New recycling regulations and another year of predicted oversupply in China's automotive market should mark a slowdown in parts manufacturing there. But more manufacturers and suppliers enter the market and new car models take to the roads each month.
Eric Herman, general manager for Greater China at GE Plastics' automotive division, does not expect a slowdown in auto-related sales. Instead, he expects car owners to request more choices.
GE Plastics can help create those choices for Chinese drivers, Herman said. For GE, he sees four key tasks: helping higher-end customers to be differentiating buyers, dealing with environmental concerns, complying with worldwide safety legislation and reducing costs.
In China, price remains the primary driver of car sales, with most growth in 2005 automotive sales being in the low-end range, at less than $13,000 per car, according to market consultancy Automotive Resources Asia Ltd., based in Beijing. ARA also has offices in Shanghai and Bangkok, Thailand.
In a price-sensitive industry, Chinese consumers represent one of the most price-sensitive segments of the market. Selling high-end solutions in a market primed for low-end prices looks like a difficult task.
``China already has a full spectrum of buyers, and GE will have a niche in the market,'' ARA President Michael J. Dunne said in a telephone interview.
Dunne said that despite the majority of growth in 2005 auto sales being in the low-end range, ``the buyers at the higher end of the price scale are more sophisticated and demanding, and differentiation is important to that set of buyers.''
Dunne predicts that GE's customers will be high-end carmakers like Audi AG, BMW Group and DaimlerChrysler AG's Mercedes Benz, which all manufacture cars in China for the local market. ARA research shows that Audi, BMW and Mercedes are the top-selling luxury cars in China.
Dunne added that while low price remains the primary selling point for a car in China, more choice in style and design will become important.
China has the highest rates of auto accidents in the world, according to a recent Chinese government report, and with 3 million new cars coming onto the roads each year, that rate probably will rise. Herman hopes GE's efforts in assisting European and U.S. automakers to meet safety standards will pay off in China. He uses GE's fender made with Noryl GTX resin as an example of an improved safety application. The Noryl fender flexes inward on impact, causing less harm to humans and objects compared with metal fenders.
Safety remains low on Chinese drivers' agendas, but Sandra Zhou, an analyst with industry consultant CSM Worldwide in Shanghai, said the issue will gain status in China in the next few years.
``When people are getting more and more familiar with the issues like power and fuel economy, they will look for new elements to evaluate a model,'' Zhou said.
Herman said cutting costs by reducing car weight remains a ``common wish'' among automakers worldwide. Most ask GE for lighter exterior body panels that retain the safety standards of traditional materials.