Chinese carmakers eye European markets
Chinese carmakers are vying to impress at this year's Beijing motor show as they look for opportunities outside their own borders to compensate for weaker demand at home.
Sales growth in their home market slowed to a virtual trickle last year, at least when compared with the ballooning market a couple of years back, and it is set to remain relatively weak throughout 2012.
So Chinese carmakers, which have long fought tough rivals from well-established non-Chinese manufacturers, are looking to diversify abroad.
Many of the new Chinese cars displayed at Auto China 2012 are expected to be exported to Europe.
Investing in Europe
Some Chinese carmakers have entered Europe, already, of course, mainly through acquisitions.
Shanghai Automotive Industry Corporation (SAIC) owns MG in the UK. Geely owns Volvo and has a stake in Manganese Bronze, the maker of London's black cabs.
Others are even gearing up for direct investments in the mass-production of their own marques within the European Union.
Great Wall Motors was the first to arrive with The Steed, a small pickup truck that will be produced in its recently opened factory in Bulgaria.
Others are sure to follow as cash-rich Chinese companies target parts of the world where local investment has dried up because of the financial crisis.
"Just as the Japanese and Koreans did decades ago, Chinese carmakers are hoping to gain strong positions in the longer term in the Western European and US markets," observes the German magazine Der Spiegel.
Great Wall's Bulgarian factory, in the village of Bahovitsa, near the town of Lovech, is not the first car plant in the area.
Bulgarians used to assemble the infamous Soviet Moskvich here during communist times, and this was where Rover's plans to produce its old Maestro model flopped some 17 years ago.
Great Wall's joint venture with Bulgaria's Litex Motors comes across as much more ambitious than either of those, however.
Though initially no more than 120 people will work here, European Whole Vehicle Type Approval has already been granted for several models, and the plan is to expand the workforce to 2,000 people and produce 50,000 cars a year for the European market.
"Bulgaria is an excellent starting point for our entry into the European markets," Great Wall's president Wang Fengying said after opening the plant in February.
"In the next three to five years, we will have a great variety of car brands, which will be sold in all European countries," she said, according to an exuberant Bulgarian media.
"Bulgaria will flood the rest of Europe with cars made in Lovech," exclaimed the daily newspaper Standart, "just as the Japanese and Koreans."
Others were more guarded, pointing out that Chinese cars have yet to establish a reputation of quality and reliability in Europe.
Bulgaria might one day be remembered as "the place where the Chinese car expansion into Europe started", observed weekly magazine Kapital.
"The only question is, what cars will the plant produce, and who is going to buy them?"
Bulgarian-produced Chinese cars will go head-to-head with the Dacia brand, which is built at Pitesti in neighbouring Romania.
The Pitesti plant, owned by the French carmaker Renault, produces affordable cars that also rely on an "inexpensive but reliable" marketing strategy.
But Dacia and Renault are far from worried.
According to the Romanian website Ziare, Great Wall's cars will be more expensive than Dacia's, as well as inferior because of the company's lack of experience.
Great Wall's president acknowledges that the carmaker has much to learn.
"We realise that we have a long way to go to achieve some of the standards that German cars have," she told Bulgarian daily Dnevnik.
"But from a market point of view, we know that there are also people in Germany who would like to buy a quality car at a reasonable price.
"This is our chance to establish a presence in Germany."
Henry Li, general manager of BYD Auto's export division, agrees.
"In the short term, competition will be more fierce, especially when international brands are launching low-cost vehicles," he says.
"We try to create our own competitive edge. We are not only staying in a low segment, but are creating new technologies and improving quality."
'Buying up Europe'
Chinese ambitions in Europe are not limited to the motor industry, however.
"China is buying up Europe," the European Council on Foreign Relations notes in a current policy brief.
"Its automobile manufacturers have bought MG and Volvo. Its transportation firms are acquiring, leasing or managing harbours, airports, and logistical and assembly bases across the continent. Its development bank is financing projects in Europe's periphery, much like it does in Africa."
China has been actively seeking business opportunities in the Balkan region, "especially in Serbia, Romania and Bulgaria", according to Prague-based website Transitions Online.
In October last year, for instance, Guangdong Nuclear Power Group said it might take part in efforts to build two new reactors at the Cernavoda nuclear power plant in Romania.
In Serbia, a consortium of Chinese companies is investing some 2bn euros in the country's EPS power utility. Another Chinese company is building a 1,500m bridge over the Danube near Belgrade.
Similar stories are emerging across Europe, which last year attracted more investment from China than the rest of Asia or North America did.
"In 2011, for the first time since Chinese companies started heading abroad, Europe became their favoured destination," according to the French newspaper Les Echos.
As yet, China's non-financial investment in the 27 European Union member states totals just $15bn, or less than 0.2% of all foreign investment in Europe, according to the consultancy Rhodium Group.
But that proportion is set to soar as China's investment overseas trebles by 2020, Rhodium predicts.
The Beijing motor show is open to the public from 27 April until 2 May.