AUTOSHOW-China joint venture brands eye growth in inland cities

* Honda, GM, Nissan ready for JV brands

* Lower-cost JV brands seen to grow in inland markets

* JV brands seen competing head on with national brands

By Fang Yan and Alison Leung

GUANGZHOU, China, Dec 20 (BestGrowthStock) – Japan’s Honda Motor and
Nissan Motor on Monday took a step closer to launching joint venture
brands in China as they aim to tap inland cities to keep up their rapid growth
in the world’s biggest car market.

The new brands — combining the foreign makers’ technology and China’s
low-cost advantage — are meant as a direct challenge to national players that
currently dominate in lower-income, smaller cities with their cheaper cars.

Honda and Guangzhou Automobile’s joint venture Guangqi Honda
introduced the S1 sedan under the Everus brand, called Li Nian in Chinese. The
launch follows the lead of General Motors , which in unveiled the Baojun
630 sedan last month, created with partners SAIC Motor Corp and
Wuling. [ID:nTOE6BJ02D]

“It is the dream of every Chinese automaker to create self-branded cars,”
Guangqi Honda Executive Vice President Yao Yiming said at the Guangzhou auto
show. The S1 model will go on sale in the first half of 2011 and Guangqi Honda
is targeting 30,000-50,000 Everus sales next year.

Nissan displayed a teaser for the Venucia marque to be created with
partner Dongfeng Motor Group . Part of the concept model was jutting
out of a wall at the Japanese No.3 car maker’s booth at the auto show in the
southern Chinese city of Guangzhou.

“Joint venture brands will be a platform for foreign automakers to
penetrate tier 3, tier 4 and tier 5 cities,” said Sheng Ye, associate research
director at industry consultancy Ipsos’ Greater China region.

“They could be quite an attractive alternative for folks in these areas
who tend to be more price-sensitive and would otherwise pick a BYD ,
Chery or Geely ,” he said, referring to three of China’s major
national brands.

While the heightened competition is expected to put pressure on car
prices, it is not yet clear whether it will accelerate consolidation among the
dozens of smaller, regional odd automakers, many of which are supported by
local governments for jobs and prestige they bring.

The explosive growth in China’s car market seen in 2010 has been a godsend
for overseas automakers, which dominate the lucrative medium-to-higher-end
segment.

But as wealth spreads in the country, smaller inland cities such as
Chaozhou and Lanzhou are replacing the affluent coastal regions as the
fastest-growing markets for everything from automobiles to flat-screen TVs and
digital gadgets.

Car sales surged more than 50 percent in second- and third-tier cities
last year compared with 26 percent in Shanghai and 32 percent in Guangzhou,
according to data provided by Gasgoo.com, a major Chinese auto parts trading
platform.

Terry Johnsson, vice president of GM’s China operations, told Reuters last
month he would not be surprised to see 60 percent of its business coming from
tier 3 and tier 4 cities in the next five years. [ID:nTOE6AL02W]

Toyota Motor , Ford Motor and Hyundai Motor say
they have no immediate plans to create a new brand. Neither does Volkswagen
(VOWG_p.DE: ), its China spokesman said, despite a recent local media report
that the automaker’s tie-up with FAW Group is putting together a concept model.

PRICING KEY

As joint venture brands aim to win over the hearts and wallets of
consumers, pricing will be key, balanced with the appeal of foreign-backed
technology.

The Baojun 630 is modeled after GM’s old Buick Excelle, while Venucia is
made on the platform of Nissan’s Tiida and Everus on Honda’s Fit, Samsung
Securities analyst Steve Man said.

Price tags for Baojun 630 and Everus S1 will be announced when they hit
the market, both in the first half of 2011.

SAIC-GM-Wuling is planning to have more than 100 dealers ready in smaller
cities in time for the Baojun 630’s debut. [ID:nTOE6AM04B]

“We recognise that brand building is not going to be an overnight event,”
said Matthew Tsien, executive vice president at SAIC-GM-Wuling.

“We are a new kid on the block and we’ve got a lot of hard work to do.”
(Editing by Ken Wills and Lincoln Feast)

AUTOSHOW-China joint venture brands eye growth in inland cities