The Chinese government wanted to create demand for an extra million vehicles per year with their “cars to the countryside” program. It goes like this: farmers who replace their three-wheeled vehicles for light commercial vehicles receive a maximum subsidy of 5,000 yuan ($731).  Not enough to spur consumption? “For cost-sensitive farmers, a 10-percent subsidy is enough and would be effective to boost demand,” said Tan Jijia, an auto analyst at Pacific Securities Co. He was wrong. There is another problem . . .

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Even though China is the largest car market in the world at the moment, Chinese car designers have a tough row to hoe. The Wall Street Journal’s China Journal blog explains that while there are plenty of well-educated Chinese industrial designers, the prevalent design philosophy keeps their best work in school. According to an unnamed Chinese auto exec, the competitive advantage for Chinese automakers vis-à-vis their foreign partnership competitors is that they never start engineering or designing from a blank sheet of paper. Rather, the standard practice is to “tell an outside engineering consultant which existing model they want to copy, and ask them to come up with a product counterfeited in a way that it won’t attract intellectual property lawsuits. In some cases that means companies combining styling ideas from two separate cars into one.”

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After overtaking the United States in January car sales for the first time, China extended its lead as the world’s largest auto market in the second straight month, Gasgoo reports.

In February, China sold a total of 827,600 vehicles, up 24.72 percent year on year according to the China Association of Automobile Manufacturers (CAAM.)

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Up to now, Chinese companies taking over Western brands was a Beijing opera of well-placed rumors, followed by ambiguous statements or outright denials. The Chinese government did their part in the play encouraging their automakers to acquire foreign assets, then warning them that it might not be a good idea, and then saying that they would back them if they do. Welcome to China. Now, for the first time, a Chinese company went on record that they are willing to make international acquisitions. They’ve even said why.
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A post at the former Tesla PR chief’s personal blog recounts the debate inside Tesla over where to manufacturer the firm’s WhiteStar sedan. Siry describes grappling with the tradeoffs between a reasonable price and skeptical public perceptions of Chinese cars. “The part causing the most conflict,” writes Siry, “was that it was clear in the world of consumer electronics and chip manufacturing that low cost manufacturing had been achieved while also maintaining the highest standards in quality. Why couldn’t this be the same case for automobiles?” After all, he argues, your iPhone is designed in California but built in China—and nobody confuses it with a purely Chinese product. Pointing to the Volt’s projected $40K price point for a Cruze-based compact/mid, Siry argues that cost is too important to phasing EVs into the market to be ignored. And that firms like his former employer will pay the price for not taking advantage of China’s opportunities.

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When China reported January sales that were higher than in the US, detractors said: “Yeah, but China was down also.” To be exact, in January, China was down 14.35 percent, while the US had declined 37.1 percent.  Old China hands pointed out that the January sales numbers were exceptional, given the fact that there was a complete sales week missing in January, due to the early start of the Chinese New Year, where all of China is shut, closed, guan. Some of the same old China hands prognosticated that due to the same fact, February might be a roaring success. But who listens to old China hands? Okay, folks, listen up:

China vehicle sales surged 25 percent in February, the first gain in four months, Bloomberg reports. Sales of passenger cars, buses and trucks climbed to 827,600, the China Association of Automobile Manufacturers said today in Beijing.

And why would that be?

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Chrysler was actually the first joint venture in China, (dis)gracing the Chinese landscape with countless Cherokees. And this is where Chrysler might end up. Beijing Auto, a state-owned automaker that makes Hyundai, Mercedes and a few local brands, has “set up a work team in charge of the acquisitions and restructuring affairs, which will mainly involve its merger of a smaller Chinese carmaker Fujian Motor and purchase of US auto giant Chrysler’s assets,” Gasgoo reports. The reports are quite detailed, this time:

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China’s top economic planner has approved of Chery’s plan to buy the Volvo brand from Ford Motor, Gasgoo says. The report is not confirmed yet by Chery Auto. However, Gasgoo is very close to Chery.

According to Chinese media reports, Dongfeng Motor Co. has also submitted its Volvo-bidding plan to the National Development and Reform Commission (NDRC). The company’s spokesman denied the reports.

On Feb. 12, Chery Auto president and CEO, Yin Tongyao, said that his company would not rule out the possibility of buying a troubled European auto brand. Volvo was believed to be one of the choices.

Chery Auto received a 10 billion yuan ($1.47 billion) loan to fund its global growth from Export-Import Bank of China (China Eximbank) in December 2008. The company was also granted the flexibility of a credit line by the bank.

Ford put Volvo up for sale late last year to raise cash, but has found little interest in the brand, because many potential buyers are facing similar crisis and the nearly $6 billion needed for buying Volvo is a prohibitive price for most carmakers.

The report has been repeated on China Daily. China Daily is the English speaking organ of the government news agency Xinhua.

Gasgoo reports that China’s Jinan (Shandong) BaoYa are seeing US demand for its electric cars jump dramatically. BaoYa sold 500 of its electric sedans last year, and despite a weak export market, this year’s US-market orders have already topped 4,800. BaoYa sedans are Zap Xebra-like Low Speed Vehicles, with a top speed capability of 50 mph (limited to 25mph in the US) and a range of about 90 miles on a 5-8 hour charge.  We’re not entirely sure that the factory and production of BaoYa vehicles documented by Repubblica here is the same Jinan-based plant of Shandong BaoYa, but there’s little doubt that the nearly 5k BaoYas sold in the US were built in similar conditions. So Americans could gaze pityingly at their neighbors’ carbon emitting planet destroyers. Savor the irony.

