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Export for survival and government support

Earlier last month, Brilliance Jinbei signed an agreement with BAG of Egypt to export 2,000 units of the Zhonghua sedan through CKD assembly in the first year of their contract. In addition, Brilliance has chosen six exclusive dealers in the Middle East and Africa to sell the Zhonghua. The first batch of 20 cars was shipped to Kuwait and total export volume to Kuwait for 2005 will be 200 units. Earlier in the year, six units each of the sample Zhonghua and Jinbei van were delivered to Russia, with a potential order of 2,100 units this year.


During Auto Shanghai 2005 late last month, Chery Automobile held its first ever international dealers’ conference in Wuhu, which was attended by over 100 dealers from around the world. Last year, Chery signed agreements with dealers in 23 countries to export its cars. Similarly, private carmaker Geely Group sold 4,846 units of cars in 2004 to 29 countries and regions and its export sales target for 2005 is 10,000 units. “I want to sell my cars to the world market like the cigarette lighters made in Wenzhou,” quipped Geely owner Li Shufu. Growth in export of
Chinese made cars in 2004 was 227 percent over 2003, to a total of 9,335 units. It will not be surprising to see that number more than double or even triple by the end of 2005.


For independent and private car-makers with indigenous local brands, moving into the export market has been an inevitable trend, especially when demand in the domestic market declines. Compared with joint venture multinationals in China, these upcoming local carmakers are at a disadvantage in product branding, technology, R&D, sales and distribution. Moreover, none of the independent players has enjoyed preferential policy treatment from the central government. Despite their clear low-cost advantage, many of them suffer in domestic sales, especially economy car models, because of regional pro-tectionist restrictions.


Tapping the international market therefore becomes a necessity for these local brands to survive and expand. Almost immediately they have discovered that export not only helps them expand sales, but also gives them a much better margin of profit because of both a premium price offered by overseas buyers and the benefi t of VAT refund. In addition
to increased sales and profi t, it will also be good exercise for them to build up their brand, improve product quality control, sales, distribution and aftersales service in an international
environment.


More importantly, the efforts of independent carmakers to export have at least caught the attention of one branch of the central government in China, the Ministry of Commerce, whose mission is to promote Chinese export. According to Vice Minister Wei Jianguo, the Ministry will select 100 or so automobile manufacturers and suppliers with independent property rights to develop into state-level export bases. By offering financing and export credit, the Ministry’s goal is for China to take up 10 percent of the world’s market in automotive sales within the next 10 years.


Multinational joint venture carmakers should be aware that their future in China might also hinge on how they move as far as exporting
their China-made vehicles is concerned.

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