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Export: an inevitable trend for JV carmakers in China

Dongfeng-Nissan Passenger Vehicle Co., Ltd., a subsidiary of Dongfeng Motor Co., Ltd., will ship 900 cars made at the company’s Huadu plant in Guangzhou to Egypt soon, according to Sharon Shen of Nissan (China) Investment.



These include 400 Livinas and 500 Bluebird Sylphys. The Livina is a 1.6L compact sedan and the Sylphy a 2.0L mid-level sedan.



The 900 cars will be sold through Nissan dealers in Egypt. Shen said that possibilities of expanding future overseas sales would depend on market reaction. Two years ago, Dongfeng-Nissan exported 1,000 Tiidas to Angola.



Nissa’s export of its cars assembled in China is the latest example of an inevitable trend that multinational joint ventures are increasingly positioning their China operations as their key global manufacturing facilities.



A few years ago, China’s first passenger car joint venture, Shanghai-Volkswagen, exported its Polo cars to Australia. Shanghai-GM has exported its Chevy Lova and Aveo to Ukraine and Russia and most recently it sold CKD kits of the Buick LaCrosse made in Shanghai to Taiwan.



Although so far Honda Motor is the first and only multinational carmaker that has set up an assembly plant in Guangzhou for export, more and more JV carmakers in China are now turning their attention to overseas markets in addition to selling domestically.



Already many of them have been exporting key components, including engines, to their domestic markets as major efforts in global sourcing. China as a low-cost manufacturing country is providing multinational automakers an important source of parts and components supply for their domestic assembly business.



Apart from low-cost manufacturing, increased pressure of capacity realization and competition from local independent brands are two major factors that are driving JV manufacturers to consider expanding export sales.



Declining sales growth over the past four months and a much cooler market prospect for 2008 and beyond has given JV manufacturers serious concerns over how to utilize their production capacity, which has been greatly expanded over the past few years when the market was exceptionally bullish. On average, China’s capacity utilization in automobile assembly is less than 70 percent until most recently. And the rate may come down further later this year. Export of China assembled vehicles is becoming an important factor in the global strategy of multinational OEMs operating in China.



Successful efforts of Chinese independent brands exporting to developing countries have been a wake-up call to multinational automakers. They are beginning to see the importance of not only expanding sales in China but also outside of China.



In this respect Honda again seems to have the best vision in deciding to launch an independent JV brand with partner Guangzhou Auto Industry Group for sale not only in China but also overseas. Honda’s success story in China as well as intensifying market competition has led to its pioneering efforts in repositioning a global strategy that hinges on China.

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