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Auto Competition Heats Up in China

December 15, 2000

SHENYANG, China (AP) _ Call it China’s car wars.

Jockeying for position ahead of China’s entry into the World Trade Organization, General Motors rolled out two new autos for the Chinese market this week. Not to be outdone, Toyota and two major Chinese companies were unveiling new vehicles of their own.

The quickening pace of releases is a foretaste of the ferocious competition next year’s expected China’s WTO entry will bring. A nation long reliant on bicycles could see legions of new car owners as Beijing fulfills commitments to slash auto tariffs, from as much as 100 percent now to 25 percent within six years of entry into global trade’s rule-making body.

Last year, Chinese bought a half million cars. But GM sees China’s yearly sales of passenger cars doubling in five years to 1 million _ with the potential to grow into the world’s largest car market within decades. To put that in perspective, about 17 million cars will be sold in the United States this year.

To compete with cheaper imports that WTO entry will bring, larger Chinese companies and foreign giants like GM and Toyota with joint ventures in China are rushing out new products.

``It will be tough running for a while, you bet,″ said Lawrence Zahner, general manager in charge of manufacturing for GM in Asia. ``But this is the fastest growing region in the world. If you want to be global, you have to be here.″

Foreign companies are betting much of that growth will be in cheaper compacts with appeal to China’s burgeoning middle class.

GM’s $1.5 billion factory in Shanghai, a 2-year old plant that already produces a luxury sedan and a minivan, rolled out another model Tuesday, this time a $12,000 compact called the Sail.

Ford is in talks with Chongqing Changan, a Chinese minibus maker, about producing a similar model. And on Thursday, Toyota’s Chinese partner, Tianjin Automotive Xiali Co., unveiled a compact car based entirely on Toyota technology.

Brilliance China Automotive, China’s largest minibus producer with a third of the market, planned to unveil Saturday the M1, a sedan priced around $24,000 which the company expects to compete against foreign-made cars in its class.

In an appeal to patriotism, Brilliance bills the M1 as the first Chinese-designed passenger car. But analysts note that the M1 relies heavily on foreign technology, with an engine produced by a Japanese joint venture, a body with German technology and its overall design done by an Italian firm.

To survive post-WTO China, the company also appears to be hedging its bets with foreign alliances. Brilliance China will buy a 23 percent stake in Jinbei GM, a General Motors joint venture in the northern city of Shenyang, the companies said Friday.

``This joint venture is an excellent example of the cooperation of the two best companies in the industry,″ Zhang Hong, a general manager at Brilliance, said at a ceremony as the first Chevrolet Blazer rolled out of Jinbei GM’s $230 million new factory.

GM boasts that Shenyang-built Blazers meet world quality standards. At $30,000 and up, they aren’t cheap. But prices will drop as lower tariffs allow GM to import key parts more cheaply, GM executives said.

A new mid-sized Toyota van, the Coaster, also rolled off production lines Friday at a joint venture in the southwestern province of Sichuan, China’s official Xinhua News Agency said.

Joint ventures with better technology and access to foreign partners’ deep pockets stand a better chance in a more open Chinese market.

But most of China’s more than 120 domestic automakers are too small and inefficient to survive, causing some Chinese to worry that turning to foreigners for technology will dent China’s long-term chances of building a vibrant auto industry of its own.

``China needed to push harder for the transfer of more valuable technology,″ said Wang Xiaodong, an author and critic of WTO. ``I am afraid now China has lost the option to build a strong domestic auto industry.″