Published : Feb. 24, 2013 - 19:40
A Geely Automobile Holdings Ltd. Emgrand EC7 sedan undergoes final inspection on the production line at the company’s factory in Cixi, Zhejiang Province, China. (Bloomberg)
Chinese automakers are about a decade away from being globally competitive and will have to increase their spending on research and development to close the gap, according to Sanford C. Bernstein & Co.
Carmakers such as General Motors Co., Volkswagen AG and Toyota Motor Corp. are outspending Chinese brands on research and development and lead in engineering, said Max Warburton, an auto analyst at Bernstein, which has a neutral rating on China’s auto industry. The Chinese have the will and money to make their auto industry world class, he said.
“The Chinese are 80 percent of the way there, 20 percent doesn’t sound very hard, but it’s probably the most complex bits to get right,” Warburton, who is based in Singapore, said in a phone interview yesterday. “They’ll be spending until they make it work and eventually they’ll end up with Chinese carmakers on the world stage.”
China’s brands are losing share in their home market as foreign manufacturers increase local production and introduce lower-priced models. The country’s automakers spend less than 2 percent of revenue on research and product development, or about half the global average, according to the China Association of Automobile Manufacturers.
Of the more than one hundred Chinese automakers, SAIC Motor Corp. stands the best chance of becoming a world-class manufacturer as it has learned a “huge amount” from its joint venture partner General Motors and has more experienced engineers compared with the rest, Warburton said.
The Bernstein team was also “positively surprised” by the progress made by smaller, independent Chinese automakers such as Geely Automobile Holdings Ltd., Warburton said. A teardown of Geely’s EC7 model showed that the Hangzhou, China-based company had a clear grip of engine technology and called it “almost competitive” with global automakers.
Bernstein has outperform ratings on Brilliance China Automotive Holdings Ltd. and Dongfeng Motor Group Co. and market perform for Great Wall Motor Co. and Guangzhou Automobile Group Co.
(Bloomberg)