Car firms remain bullish about Chinese growth, writes Clifford Conan in Shanghai
Some of the world's big car-makers may be stuck in neutral in what they hope will become the world's biggest car market, but the atmosphere at the Shanghai Car Show remains charged with possibility. Or is that borderline anxiety?
The sight of a pink Cadillac Eldorado at the Shanghai car show is a reassuring beacon from the golden days of US automobiles, as American as apple pie,cheese-burgers and cheap gasoline.
But these days the world's eyes are on Shanghai, not Detroit. Everyone needs car-mad China to massage flagging global demand and this is reflected by the huge number of marques scrabbling for a slice of what is potentially a bumper market.
"All the research shows it will happen that China becomes the world's biggest car market. We're looking very optimistically into the future," said one senior Shanghai Automotive Industry Corporation (SAIC)executive.
"If there is a slowdown, then we'll build more capacity. It's a good time to do it," she said.
This might sound like a controversial statement, but there are some rather impresive Chinese cars on show, like the QQ, which is really very similar to the Chevrolet Spark, and even the redoubtable Geely is growing in sophistication.
Geely unveiled the Chegbao sports car-prototype - a kind of a bubble car with sports characteristics - as well as new versions of its Charade based Haoqing.
The joint venture cars are getting better all the time too.
I was particularly keen to see what had been done to my own trusty steed. I drive a 2002 Beijing Jeep Cherokee and was reassured to see that the 2005 model on the stand is almost the exact same as far as specs are concerned, although the display version is considerably shinier than my Beijing-dust-encrusted chariot.
. The Jeep is such a stalwart on Chinese roads - high-up to give you a big field of vision to avoidsome of the more worrying road dangers below, robust enough for country driving and while a little bit small in the cab, quite a comfortable ride.
On the SAIC stand, the joint-venture cars with VW include the Santana, long beloved of Chinese taxi drivers although it is steadily losing ground to the Buick. Sitting in its comfortable pilot seat, it remains, and seems destined to remain, a solid if unspectacular, option.
This is the show's 11th year and it's happening in a cavernous grouping of trade fair halls in Shanghai's Pudong financial district.
All in all, 1,036 car firms and parts suppliers have spread themselves over 1.3 million square feet of exhibition centre and around 300,000 visitors are expected during the biennial show.
Everyone needs China. The rest of the world is seeing a slowdown, but not so in China. Hence the world's carmakers are here to try and exploit the market.
One of the big news points at the show was the announcement by DaimlerChrysler, the world's fifth-biggest car maker, that it was is in talks to set up a China venture that would make and export Chrysler cars to North America.
General Motors had the Shanghai Symphony Orchestra at hand to showcase its latest offerings, although news of GM's biggest quarterly loss since 1992 took some of the exaltation away.
Among GM's offerings are its hydrogen fuel cell powered Sequel, as well as new luxury sports models from Jaguar, Lamborghini and Porsche.
Bob Lutz, GM vice chairman for global product development, said China was vital to the firm's future.
"The importance of this market extends beyond our bottom line and beyond China," he said.
GM's main offering at the show is a new version of the Chevrolet Aveo, a four-door compact developed in South Korea by GM Daewoo that will be manufactured by the company's Shanghai joint venture, SAIC.
It seems well pitched for the Chinese market - China was GM's second-largest global market last year, with sales rising 27 per cent to nearly 500,000.
One of the talking points at the show has been why Phil Murtaugh, GM's China boss, quit so suddenly when the figures were good. He has been linked with every other joint-venture carmaker in town, including SAIC, but it remains a mystery.
The Chinese car market still has considerable room to expand.
Less than three per cent of all Chinese families own cars, and carmakers are counting on rising incomes in the country of 1.3 billion to keep growth strong for a long time to come and offset falling sales elsewhere.
Demand is slowing down. Carmakers in China sold 574,300 passenger vehicles in the first quarter of this year, down nearly eight per cent on a year ago.
Rising steel prices and lower car prices mean the domestic producers are seeing profits plunge by nearly 80 per cent in the first two months of the year.
But March was better. Passenger vehicle sales rose around 2.5 per cent in the month to 256,000.
Overall, vehicle sales are forecast to rise about 10 per cent this year, compared with 75 per cent growth in passenger car sales in 2003 and 15 percent last year.
So the companies are confident, or at least wishful, that relentless economic growth in China will translate into a second-half rise in car sales, offsetting the effects of higher petrol costs and a clampdown on runaway lending.
And so the producers roll out all kinds of new models to woo the Chinese consumer.
Mazda is starting to produce two additional versions of its Mazda6 here - a five-door hatchback and a wagon.
Mazda also said it would begin selling the Tribute, a midsize sport-utility vehicle, and its RX-8 sports car in China.
"As a director of a global automotive company, I know full well, if we are not successful in China, we ultimately will not be successful," said Mazda's marketing director Stephen Odell.
The Chinese are still car-crazy, but consumers are looking for less thirsty models with fuel costs rocketing and the government examining schemes to conserve energy.
This presents a problem for the carmakers. Naturally, the big margins are on the two-litre models, while profits on the 1.3-litre cars are low.
This has prompted Nissan to look at the middle ground.
"We believe the introduction of a 1.6-litre will be a boost to our Chinese sales," said Toshiyuki Shiga, Nissan's chief operating officer. Nissan is showing its 1.6-litre Tiida in Shanghai.
Analysts reckon that Japanese and South Korean car makers are better at controlling costs than European and US rivals, which gives them more room to cut costs in China.