Chinese car makers catching up
As the German government and General Motors are hammering out a deal to put GM’s European division (Opel and Vauxhall) on its own feet, a new bidder from China might change the game. While the German side has a preference for the Canadian partsmaker Magna, GM is likely to appreciate the new unexpected bid from BAIC. The Beijing Automobile Industry Holding Corporation - which has joint ventures with Jeep and Daimler - is interested in GM’s European operations and unlike its fellow bidders Magna and Fiat which rely on generous government loans to continue Opel’s operations, BAIC won’t have any financing problems.
Whether or not BAIC will get a chance to take over Opel, it’s just a matter of time until a Chinese company will buy the next struggling Western car maker.
These are challenging times for the entire automobile industry because a sharp fall in demand in all major car markets (except China) coincides with enormous structural changes regarding the number of competing companies as well as the propulsion technologies that will be competing in the next decade.
A considerable number of Western auto manufacturers will go out of business in a rather short time span. At the same time, the Chinese auto industry is gearing up to take on the established car giants in China, and even more important, to meet the rapidly growing domestic demand for new cars.
So far, China’s auto companies such as SAIC (Shanghai Automotive Industry Group; read my post Chinese automaker SAIC to become a global industry heavyweight) - which has joint ventures with both General Motors ( checkout my post: GM China: the crown jewel in General Motor’s global operations ) and Volkswagen - haven’t caught up technology wise with their counterparts in Europe and the United States. However, this is the perfect opportunity for Chinese auto manufacturers to gain access to technologies for a very reasonable price instead of having to develop everything on their own which would take years.
Now is the time for China’s auto makers to equip their cars with the latest conventional combustion engines from overseas. But in the medium and long term, the focus of the Chinese auto industry will move to electric cars. And while it wouldn’t make sense to put a lot of resources into the development of a comparatively inefficient technology that is going to be replaced within the foreseeable future, China has the resources to develop and produce electric cars on a grand scale.
While the per-capita car ownership ratio is increasing at a rapid pace, it becomes obvious that China can’t afford ever greater numbers of gas-guzzlers on the streets given its resource-dependent economy and polluted environment. Another reason why electric vehicles are much more suitable for the needs of many Chinese households is the gridlocked traffic in megacities like Shanghai. Since most car buyers live within the metropolitan areas along the coast, Chinese cars will be made to meet their needs. Consequently, driving range and maximum speed will be less of an issue, compared to efficiency and comfort.
Last but not least, the Chinese government will obviously have a considerable influence on the development of domestically-made cars. Therefore, new car developments will be aimed at limiting the consumption of gasoline which cost the government-controlled oil companies billions in subsidies last year. Fearing to spur anger amongst those car buyers who spent their entire savings on a car but would have been struggling to pay for gasoline, the government kept gasoline prices low -which is quite costly for a longer period of time. With electric cars, there’s no need to subsidize gasoline and tough it’s not beneficial from an environmental perspective, China’s coal-fired power plants can generate most of the energy needed to run an electric car fleet.
http://www.autocar.co.uk/News/NewsArticle/AllCars/240982/
