One of the most significant events at the world’s biggest motor show in Frankfurt is not the concept cars or the home-grown heavyweight, the new Mercedes S-Class, but rather the appearance for the first time of vehicles made in China by Chinese firms which they plan to export to Europe.
It is a worrying trend for European carmakers, who are already struggling with high production costs and stagnant demand. A handful of Chinese manufacturers have stands at the Frankfurt show. They include China’s biggest private carmaker Geely. Last year it build 100,000 vehicles, but the company has just said it aims to boost output to two million vehicles a year in the next decade.
Two-thirds of those would be sold in the international market. Production by Chinese companies – as opposed to European or US manufacturers building cars there – has been growing rapidly. The total for all of 2004 was 2.3 million, but already in the first six month of 2005 they have made 2.8 million.
However, with the Beijing government cutting back on cheap loans, vehicle sales there have been depressed recently, which is why the Chinese car makers are looking to export. Chery, another independent low cost car maker, is even negotiating deals to sell cars in the United States by 2007. Next step in Europe for the Chinese will be to build up dealer and maintenance networks, at which point they will be able to start putting pressure on an industry already being squeezed by chronic overcapacity.