Sunday, April 24, 2005
Daimler to make cars in China
Geoff Dyer / Shanghai April 23, 2005
DaimlerChrysler is considering setting up a production base in China to make cars for export to the US market, one of the first stages in what could be an important but politically sensitive shift in the car industry.
The German-US group said on Thursday it was in talks with a potential joint venture partner in China for the new export production base for Chrysler cars. It is also looking to source more car parts from China.
If it goes ahead, DaimlerChrysler would be the first multinational carmaker to open a plant in China to make vehicles for the US market.
Honda is due to begin exporting a model made in southern China to the European market later this year.
“We have begun looking at China for export to the US for a Chrysler product,” said Ruediger Grube, the board member responsible for China. The talks were at a preliminary stage and no decision had been taken, he said.
However, the news comes at a time of mounting controversy in the US about the competitiveness of Chinese exports, amid allegations that China's currency is significantly undervalued.
In the past week, both the White House and the Treasury department have called on China to adopt a more flexible exchange rate and the administration is coming under heavy pressure from Congress to take tougher action on Chinese exports.
Carmakers have not used China as an export base until now, in part because until the Chinese market began to slow in the second half of last year, they were working flat-out just to meet demand in the country.
Moreover, although labour in China is substantially cheaper than Europe or the US, China has not yet enjoyed a big cost advantage in car production because many of the components had to be imported and foreign managers were needed to run plants.
DaimlerChrysler said its potential partner in the project was one of its existing joint venture partners in China, which include Beijing Automotive, China Motor Corporation and Fujian Motor Group.
Analysts said the vehicle likely to be exported from China would be a sub-compact, a segment of the market which is dominated in the US by Asian companies.
DaimlerChrysler, which plans to invest $1.6 billion over the next three to five years in China, will produce Mercedes cars this year at a Chinese plant.