Shanghai VW eyes 20% market share by 2008
By Gong Zhengzheng (China Daily)
Updated: 2004-03-16 10:45

China's biggest carmakerShanghai VWhas pledged it will strive to maintain its upper hand in the nation's booming car market over the next five years, despite increasingly fierce competition.

Shanghai VW President Chen Zhixin explains that the firm, which is a joint venture of China's Shanghai Automotive Industry Corp (SAIC) and German Volkswagen Group, wants to hold on to its 20 per cent slice of the domestic car market by 2008.

Chen said that 2003 was a good year for the joint venture, which notched up a 30 per cent year-on-year sales increase, selling 396,000 cars - a 19.1 per cent share of the domestic auto market.

This year, Shanghai VW plans to increase its sales to at least 462,000 cars.

New car sales in China reached 2.07 million units last year, including 1.97 million locally made vehicles and 100,000 imported models.

"We will also maintain a strong profit-earning capability during the next five years," Chen said.

Shanghai VW hopes to maintain its position in the market through the introduction of at least one or two new models.

It currently turns out the Santana, Santana 3000, notchback and hatchback Polos, Passats and Gols.

The Santana 3000 was launched last week. The company will launch the Touran multi-purpose vehicle during the second half of this year.

Shanghai VW was the first Sino-foreign car joint venture. It was set up in 1985 and has so far produced 2.7 million cars.

But analysts say it will be difficult for the firm to maintain its current market share and strong profit-making ability as a result of increasing rivalry from other auto companies.

FAW VW, Volkswagen's other China joint venture with the First Automotive Works Corp in Northeast China's Jilin Province, has set a target to increase its annual sales to 1 million cars by 2008 from almost 300,000 units last year.

FAW VW, which is only second to Shanghai VW in its current annual unit sales, said its sales in 2008 will include 850,000 units of Volkswagen brand models and 150,000 units of Audi brand models, said company President Qin Huanming.

Shanghai GM, US-based General Motors' joint venture with the SAIC, also aims to increase its market share to 20 per cent within the next five to six years from last year's 9.8 per cent.

The joint venture, China's No 3 car maker, said it expects to sell 285,000 cars this year, controlling more than 10 per cent of the market.

Both two joint ventures of another Chinese auto giant Dongfeng Motor Corp, with French PSA Peugeot Citroen and Japan's Nissan, plan to produce 300,000 passenger cars annually by 2007.

Even Geely, a small privately owned carmaker in Zhejiang Province, also wants to elevate its annual sales to 1 million cars by 2010, up from 80,000 units last year.

"China is the world's last rapidly growing major car market, and it's very natural that all of its players are eager to take a big bite," said Jia Xinguang, from the China National Automotive Industry Consulting and Development Corp.

"However, not all of them will be able to achieve their sales or market share targets unless there is a 200 per cent market share," Jia said.

"Competition in the industry will include sourcing, development, manufacturing, branding and sales and after-sales services. Those less competitive players will die or be merged in the years to come," he added.

Carmakers' staggering profit margins will continue to decline as most of them have to cut prices to survive competition, he said.

Currently, the profit margins of major carmakers in China stand at 20 to 30 per cent on average.

Last year, Chins's 15 key State-owned automakers reported 40.93 billion yuan (US$4.94 billion) profits, up 57.6 per cent from a year earlier.

There are currently around 120 vehicle plants in China, including 35 making passenger cars.