AUTOSHOW-Car makers dismiss China oversupply fears
Reuters, 10.20.03, 10:10 PM ET
By Chang-Ran Kim, Asia auto correspondent
TOKYO, Oct 21 (Reuters) - As fears of overcapacity in the Chinese car market grow with every expansion announcement, big car makers would only express optimism as they outlined their China plans at the Tokyo Motor Show.
Executives at Volkswagen <VOWG.DE>, Toyota Motor <7203.T>, Honda Motor <7267.T> said they would continue to raise output capacity -- which already exceeds sales on an industry-wide basis -- as they count on explosive economic growth to foster new demand.
China's car sales soared 60 percent last year to 1.2 million, making it the world's fastest growing major car market.
But many analysts have warned that the rapid expansion by foreign car makers would lead to a glut soon, threatening to reduce prices and making operations in China less profitable.
Foreign carmakers are planning to spend $10 billion in China in the next few years to chase exploding demand, even though the Chinese government has decreed that local manufacturers would have half the market by 2010.
Consensus estimates put car sales at around six million units by the end of the decade, meaning foreigners would have to share a three-million market at that point if the government's goal is achieved.
Volkswagen wants to hold on to its dominant position with about 40 percent of the market, and Toyota Motor, Japan's top auto maker, said it wants 10 percent by 2010 from just over one percent this year -- a target higher than the current share held by number-two player General Motors (nyse: GM - news - people).
"Because of our late entry, unfortunately, we only have less than two percent of the market now," Akira Sasaki, project manager of Toyota's China division, said on Monday. "But by 2010, we want 10 percent."
If the German auto maker, Toyota and the Chinese government all have their way, that would leave nothing for other foreign car makers.
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