a Chinese joint venture, Wuling, that already produces small, lightweight minivans that get 43 miles a gallon in city driving, although they do not meet American safety and environmental standards.
G.M. wants to increase its stake in the company by buying at least part of the nearly 16 percent held by the municipal government of Liuzhou, the city in southernmost China where Wuling is based, Nick Reilly, the president of G.M.’s Asian and Pacific operations, said in an interview on Monday afternoon.
Mr. Reilly said he wanted the Wuling venture to start exporting, although probably not to the United States.
Mr. Reilly’s remarks represent the first time a G.M. executive has publicly voiced an interest in an overseas acquisition since the company ran into severe financial difficulties last year and had to seek billions of dollars in help from the United States government. While an automaker is being kept in business by federal loans, any of its acquisitions in China could prove controversial in Washington.
Beyond stressing fuel efficiency, the Chinese government is emphasizing alternative-fuel vehicles, particularly electric cars with rechargeable batteries. Senior Beijing officials want the country to become a leader in such technology, and Western auto executives give China a strong chance of success.
“There’s no question that the government and the companies here are spending huge amounts in this area, so there’s no doubt they are going to be important players,” Mr. Reilly said. “If you look at where batteries are making the fastest progress, it’s China, it’s Korea, it’s where the government is heavily behind it.”
Andy Palmer, Nissan’s senior vice president for vehicle planning, said that Nissan started an electric car experiment this month in Wuhan, China, mainly because China wanted it. “We didn’t approach them, they approached us,” Mr. Palmer said.
Automakers have long built vehicles to suit American preferences and then marketed the same models around the world after recouping the development costs in the United States market. Manufacturers sharply increased their development and production of sport utility vehicles and minivans in the 1980s, for example, in large part because those vehicles were subject to less stringent fuel economy regulations in the United States; the automakers then marketed the same models around the globe.
In addition to better fuel economy, the rapidly rising importance of the Chinese market will probably result in much more comfortable rear seats in cars around the world. That is because even the owners of compact cars in China frequently hire full-time chauffeurs, who cost as little as $440 a month and allow the owner to read or make phone calls in the back seat while in traffic jams.
Published: April 20, 2009
SHANGHAI — After a century in which American tastes largely set the course of the global automotive market, China is poised to increasingly take on the role of global trendsetter.
Automakers say just as car buyers around the world saw more sport utility vehicles and cup holders because that was what Americans wanted, they will probably see more features that the Chinese favor, from greater fuel efficiency to more comfortable back seats.
Vehicle sales in China passed those in the United States in the first quarter, as China has weathered the global downturn much better than other major economies. And there are growing signs that China will become the leading automotive market in the long term.
“The center of gravity is moving eastward,” Dieter Zetsche, the chairman of Daimler, said at the opening day of the Shanghai auto show Monday. “This has, if anything, only accelerated through the crisis.”
China’s emphasis on fuel efficiency is partly a reflection of frugality: income per person in China is still one-sixteenth of American levels. But it is mainly a result of the Chinese government’s strong determination to reduce dependence on imported oil.
Late last year, the government cut to 1 percent its tax on “family vehicles” with fuel-sipping engines no larger than 1.6 liters, while raising the tax to as much as 40 percent on cars, minivans and sport utility vehicles with larger engines.
Sales of cars with smaller engines have surged in response, while sales of beefier models have grown more slowly and in some cases actually fallen. Multinational automakers are responding by transferring their latest fuel-efficiency technology to China, so as to shrink their engines to 1.6 liters or less while providing the best possible performance.
John Parker, executive vice president for Asia, the Pacific and Africa at Ford Motor, said that the carmaker would transfer its “Eco-boost” engine efficiency technology, including turbocharging and very precise fuel injection, to its Chinese joint venture. Ford is also reconsidering its future vehicle development plans after having concluded that the Chinese government would keep insisting on greater fuel efficiency.
“My overall belief is the trend is for keeps,” he said.
General Motors is also trying to expand sales of fuel-efficient models worldwide with a special emphasis on China. It has a 34 percent stake in a Chinese joint venture, Wuling, that already produces small, lightweight minivans that get 43 miles a gallon in city driving, although they do not meet American safety and environmental standards.
G.M. wants to increase its stake in the company by buying at least part of the nearly 16 percent held by the municipal government of Liuzhou, the city in southernmost China where Wuling is based, Nick Reilly, the president of G.M.’s Asian and Pacific operations, said in an interview on Monday afternoon.
Mr. Reilly said he wanted the Wuling venture to start exporting, although probably not to the United States.
Mr. Reilly’s remarks represent the first time a G.M. executive has publicly voiced an interest in an overseas acquisition since the company ran into severe financial difficulties last year and had to seek billions of dollars in help from the United States government. While an automaker is being kept in business by federal loans, any of its acquisitions in China could prove controversial in Washington.
Beyond stressing fuel efficiency, the Chinese government is emphasizing alternative-fuel vehicles, particularly electric cars with rechargeable batteries. Senior Beijing officials want the country to become a leader in such technology, and Western auto executives give China a strong chance of success.
“There’s no question that the government and the companies here are spending huge amounts in this area, so there’s no doubt they are going to be important players,” Mr. Reilly said. “If you look at where batteries are making the fastest progress, it’s China, it’s Korea, it’s where the government is heavily behind it.”
Andy Palmer, Nissan’s senior vice president for vehicle planning, said that Nissan started an electric car experiment this month in Wuhan, China, mainly because China wanted it. “We didn’t approach them, they approached us,” Mr. Palmer said.
Automakers have long built vehicles to suit American preferences and then marketed the same models around the world after recouping the development costs in the United States market. Manufacturers sharply increased their development and production of sport utility vehicles and minivans in the 1980s, for example, in large part because those vehicles were subject to less stringent fuel economy regulations in the United States; the automakers then marketed the same models around the globe.
In addition to better fuel economy, the rapidly rising importance of the Chinese market will probably result in much more comfortable rear seats in cars around the world. That is because even the owners of compact cars in China frequently hire full-time chauffeurs, who cost as little as $440 a month and allow the owner to read or make phone calls in the back seat while in traffic jams.
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