Intentional ambiguity, id est, “keep ’em guessing,” is a tried and true tool in politics and business negotiations. Case in point: For months, we’ve been following the on-again, off-again attempts to marry cast-off Detroit brands with Chinese buyers. Now, as some deals finally look like they are coming together, China’s top industrial planning official comes out and says that local auto makers lack “sufficient capability” for overseas brand buying deals, Gasgoo reports. Domestic auto makers aren’t ready yet “to go overseas and cooperate with big companies,” Chen Bin, head of the National Development and Reform Commission’s industrial coordination department, said in Beijing yesterday. WTF? (What Thinks Farago . . . .)
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For the time being, China’s central government will say “bu hao” (not good) to any moves of its government-backed automakers to do any overseas mergers and acquisitions, International Business Times reports via Gasgoo. It’s not that the Chinese government is against the idea. They think, global asset prices will continue to drop, and better terms can be reached for offshore acquisitions by waiting. “The State-owned Assets Supervision and Administration Commission hopes the manufacturing companies, will adopt a wait-and-see attitude to purchasing global assets,” said commission chief Li Rongrong in a recent internal meeting. A mole in the commission said “Beijing won’t approve of automakers and banks to purchase overseas assets in the near future unless the buyers can prove the strategic importance of securing the deals.” Meaning what?
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Via Green Car Congress comes word of China’s second plug-in electric car (after BYD’s Dual Mode plug-in, allegedly on sale now), the Chery S18. Chery’s website (In Mandarin, click here for Google translated hilarity) shows the tiny city car rolling off the assembly line, implying that China is taking a two-nil lead over the US in the race for production EVs. On the other hand, it’s probably safe to say that a carboard box has a higher chance of passing US crash test. Anyway, the S18 reportedly sports a 336 V, 40 KwH electric drivetrain featuring 40 Ah Lithium Iron-Phosphate batteries which recharge in 4-6 hours from a 220 V socket (a 30-minute quick charge provides 80 percent of battery capacity). Top speed is said to be 75 mph, and range is estimated at a modest 75-95 miles. Chery’s Yuan Tao claims (in Google translation) that the S18 not only boasts “the world’s most advanced technology” but “the price is also very suitable for families to buy.” Gasgoo says the S18 will go on sale in China later this year starting at less than 100K RMB ($15K), considerably less than even BYD’s F3DM which retails for 150K RMB.

There is an old adage on Wall Street: If Business Week calls a trend, sell and run. TTAC has followed the dalliances between China and Detroit for many months now. The rumors ran the gamut from SAIC buying all of GM to a small Chinese manufacturer picking up Hummer. So far, nothing materialized. Now, Business Week jumps on the bandwagon: “The last hope to stop General Motors Corp.’s wounded Saturn brand from falling out of the solar system appears to rest with some unknown automaker building cars for the dealers to sell. Chinese and Indian automakers, which have made noise about entering the U.S. market, would be the most likely suppliers.” A bit belatedly, Business Week made some calls.

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Ford’s Volvo has been on the block–excuse us, “strategic review”–for a while now, both unofficially and officially. So far, the flirtations with possible suitors resembled dating tours to the Philippines or Russia. A little petting, and then nothing. Now, finally, there are indications that the dalliances may enter the terminal phase: Either Ford gets a signature from a willing buyer or Volvo will be terminated. Extra urgency has no doubt been lent by the Swedish government which told GM (and by implication, Ford) not to expect a single öre, and to get on with it, or get out.

The Swedish paper Dagens Industri yesterday carried a report that there are four serious suitors for Volvo: China’s Changan, China’s Dongfeng, and–surprise–France’s Renault. As the dark horse, there is an ominously unidentified suitor. For those who have a problem understanding Swedish, Bloomberg carries a pretty good summation of Dagens Industri’s report. Ford and Volvo met with their investment bankers in London this past week, and the candidates were deemed “serious” enough to be allowed to see confidential information about future Volvo Cars models, says Dagens Industri.
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New twist in the SAIC buying GM saga (and fair warnings to TTAC’s admins to allocate extra bandwidth). We’ve said all along that SAIC had designs on GM’s assets. That they would just wait until the time—make that until the price—is right. Well, the time is right. GM has until Tuesday to submit a new restructuring plan to the U.S. government detailing its progress cutting costs, shoring up its balance sheet and figuring out a way Fordward [sic]. So the time has never been righter, and the price is most likely commensurate. With all other deals failing, GM is getting ready to sell their crown jewels: their China operation.

Despite constant denials, General Motors has held talks with China’s SAIC Motor Corp about selling part of its stake in their joint venture or other assets as the U.S. automaker, Reuters reports. GM needs the cash, STAT. According to Reuters, GM approached SAIC Motor in recent weeks with an offer to sell some of its stake in their 50-50 joint venture that builds and markets Buick, Cadillac and Chevrolet models in China. And why would they do that?
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