Car­mak­ers look south­west for growth

For­eign, do­mes­tic firms drawn by rapidly grow­ing re­gional econ­omy

Global Times - Weekend - - AUTO - By Wang Cong

On a re­cent rainy Fri­day morn­ing, lo­cal auto en­thu­si­asts in Chengdu, cap­i­tal of South­west China’s Sichuan Prov­ince, shrugged off heavy rain and bat­tled traf­fic jams in the city’s bustling south district to take a look at their dream cars.

“The weather re­ally sucks,” a man in his 20s re­marked in Sichuan di­alect as he got out of a taxi out­side the New Cen­tury City In­ter­na­tional Con­fer­ence and Ex­hi­bi­tion Cen­ter, where the Chengdu Mo­tor Show 2017 kicked off. As he and two other friends walked to­ward the en­trance, scalpers in rain­coats ap­proached them to try and sell them tick­ets.

They were far from the first to brave the rain to at­tend the mo­tor show, said to be the largest in South­west China. Thou­sands of fans had al­ready been inside the show­rooms.

“Chengdu is one of the cities in China with a huge base of auto fans; I mean, look at all these peo­ple com­ing in this kind of weather,” said an auto in­dus­try reporter, who has cov­ered ma­jor auto shows both in China and abroad for years.

Inside the mas­sive ex­hi­bi­tion cen­ter, car­mak­ers had crowded the halls to un­veil their lat­est car mod­els rang­ing from sports-util­ity ve­hi­cles (SUVs) to sedans and state-of-theart tech­nolo­gies in self-driv­ing and en­ergy-sav­ing.

Such a busy scene is the ev­i­dence of a huge fan base for cars in the city and the in­tense fo­cus of for­eign and do­mes­tic car­mak­ers on cash­ing in on the base amid slow­ing growth in sales in the world’s largest auto mar­ket.

Huge fan base

Chengdu, de­spite its lower stand­ing among Chi­nese cities in terms of GDP and pop­u­la­tion, is one of the largest auto mar­kets in the coun­try, ac­cord­ing to in­dus­try data.

With a to­tal of 4.29 mil­lion pas­sen­ger cars reg­is­tered at the end of June, Chengdu’s car own­er­ship is sec­ond in the coun­try only to Bei­jing, which had 5.55 mil­lion, ac­cord­ing to data re­leased by the Traf­fic Man­age­ment Bureau of the Public Se­cu­rity Min­istry on July 11.

An­other mega city in South­west China, Chongqing, ranked the third with 3.5 mil­lion pas­sen­ger cars, the data showed.

Both Chengdu and Chongqing, which are about 340 kilo­me­ters apart, have main­tained dou­ble-digit growth in pas­sen­ger car own­er­ship in re­cent years, ac­cord­ing to me­dia re­ports. In 2016, Chengdu’s car own­er­ship grew 12.7 per­cent from 2015 and Chongqing’s rose 17.6 per­cent, com­pared to 2.4 per­cent growth for Bei­jing, the Chongqing Morn­ing Post re­ported in Fe­bru­ary.

The rapidly grow­ing mar­kets in Chengdu and Chongqing have led to both for­eign and do­mes­tic cars fo­cus­ing on the re­gional mar­ket, ac­cord­ing to Wu Shuocheng, a Shang­hai-based in­de­pen­dent in­dus­try ex­pert.

“The auto mar­ket in South­west China is highly di­verse, with many ar­eas see­ing slow growth and some ar­eas like Chengdu hav­ing some of the fastest growth in the coun­try,” Wu told the Global Times on Tues­day. “I think that is what’s driv­ing car­mak­ers to the re­gion.”

Great po­ten­tial

The re­gion is also home to some of the fastest-grow­ing provin­cial economies in the coun­try. The five south­west­ern provin­cial-level ar­eas – Sichuan, Chongqing, Yun­nan, Guizhou and Ti­bet Au­ton­o­mous Re­gion – have main­tained eco­nomic growth of above 8.2 per­cent, with Ti­bet see­ing the fastest pace at 10.8 per­cent and Sichuan the low­est at 8.2 per­cent.

“Eco­nomic growth and car sales are pos­i­tively cor­re­lated; so there is huge po­ten­tial for the car mar­ket in the South­west China re­gion,” Wu said.

Apart from the growth po­ten­tial, the auto mar­ket in South­west China is also one that could ben­e­fit both for­eign high-end pre­mium mod­els and do­mes­tic cars, ac­cord­ing to ex­perts.

Pro­pelled by ro­bust eco­nomic growth and a lo­cal cul­ture of spend­ing, de­mand for high-end cars in south­west­ern cities such as Chengdu and Chongqing is par­tic­u­larly strong, and “may even be com­pa­ra­ble to cities in coastal de­vel­oped cities such as Shang­hai,” re­marked Wu.

In ad­di­tion, more young peo­ple are buy­ing pre­mium cars in cities like Chengdu, ac­cord­ing to the Na­tional Busi­ness Daily. In 2016, high-end con­sumers born af­ter 1987 ac­counted for more than 40 per­cent of buy­ers, up from 20 per­cent in 2014, the re­port said.

These younger, higher-end con­sumer bases at­tracted top lux­ury brands such as Porsche, Mercedes-Benz and BMW to the Chengdu Mo­tor Show this year to show off their top-of-the-line mod­els such as the Porsche 911 GT3, priced at more than 2 mil­lion yuan ($303,800).

Do­mes­tic brands have also found a strong base in the South­west for their cars. Four prov­inces in South­west China were among the top 13 prov­inces for cars sale of do­mes­tic brands in the first half of 2017, with a com­bined 495,000 units, auto in­dus­try news site re­ported on July 28.

At the Chengdu Auto Show, do­mes­tic car brands such as Zhe­jiang Geely, Ch­ery and new­com­ers such as Wey all show­cased their new­est mod­els, mostly SUVs and new-en­ergy ve­hi­cles.

Lo­cal fans also showed their ad­mi­ra­tion for Wey, a new do­mes­tic brand fo­cus­ing on pre­mium SUVs, on Fri­day when the com­pany de­buted its new­est SUV model, the Wey VV5s.

“This is a more re­al­is­tic op­tion for me; it looks great both out­side and inside and the price is much bet­ter,” a Chengdu res­i­dent sur­named Liu told the Global Times, jump­ing in the driver’s seat of a fresh, red Wey VV5s.

Photo: IC

Vis­i­tors take a close look at cars ex­hib­ited dur­ing the Chengdu Mo­tor Show.

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