Automakers unveil ambitious China expansion plans

[April 19, 2011]  SHANGHAI (AP) -- Global automakers unveiled ambitious expansion plans for China on Tuesday, targeting the country's newly prosperous drivers as the industry struggles to recover from Japan's tsunami.

Nissan Motor Co. plans to raise sales by about 15 percent to 1.15 million vehicles this year, said CEO Carlos Ghosn. He spoke as the company unveiled the new Tiida sedan, one of a series of world premieres at Shanghai's auto show by automakers that reflect China's critical importance to their sales.

China is the biggest auto market by number of vehicles sold and is the biggest for General Motors Co., Volkswagen AG, Nissan and other major brands. Automakers are looking to China to drive future sales as growth slows in Western markets, and producers are creating models aimed at China's fast-growing population of car buyers.

"We are paying close attention to what they want and what they need," Ghosn said. He said Nissan is investing heavily to expand production to meet booming demand.

GM said it plans to double the number of cars it sells in China to 5 million by 2015. GM China President Kevin Wale called the target "ambitious" and "aggressive" but he said he's optimistic it could be achieved because of low vehicle ownership rates and a strong economy.

The company will roll out 60 new or upgraded models in China over the next five years, many aimed at newly middle class drivers.

In a sign of China's importance to GM, the company chose the Shanghai auto show for the world premiere of the latest model of its best-selling Malibu midsized sedan, which it plans to sell in nearly 100 countries.

Ford Motor Co. announced plans to launch 15 new vehicles in China and double the number of dealerships by 2015 as it seeks to gain more market share in China. The company currently has 340 dealers in China.

"We have very aggressive growth plans," said Ford China CEO Joe Hinrichs.

Even niche luxury brand Rolls-Royce announced plans to expand its dealership network to cater to more of the superrich Chinese entrepreneurs that have been driving growth in the luxury market. The British car maker said it's opening new dealerships in the cities of Chongqing, Tianjin and Wuhan, bringing the number of showrooms in China to 11, the second-highest amount after the U.S.

Auto sales surged in China last year by a third over 2009, but the strong performance is not likely to be repeated this year because some tax incentives have ended and cities are stepping up efforts to control traffic congestion. Sales in March rose 5.4 percent over a year ago to 1.8 million vehicles, up from February's 4.6 percent increase. Car companies and analysts forecast that sales growth of about 10 percent this year.

Some 18 million vehicles were sold in China in 2010.

Daimler CEO Dieter Zetsche said he expects "significant" medium-term growth for the China market.

"Numbers of 20 million or even 30 million seem to be within reach in the next five to 10 years for the total passenger car market," Zetsche said.

Mercedes sales in China jumped 86 percent in the first quarter of 2011 over the year before, although Zetsche noted that's down from 115 percent from the year before.

Automakers have been hit by production halts and slowdowns because of supply chain disruptions stemming from a devastating earthquake and tsunami that struck Japan's industrial northeast on March 11. The disaster killed 25,000 people, destroyed towns, upended a nuclear reactor, and decimated scores of businesses and factories. The region also had a high concentration of auto parts suppliers that were hit.

Ford cut back on overtime at a joint venture plant with Mazda in Thailand a month ago to conserve parts but production at its China operations has not been affected, Hinrichs said.

The company expects to see "some effect" on manufacturing at its Thai and Philippine plants by late April or May but it's unclear how long it will last, Hinrichs said.

"Until we see the full ramp up of production in the supply base Japan and the refilling of the pipeline, we won't be able to make that determination," Hinrichs said.

Ford is limiting the use of one paint color, "Sea Gray," in China because of scarce supplies.

Executives at a Nissan joint venture with a Chinese partner downplayed the disaster's effect on production, saying a lot of the components used were sourced locally.

However, some suppliers have been affected because they use Japanese-made parts, said Kimiyasu Nakamura, president of the joint venture known as Dongfeng Motor Co.

The company has sent staff to every one of its suppliers to get an idea of how many parts and components are available, Nakamura said. It also has a contingency plan in place to secure parts from places such as Thailand or the Philippines, he said.

Daimler's Japanese production was interrupted for more than a month and it is slowly restarting now, Zetsche said. He said the recovery efforts are looking "promising these days."

Toyota Motor Corp. resumed car production at all of its plants in Japan on Monday for the first time since the tsunami, but said the factories will run at half capacity due to parts shortages.

GM executives said they have experienced "minimal" impact on production, and a team of more than 200 people around the world is monitoring the situation.

[Associated Press; By KELVIN CHAN]

AP Business Writer Joe McDonald contributed to this report.

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