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Brits pulling crowds in Beijing.

Byline: James O'Brien

British-built cars are attracting the crowds at the Beijing Motor Show with greyuniformed police pushing back the enthusiastic visitors crowding round the stands.

It is not the scantily clad models - whose presence was once de rigueur at British motor shows - who are centre of attention as they drape themselves over the car bonnets.

Car manufacturers in the West, including MG Rover, see China as a huge market and while it is still a poor economy the areas where it is booming has its share of the very rich who can afford without any problem what the best in the West has to offer.

A small but growing ultrawealthy class is developing appetites for speed and luxury.

Luxury car makers, faced with slowing sales in Japan and the US, see China as a new growth market.

Government licences are necessary before foreign manufacturers can build car plants in China, but that does not prevent imports.

Foreign car makers will need a little luck as they pile into a market that, while opening wider after China's entry into the World Trade Organisation, is still dogged by a fierce price war, small sales volumes and lack of financing for consumers.

Among them is MG Rover which has signed a development and research agreement with Chinese manufacturer Brilliance. The Longbridge company should be well suited to the secretive way in which the Chinese are known to operate.

Rover is sending Rover 75 kits from Longbridge for assembly by Brilliance in China and these will be quickly followed by Rover 25 kits. These will be badged by Brilliance.

'China's entry into the World Trade Organisation has triggered a rush of hearsay and speculation that at times seems to carry as much weight as the facts,' said Michael Dunne, president of market research firm Automotive Resources Asia, highlighting several hopes likely to be dashed against the reality of doing business in China.

'Now that the euphoria over China's membership has settled, it is time to cast away some widely-held myths.'

For instance, though Beijing has promised to cut import tariffs to 25 per cent by 2006, that is still too high for foreign models to compete against a flood of domestically-made cars, which are fast reaching international quality standards.

But in the meantime Kenneth Tsang, chief executive of the Beijing operations of Bentley which builds its cars at Crewe, is happy with the way the Chinese public is responding to the dawn of the sophisticated automobile at the Chinese show.

'They are saying 'Wow! WO-W!' That is the reaction I want,' said Mr Tsang as the models draped themselves over four cars whose price tags total well over pounds 1.2 million.

'We could not find a better time than now to come into China. We are looking at sustained and healthy economic growth and we have China's accession to the World Trade Organisation and the winning of the 2008 Olympics.

'We are looking at the spawning of a generation of young entrepreneurs. They have not only money, but also a passion for driving.'

Luxury models from DaimlerChrysler's Mercedes-Benz, Germany's BMW and Volkswagen's Audi are familiar sights in major Chinese cities, but enthusiasts now hunger for more.

'It is something to massage the ego. It is an instrument with which to mark their success,' said Mr Tsang about the meticulously crafted Bentleys and Rolls-Royces.

Bentley's cost from pounds 310,000 for the 6.8 litre, 400-horsepower Arnage model, to pounds 749,000 for a special stretch limousine. The firm hopes to sell 30 cars this year in China. That would put China on a par with super-rich Hong Kong, which has long boasted of having the highest density of Bentley and Rolls-Royce cars of any city in the world. But it is suffering yet another economic slump, with sales of 25 to 30 cars a year.

Mr Tsang believes China's growth prospects are so strong that sales could hit 100 vehicles next year, putting it on par with Japan, which has struggled with recession for the past decade.

Bentley's strongest markets are still Europe and the US which each buy 400 to 600 cars a year. Bentley made 1,800 cars last year.

Other executives are more cautious, but share Mr Tsang's enthusiasm for China and say the 100-car mark can be hit within a few years.

'This growth will not be replicated anywhere else in the world,' said Richard Charlesworth, director of special customer commissions and heritage.

Sports car maker Group Lotuswas another popular British exhibitor Thousands of people - many of whose incomes are probably just a few hundred pounds a month - elbowed each other for a glimpse of some of the fastest and most expensive driving machines on the planet.

Lotus, showing off a canaryyellow flagship Esprit and a maroon Elise roadster, used the show to open its first Beijing office and said it anticipated making its first sale next month. 'We have had a lot of prospective buyers,' said Oh Kah Beng, deputy general manager of Lotus Cars Asia Pacific, based in Malaysia. Malaysia's Proton owns 80 per cent of Lotus.

Lotus aims to sell just five of the pounds 140,000 Esprits in China this year. Global production of the 350-horsepower speedsters is just 300 a year, Mr Oh said.

The curvy Elise - a relative bargain at just pounds 84,000 and more readily available with 10,000 of them made a year - is likely to attract about 50 Chinese buyers this year, he added.

'When we came here two years ago we had six inquiries and they were prepared to pay cash,' said Mr Oh referring to interest in the Elise.

Getting behind the wheel of a high-end car is somewhat of a novelty in China, where being chauffeured about has been a mark of wealth and status. But it is not easy owning a supercar in cities like Beijing, where the streets are clogged with around 1.75 million spluttering cars, often with smokey and underpowered engines. Cyclists and delivery tricycles dart in and out of the traffic, threatening the pristine paint jobs of exotic cars. 'I know men who get up at 3am and drive to the airport and back just so they know what it's like to drive at 125 mph,' said Kevin McCann, executive director of Audi's China operations.

The Chinese pay dearly for such performance. The Government has been paring back import tariffs under its WTO commitments, but high-performance cars still face duties of more than 50 per cent.

There is virtually no consumer credit available for car purchases. Automotive financing is not in full gear right now and less than five per cent of automotive sales last year were made with individual financing plans.

A credit system is critical for the automotive financing business which has always been a critical catalyst for growth around the world.

But hopes that China will move quickly to boost consumer car purchases through creation of a financing system overlook the muddy process for handling loan defaults, currently dealt with by police rather than the courts, making repossession of cars difficult.

Optimistic foreign firms point to a car-buying boom in China, where saloon sales soared 18 per cent last year, according to official figures.

But analysts caution that absolute sales are still small - just 722,000 saloons last year --when compared with the giant US, European and Japanese markets. The market is also highly splintered, with 12 firms churning out more than 50,000 vehicles in 2001.

US, European and Japanese car makers are convinced China is a key market and many seem willing to settle for initial sales as low as a few hundred vehicles a month in hopes of a bigger pay-off down the road.

'China today is our number one geographic priority in terms of market development,' said Nissan chief executive Carlos Ghosn in a speech at the Beijing Motor Show last week.

Nissan is in talks to start a joint venture with Dongfeng Motor Group, China's second biggest automotive manufacturer, to make a wide range of vehicles.

Ford, which has built commercial vans in a venture since 1997 but lost to rival General Motors in bidding for a giant plant in Shanghai with China's top carmaker, said a new project announced last year will make a car based on its Fiesta, building 50,000 cars a year.

Ford's strategy is simple. It is in China for long-term growth and not just for a project to 'hit and run for profits'.

In common with other big manufacturers, China is one of the few critical markets around the world.

Germany's Volkswagen has long been a fixture on China's roads with its popular Santana and Jetta cars, and its Audi arm is counting on rising demand for its luxury A6 which it has made in China since early 2000.

It is one of the three most important strategic markets for Volkswagen.

Although Toyota and Nissan have lagged behind General Motors and Volkswagen in establishing a manufacturing presence in passenger cars, Japanese car makers are, in time, expected to have an edge.

'There is open disdain for Japan from a historical context but Chinese consumers make a distinction when it comes to product. They like Toyotas, Hondas and Nissans,' said Mr Dunne.

CAPTION(S):

Models add to the graceful lines of a Toyota T-1 car at the Beijing international auto show
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Jun 11, 2002
Words:1564
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