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Niche in Europe for China cars?

By Li Fangfang (China Daily)
Updated: 2009-06-15 08:08

The newly released Chery Faira YY at a media preview during the 2008 Beijing Auto Show.[Bloomberg News]

The ongoing financial crisis that has hit Western countries especially hard is now giving China's homegrown auto brands some traction in Europe, a must-win battlefield for all international manufacturers.

"If they (Chinese automakers) do it in Europe, they can do it everywhere," said Hans-Ulrich Sachs, managing director of HSO Motors Europe, sales agent for China's Brilliance Jinbei Automobile Co Ltd in Germany.

"I believe Chinese auto brands will have a shorter journey to go than their Japanese and Korean counterparts did decades ago," said Detthold Aden, president and CEO of BLG Automobile Logistics, Germany's biggest logistics company, which is based in the northern port city Bremen.

Aden said he believes that the financial crisis, which makes smaller and cheaper cars popular, provides Chinese medium- and low-end vehicles the best opportunity in Europe.

To boost car sales the German government this January began providing subsidies of 2,500 euros to consumers for every vehicle more than nine years old that is traded for a new car with a smaller engine capacity.

In April, the government raised total funds available for subsidies to 5 billion euros from an initial 1.5 billion euros in the scheme that will expire at the end of the year.

"It is (a chance for) a niche market for Chinese auto brands," said Aden.

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Tong Zhiyuan, president of China's Huatai Automobile Group, agrees with Aden. "It's an opportunity for Chinese cars to enter Europe when local markets cry out for small cars with low prices and good performance."

Tong added that by starting in the small car segment, Chinese carmakers can escape a face-down with legendary European rivals in the medium-sized car market.

As one of the largest automobile logistics suppliers in the world with more than 130 years of experience, BLG is "able to support the Chinese OEMs in any direction", said Michael Bnning, BLG's sales and marketing director.

But Europe's high standards for security, the environment, styling, safety and performance are major hurdles for Chinese carmakers.

"They will have to cooperate with local industry players," said Bnning. "More than 500 experienced technicians in our technique center will help Chinese cars overcome some problems and meet local standards."

The company will also manage all necessary compliance and customs papers before Chinese cars enter the market.

Over the past year, BLG and HSO helped Brilliance to improve its emissions to meet the required Euro IV standard.

Feng Ping, vice-president of Chery Automobile Co Ltd in charge of international business, told China Business Weekly that Chery is considering contracting with BLG for pre-delivery inspection (PDI) on Chery cars in Gioia Tauro harbor in Italy.

'Same direction'

Last year, BLG transported 10,000 Chery cars from China to Russia that were offloaded at Bremerhaven harbor in north Germany.

"PDI services, which double-checks the quality and parts and maintains and cleans cars after the long ship journey, prepare brand-new cars for showrooms. It's good for our brand image that the cars have no defects prior to receipt by dealers," said Feng.

BLG, the comprehensive logistics partner for Mercedes-Benz, also said it can and would like to help Chinese automakers establish their overseas manufacturing facilities in Eastern Europe.

BLG is now providing a logistics services package for South Korea's Hyundai Motors' manufacturing base in the Czech Republic. It delivers auto parts to the facility and then transports assembled vehicles to 43 countries.

"As Chinese cars now focus on the Russian market, BLG has also made huge investment to expand its logistics network in Eastern Europe. We - BLG and the Chinese - are going in the same direction," said Manfred Kuhr, deputy chairman of BLG's executive board.

BLG's logistics network, which uses vessels, railways and trucks, can provide transport to Chinese cars or their CKD - complete knocked down - and SKD - semi-knocked down - assembles to Russia, currently the prominent destination for Chinese car exporters, Kuhr said.

"Around 30 years ago, when Japan's Toyota delivered its first car in Europe from Bremerhaven, one of the largest automobile harbors in the world, people thought it was impossible for Toyota to sell cars in Western countries. Today Toyota is the world's top auto manufacturer," said Kuhr.

He noted that when BLG and HSO helped the South Korean brand Hyundai enter the European market 19 years ago, Europeans also looked down on them.

"Yet 350,000 cars under the Hyundai brand and 150,000 Kia cars were sold in Europe last year. Now it's China's turn," said Kuhr.

Chinese auto brands, including Chery, Great Wall and Geely, now have a share of the Russian and Ukrainian markets. Only Brilliance has gone into western Europe, using HSO's 850 dealerships.

HSO sold 800 Brillance cars in Europe in 2008 and aims to increase the number to 3,000 this year, then extend distribution to France, Spain and Italy. According to a distribution agreement signed in 2006, HSO will help Brilliance sell 15,800 cars in Europe within five years.

"Last year, 24.63 percent of the cars on the road in Europe came from outside the continent, the majority from Japan and South Korea," said Sachs. "According to our survey, 25 percent of the Eurozone's 200 million drivers said that they wouldn't say 'no' to Chinese auto brands."

In addition to Brilliance, Great Wall, BYD and Huatai also have ambitions in Europe.

Xing Wenlin, vice-president of Hebei's Great Wall Motor Co, told China Business Weekly that his company "will go to Eastern Europe markets within two years and enter Western Europe in three to five".

Shenzhen-based BYD Auto said that it will export its electric cars to Europe one or two years after they enter the US in 2011.

"We will start selling our cars in Eastern Europe and the south in the near future," said Tong of Huatai, who declined to disclose a detailed export plan before his company starts production in its new factory in Inner Mongolia in July.