Through The Fly's Eyes: Auto Sector
From Kevin Shult of Theflyonthewall.com
Chinese Car Manufacturers Roll into Africa with a Vengeance
Africa is too poor to be a major market for the world’s major automobile companies, but the industry has started noticing a new trend: China’s young car companies are aggressively moving into the continent.
The majority of people in Africa, especially in the smaller economies like Senegal in West Africa, lack the means to purchase a new Toyota (TM), Ford (F) or Volkswagen (VLKAY), according to the Wall Street Journal. For years, many Africans purchased used vehicles from developed nations in Europe. Now, Chinese automakers like Great Wall, Chery Automobile and Geely Group are challenging European, Korean, Japanese and American automakers by offering cheaper alternatives in the price-sensitive market.
In addition to exporting to Africa, China’s car companies are quickly building manufacturing hubs outside their home country. Now other companies are quickly maneuvering to be included in the global market expansion: Japan’s Nissan Motor Co (NSANY) and Renault SA of France are in talks with India’s Mahindra & Mahindra Ltd. to develop a car that would cost less than $3,000. Last month, Chrysler (DAI) and Chery announced their joint venture to export cars to Latin America and Eastern Europe. India’s Tata Motors Ltd. (TTM) is also developing a $2,500 car and putting up showrooms across Africa, the WSJ reported.
The Detroit News Wire Services reported that General Motors Corp (GM) and Malaysia’s DRB-Hicom Bhd. agreed to form a manufacturing and distribution joint venture in Malaysia to gain market share in Southeast Asia. In July, the Wall Street Journal said that Ford would invest $930.6 million into Romanian car maker Automobile Craiova if it won the sole bid for a 72.4% stake in the plant. The Romanian government hopes to close the deal by September 1st. With the current set of problems between the UAW and American car manufacturers, the recent threats from Ford and General Motors could spur additional joint ventures in foreign lands.