Car firms go large in Shanghai

The models wore traditional cheongsam dresses and mediaeval Chinese armour as well as the usual rainbow of shiny miniskirts at the Shanghai motor show at the weekend but the midsize cars and sport utility vehicles on display made it look like an American motor show.

Gone are the days when buyers in China, the world's largest car market since 2009, mostly purchased fuel-sipping compacts and subcompacts. The shift towards larger and ever-more-numerous vehicles is not only driving up China's oil import bill and contributing to pollution but also fattening car makers' profits - and manufacturers made clear on the weekend they planned to infuse the market with large vehicles.

General Motors announced it would introduce nine new or restyled SUV models in China in the next five years, and said it would build four more factories and add 6000 jobs to accommodate its rising sales. A Chrysler executive said his company would start making Jeep Cherokees in Changsha in southern China by the end of next year. And China's domestic car makers showed a wide range of SUVs, the heftier the better.

Sedans were bigger than at previous motor shows. Ford promoted its Lincoln brand, which it is bringing to China. Many manufacturers gave prominence to luxury cars, a nod to rising affluence in China.

"Our focus is on luxury vehicles and SUVs," said Bob Socia, president of GM China, which has been neck-and-neck with Volkswagen as Chinese market leader. "Not long ago, both were considered niche segments. Both are now mainstream and growing rapidly."

SUV sales jumped 49 per cent in March from a year ago as new models poured into the market. Overall, vehicle sales in China climbed 13 per cent in March and are on track for almost 21 million sold this year. By comparison, the latest forecasts in the US this year are for a little more than 15 million vehicles.

Socia predicted SUV sales would double by 2015, to 4 million vehicles. But that would still leave them trailing midsize car sales, which have surged to 5 million cars a year.

That made midsize cars not only the largest market segment in China but also bigger than the entire car market in Japan, or the combined vehicle markets of Germany and Britain, said Jim Farley, Ford's executive vice president for global marketing, sales and service.

Having opened an assembly plant in Chongqing last year, Ford is building another, an engine factory and a transmission factory in Chongqing, as well as assembly plants in Hangzhou and Nanchang.

Ford is predicting annual Chinese sales will soar to 30 million cars and trucks by 2020. GM is forecasting 35 million by 2022.

Fuel consumption concerns in China often focus more on the sheer number of vehicles being sold than on the fuel economy of each one. But while China is a negligible market for the true behemoths that remain fairly popular in the US, like the Chevrolet Tahoe and the Lincoln Navigator, the upward creep in vehicle size in China towards midsize cars and SUVs is complicating policymakers' efforts to limit total oil use.

To be sure, SUVs and midsize cars in China tend to be a little smaller than in the US. The SUVs are almost entirely what the motor industry refers to as crossover utility vehicles, which are built on car platforms instead of the heavier utility underbodies Detroit relied on in the 1980s and '90s.

Midsize cars in China would be classified as lower midsize cars in the US, like the Ford Fusion, sold here as the Ford Mondeo. Upper midsize cars, like the Toyota Camry, are also gaining ground but are not quite so popular.

The shift towards bigger cars and SUVs, despite punitive taxes of up to 40 per cent on models with engine displacements of more than four litres, is prompting concern in Beijing. Policymakers are considering whether to follow the example of the Obama administration and the European Union in increasing fuel consumption regulations.

Stricter rules could hurt sales of the largest models but car makers have been preparing by offering many cars and SUVs with slightly smaller engines than in the US.

"The most important discussion ... is the changing fuel-economy requirements," Mr Farley said.

Much of the change in Chinese automotive tastes is culturally driven. Until the past few years, sport utility vehicles were dismissed as looking too much like farm vehicles, at a time when recent Chinese arrivals in cities were eager to shed links to their rural pasts.

Manufacturers in China are so focused on their market that exports are limited and mainly aimed at other emerging markets, with little sign of a switch to industrialised countries. Mr Socia said GM's factories could barely keep up with demand in China.