Carmakers step up in China as West wobbles

Automobile industry executives at Beijing's bi-annual car show forecast another boom year in China in 2008, with sales in the world's No. 2 car market rising and production ramping up to take advantage of lower costs.

Global automakers such as Volkswagen AG, General Motors Corp and Ford Motor Co. are increasingly relying on emerging markets such as China to take up the slack as US and European consumers feel the pinch from slowing economies and rising prices.

"I say this internally all the time, but the company that gets China right is going to be the dominant player for the next 25 years," GM chief executive officer Rick Wagoner said at the Beijing International Automotive Exhibition.

GM's China sales lagged in the first quarter due to winter storms that disrupted shipments, but the company ranked No. 2 by production in China last year is forecasting a recovery.

"We still expect a very good year and to grow in line with the market," GM's president and managing director Kevin Wale said.

GM expects total China sales to rise about 16 per cent in 2008, after climbing to 6.3 million in 2007.

Ford is considering building a third assembly plant in China to meet fast-growing demand for its cars just five years after entering the market, while Volkswagen's chief executive officer said he expects the German company to sell at least 1 million vehicles in China this year.

Luxury brands such as Germany's BMW and Daimler's Mercedes division are also eyeing China's growing elite to boost global demand for top-end vehicles.

BMW's China venture, Brilliance Auto, plans to nearly triple capacity in the next four years, aiming to produce around 100,000 vehicles a year by 2012.

Qi Yumin, chairman of Brilliance Auto, the state parent of the Hong Kong-listed unit, Brilliance China Automotive Ltd, said the company was still in talks with BMW to build a second plant in China, but gave no further details.

Despite BMW's aggressive growth plan, the chief executive officer of Daimler, Dieter Zetsche, said he was convinced his Mercedes Benz unit, which launched its GLK small SUV in China at the show, would overtake BMW in the market.

But with soaring oil costs one of the major challenges facing the auto industry, many car makers are shifting their focus to smaller, cheaper, more fuel-efficient models - despite the threat to margins.

Japan's Mitsubishi Motors is developing a low-cost car it aims to start selling in China and elsewhere from 2010.

The car, expected to be priced under $10,000, would be based on a 660cc platform currently only used in Japan, President Osamu Masuko said.

Mitsubishi Motors also announced plans to nearly double capacity at two Chinese engine plants in which it has minority stakes.

The plant sells most of the engines they produce to local automakers, but President Masuko said China could eventually become an export base for Mitsubishi to supply other countries.

Reducing production costs is taking on greater urgency as major developed markets stumble.

Mitsubishi said its 2008 US sales target would be tough to achieve, given industry-wide forecasts for sales to fall as low as 14.5 million vehicles.

But Nissan Motor Co executive Carlos Ghosn sounded a brighter note, saying he was not revising down his forecast for 2008 US industry sales of 15.5 million units.

"I don't believe it will be below this," Mr Ghosn told reporters.

"The economy in the United States is adjusting very quickly."