Foreign automakers double down on China bets despite slowing growth

Sun Apr 19, 2015 3:01am EDT
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By Jake Spring

SHANGHAI (Reuters) - Foreign automakers continue to plough money into factories in China, the world's largest car market, even as the biggest economic slowdown in a quarter of a century crimps sales growth.

Market leaders Volkswagen AG (VOWG_p.DE: Quote) and General Motors (GM.N: Quote) show no sign of letting up on their planned investments, while Toyota Motor (7203.T: Quote) and Ford Motor (F.N: Quote) are also pursuing new China expansion plans.

That's in spite of the economic slowdown further depressing the car market in January-March, when sales grew only 3.9 percent, compared to 9.2 percent a year ago and way below the 7 percent growth that the China Association of Automobile Manufacturers (CAAM) predicts for this year.

Foreign automakers, many of which are expected to unveil new products for China at this week's Shanghai autoshow, including Ford's redesigned Taurus sedan , aren't fretting over the first quarter slowdown. But if the fallout from the broader economic slowdown bleeds into the rest of the year, global automakers may need to reconsider their China expansion plans, said James Chao, Asia chief of IHS Automotive.

A handful of foreign automakers are still outperforming the market, with Ford, for example, posting 9 percent sales growth in the first quarter.

"It's still a tale of two worlds, with domestic manufacturers probably hovering around 60 percent capacity and the international joint ventures at 80-85 percent. It's a big difference," Chao said.

Anthony Lau, Shanghai-based research director for consultancy TNS Sinotrust, said even strong single-digit growth in car sales in China is much better than in markets elsewhere.

China accounted for more than half the total industry spending on new or expanded capacity last year, with plant investments worth $12.7 billion, according to an annual Canadian study of automakers' outlays.   Continued...

Employees work at the third factory of Dongfeng Peugeot Citroen Automobile company, after its inauguration ceremony, in Wuhan, in this July 2, 2013 file photo.  REUTERS/China Daily/Files