Carmakers–Facing Tough Periods in China
The head of Volkswagen, Winfried Vahland, said at the Beijing Auto Show that shrinking margins have “put great pressure on the profitability and even the survival of automakers in China.” The challenges, like slowing sales, tumbling prices, eroding profits and choosy customers, will face all cat-making competitors at least the next three years.
According to Bloomberg reports, car prices in China fell by one-third between 2000 and 2007. At the same time, prices for raw materials, fuel and power increased by 36 percent.
One of the problems shared by such European and US car makers as Volkswagen and GM in China is that they are less competitive in small models of cars, though they have strong brands. However, domestic auto makers have great difficulties in establishing their brands, whose strategy is basically to follow the international supplies and to subcontract from them.
Still, Vahland estimates that China will surpass the United States as the biggest car maker by 2015.
Popularity: 6%