Driving China: The New Automotive Frontier
Interview with Troy E. Clarke and Mei Wei Cheng
For years, American companies have salivated over the
prospect of entering Chinese markets. The automotive industry
has proven no exception. Over the past fifteen years,
American and European automotive companies have rushed
headlong into the Chinese automobile market in search of new
profits. Though most major automotive companies now operate
in the country, this fervor has not abated. General Motors
(GM), the second largest automaker in China, continues to
invest heavily in the Chinese market. Ford Motor Company,
despite operating on a smaller scale, has also made considerable
investments in the country. With the initial courtship now
over and the Chinese auto market beginning to slowly mature,
the Journal consulted Troy Clarke, GM Group Vice President
and President of GM Asia/Pacific, and Mei-Wei Cheng, Vice
President of Ford Motor Company, and CEO and Chairman of Ford
Motor (China), as to the future of the automotive industry in
China, and the potential worldwide impact of increasing
Chinese participation in the auto industry.
GJIA: GM and Ford have committed billions of dollars to
expanding production in China over the next few years,
despite a marked slowdown in vehicle sales over the past year
and cutbacks in investment from other automakers such as Volkswagen. Some critics have claimed
that the auto market could remain flat
until 2007. What justifies this faith in
your continued expansion?
CHENG: The dramatic growth of China's
auto market in 2002 and 2003 reflected
several important factors, including
increasing per capita income (particularly
in the eastern cities and provinces),
greater availability of up-to-date products,
and the evolution of consumer buying
patterns to include automobiles. The
growth rate in 2004 slowed to more normal
and sustainable levels, and industry
volume increased by 15 percent from
2003. The outlook for continued economic
growth in China in the range of 7-
8 percent a year likely will result in continuing
expansion of the auto industry by
8 to 10 percent annually. Considering the
absolute size of the industry (5.2 million
units in 2004) and this level of ongoing
growth, it is easy to see why just about
every automaker in the world is looking to
participate in this growth.
According to a recent report by the
China Economic Information Center,
the annual growth rate of China's auto
market is expected to remain at 10-15
percent until the year 2010. China is now
easily the third largest auto market in the
world, with sales of 5.2 million vehicles in
2004. Even with the amazing growth
we've seen, less than 5 percent of the
Chinese population has a motor vehicle,
so there is still a lot of potential in the
Chinese market. The country is expected
to become the top auto market in the
world in the next fifteen to twenty years.
Ford Motor Company is committed to
a long-term development strategy in
China. We have a firm belief in the country's
sustained economic growth, driven
in part by the strength of the growth and development of the automotive industry.
We are running a marathon here, not a
sprint. We have been rolling out our
business development plan in a step-bystep
approach, aiming to become a key
auto player in China and to stay consistent
with our global ranking as a leading
auto company.
CLARKE: Let me begin by saying a few
words about our new investments. In
June 2004, GM announced a series of
new investments in China that, pending
Chinese government approval, will likely
exceed $3 billion over three years.
Among the investments are the introduction
of twenty completely new or upgraded
products, the expansion of GM's
manufacturing joint ventures, the growth
of GM's Pan Asia Technical Automotive
Center (PATAC) automotive engineering
and design center, and last year's
launch of GM's new automotive financing
joint venture (GMAC-SAIC
Automotive Finance Co.).
China's vehicle market is anything but
flat. Last year's moderate increase in
vehicle sales in China followed two years
of record growth (sales grew a record 40
percent in 2002 and about 35 percent
in 2003). This year, GM is projecting
more modest sales growth of between 10
and 15 percent.
Over the next few years, GM anticipates
the market entering a period of
steady, sustained growth of around 10
percent annually. While this is lower than
the unusually high growth of the past few
years, it is still very high by global standards.
Considering that China has an
estimated eight personal vehicles per
1,000 individuals (compared to about
940 in the United States), it is easy to see
the tremendous potential for growth.
This explains why GM and most other major global automakers have made success
in China a corporate priority. It also
explains why GM has taken the lead in
expanding the full scope of our operations
in China at this time.