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China gears up for huge car show, eyeing growth prospects

A car yard/FILE

A car yard/FILE

BEIJING, Apr 17 – Global automakers will flock to the largest car show in the world’s biggest car market next week — but environmental concerns and slowing Chinese economic growth mean the road ahead could be bumpy.

The Beijing auto show, which opens to the public on Monday, will showcase more than 1,100 vehicles, according to organisers.

Leading global automakers such as General Motors, Toyota, Volkswagen and Hyundai are set to attend along with domestic manufacturers SAIC Motor — the country’s biggest by sales — and Dongfeng Motor.

China, which over the past 35 years has transformed from a nation reliant mostly on bicycles to one where urban roads are clogged with motor vehicles, now sits firmly at the centre of manufacturers’ profit dreams.

The country’s auto sales surged 13.9 percent to 21.98 million vehicles last year, though analysts warn that purchases could be dampened by restrictions on car numbers by some cities — so far, six — to help battle pollution and congestion. Slowing economic growth could pose another obstacle.

China’s leaders say they envision a transformation whereby growth will be increasingly driven by private-led demand such as consumer spending rather than the traditional locomotive of massive state-backed investment projects.

That could be good for carmakers, but as China’s economy develops more citizens are clamouring for a better environment, including cleaner air in cities such as Beijing.

Dangerous levels of pollution in the capital have spurred authorities to take action, including by restricting car numbers.

Although still expanding at rates most countries would envy, China’s economic growth is slowing after decades of double-digit leaps.

Gross domestic product in the first quarter of this year, announced on Wednesday, grew 7.4 percent, its weakest performance in 18 months.

The auto market has not been immune to the effects of the slowdown, with growth in auto sales in China decelerating in February and March after hitting a record in January.

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Sales of all types of vehicles rose 6.6 percent year-on-year to 2.17 million units in the month, the China Association of Automobile Manufacturers said, slowing from a 17.8 percent increase the month before.

– ‘The most promising market’ –

Despite issues facing the market, it remains a key hope for global automakers eager to boost sales and profits.

“China represents between 26 percent and 28 percent of worldwide demand,” Yann Lacroix, a Paris-based auto analyst with credit insurance company Euler Hermes, told AFP.

“It will remain the most promising market for years to come.”

China’s importance to the global auto industry was visible earlier this year when French auto giant Peugeot Citroen handed part control to Dongfeng — China’s number two automaker — and the French state, in a bid to help revive itself by using China’s market to boost its profile in Asia.

German auto giant Daimler said last month it had signed a deal worth one billion euros ($1.4 billion) with its Chinese partner Beijing Automotive Industry Corporation to expand production at their joint Beijing-based venture.

South Korea’s largest carmaker Hyundai Motor, whose vehicles are a common sight on China’s roads, said last month it planned a fourth plant in the country.

Manufacturers from Japan are also hoping to expand sales in China, although political tensions between Tokyo and Beijing have cast a shadow over their business.

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Protests in 2012 over a maritime territorial dispute saw crowds attacking and overturning Japanese vehicles in some Chinese cities. Sales took a hit but have been recovering.

“We believe China will be an important market for Japanese automakers in 2014,” Akira Kishimoto, auto analyst with J.P. Morgan in Tokyo, said in a report.

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