Chinese suppliers continuing to expand

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From China Plastics News:

SHANGHAI (June 13, 2011) — In the middle of the financial crisis, when the rest of the world had stopped buying cars, China bucked the trend. Stimulus money and a growing middle class pushed China’s auto market past the US in 2009 when light vehicle sales reached 12.9 million units.
Now, with carmakers flocking to the booming market, plastics manufacturers are following.

“It’s no secret that China has experienced unmatched vehicle sales growth over the past decade,” said Kevin Wale, the president and managing director of General Motors China, Inc, speaking at the Automotive News China Conference held in Shanghai during the 2011 Shanghai Auto Show. “The market, however, is still young.”

Even during the company’s restructuring, GM held its commitment to the Chinese market, where, in 2010, the company sold 2.3 million units.

“That happened four years earlier than we anticipated,” Wale said. “Vehicle sales surpassed sales in the US a full decade earlier than we were predicting just a few years ago. “One thing we’ve learned is to never underestimate China’s growth in the vehicle market.”

In 2010, China’s market expanded an additional 30 percent. Growth is expected to slow throughout 2011 with the end of China’s stimulus money, but GM still expects between 10 and 15 percent growth, Wale said.

This expanding demand is leading to a quick build-out of capacity among automakers

Volkswagen, which holds the number one position in terms of market share, is expanding as fast as possible. “We’re looking at adding two new plants, minimum,” said Weiming Soh, executive vice president of sales and marketing and a member of the board of management at Volkswagen Group China. “And also doubling the size of the factories that we have…We need to do this ASAP,” he said.

As auto manufacturers continue to expand in China, their suppliers have to keep up. The global automotive supplier Visteon expanded nine of its plants in China last year, according to Annouk Ruffo Leduk, head of corporate communications for Visteon’s Asia-Pacific operation, and expect more to come.

Plastics, in particular, have room to grow in the Chinese market. Chinese cars tend to feature less plastic than cars in other markets. For example, a single vehicle in Europe or Japan will contain around US$1,242 worth of plastics. In China, the use of plastics in a single vehicle amounts to only US$951.

At the same time, Chinese car buyers are cost-conscious, looking for cars that are fuel efficient and compact. This is particularly true for cities in inland China, according to Thomas McGuckin, the Asia-Pacific automotive leader at the global consulting firm Price Waterhouse Cooper, also speaking from the Automotive News China Conference.

“These buyers are different; they’re more pragmatic and utilitarian,” he said, speaking from the same conference. Many, purchasing a car for the first time, are accustomed to the fuel economy of scooters and motorcycles. In addition to consumer demand, China’s government is pushing automakers to lighten their vehicles and to promote energy-efficient and electric cars, a trend that will eventually increase the demand for lighter plastic materials.

“Both the government and industry in China are working with great ambition to make the country the spearhead of e-mobility,” said Zheng Daqing, a senior vice president of BASF Group and member of the BASF Greater China Country Board. “In 2007 there were 24 cars per 1000 inhabitants in China; in 2020 this number will increase to 102 per 1000,” said Albert Heuser, the president of market and business development in Asia Pacific for BASF Group. This, he continued, will force municipalities to work on infrastructure and car makers to focus on designing cars that are lighter and more efficient.