Changan Automobile Group targets sales of six million units by 2020

 Since 2011, the sales volume of Changan Automobile Group has been on the decline. This trend has been caused by the termination of purchase promotional programs by the Chinese government as well as the stalled growth experienced throughout Chinese national brands (Chinese manufacturers' own brands) resulting in a y/y decrease of 15.6% to 2.01 million units for 2011, and sales volume for the January to September period of 2012 was down 8.5% y/y to 1.4 million units.

 In spite of struggling group sales, Changan Automobile Group is proactively introducing new models under its own brand to expand its share in the market. In early 2011, the manufacturer established a worldwide R&D network at nine locations in five countries. To date, a number of models engineered through this system, such as the Eado and the Alsvin V3, have been introduced to the market. Changan Automobile Group has declared that it will grow the number of vehicles manufactured and sold to six million units by 2020, covering 60% of the volume with its own brand models.

 In the realm of its joint venture with foreign OEMs, Ford is increasing its investment in the joint venture. The joint ventures owned by Changan Ford Mazda and Jiangling Motors are jointly constructing five plants. With the completion of these plants, Ford expects to achieve an annual vehicle production capability of 1.2 million units. With the acquisition of a heavy-duty truck OEM by Jiangling Motors, there's a rumor that Ford trucks may make an entry into the Chinese market.

 The joint venture with PSA is organizing production sites and sales networks aiming to achieve production and sales volumes of one million units by 2020. As the first phase to accomplishing this goal, it began the import sales of the DS Line in June 2012.

 On the other hand, September sales volume for the joint ventures with Japanese OEMs dropped altogether due to anti-Japanese protests. Mazda and Suzuki both launched improved and new models, respectively, but some of the Japanese automakers are still cutting its productions as the situation continues to be uncertain.

Related Reports: Beijing Motor Show 2012 - Changan Automobile (June, 2012)

 The group sales volume for 2011 dropped 15.6% y/y to 2.01 million units, failing to achieve its original goal of 2.4 million units. It is assumed that the termination of government led purchase promotional campaigns such as "exchanging old for new" and "automobile industry promotion program in farming areas" at the end of 2010 are the cause of this downfall. Minivans and light-duty trucks were the targets for receiving subsidies for the "automobile industry promotion program in farming areas," and the Changan Automobile Group provided a variety of major minivans throughout the group, making a large contribution to the group sales between 2009 and 2010.

 The decline continued in 2012 with total sales down 8.5% y/y to 1.4 million units in the period from January to September. In addition to the overall sales decline in Chinese brand vehicles and CVs, the trend was also influenced by the September anti-Japanese protests resulting in the sales of Japanese OEMs to drop.

In-country productions

CKD sites outside of China

Changan Automobile

Jiangling Motors

Hafei Automobile

Changan Kuayue Automobile

Changan Automobile plans to construct new line in Paraguay

Hafei Automobile to begin KD production in 2014 in Brazil

Establishment of worldwide R&D structure

 In January 2011, Changan Automobile established its ninth R&D center in the U.S., completing its worldwide R&D structure. The OEM currently has R&D centers for its own brand, running in nine locations in five countries: China (Chongqing, Shanghai, Beijing, Harbin, and Jiangxi), Italy (Torino), Japan (Yokohama), the U.K. (Nottingham), and the U.S. (Detroit). Chongqing is acting as the headquarters of these centers, constructing site-wide plans and integrating its systems. The Shanghai center is responsible for process planning and global recruitment while the Beijing center will work on regulation and law compliances and R&D of new energy technologies. Additionally, centers in Harbin and Jiangxi will help support research and development for its group's brand OEMs like Hafei Automobile and Changhe Automobile.

 Overseas sites will focus on designs (Italy), interiors and exteriors (Japan), powertrains (U.K.), and chassis (U.S.). These nine locations in five countries will collaborate in 24-hour operations to enhance the automaker's R&D structure. Through its worldwide R&D structure, Changan Automobile will strengthen its proprietary development capability while enhancing its corporate core competence.

Aims to expand market share by proactively launching new models

 Since the beginning of 2012, Changan Automobile has been proactively launching its own brand models. A total of four brand models, including the Honor, the Eado, and the Alsvin V3, have been introduced by the end of September. Of these models, the Eado, a middle-end sedan launched in March, was the first showcased at the 2011 Frankfurt Motor Show where Changan Automobile was the only Chinese OEM to exhibit at the show. The design was done by the Italy R&D center, interior by Japan, chassis by the U.S. and powertrain by the U.K. The Honor and the Alsvin V3, as well as the Raeton are all engineered through these nine R&D centers to drive market competitiveness by launching its own brand models with global standards.

Changan Automobile's current and scheduled model launches

Jiangling Motor Holding's current and planned model launches

Jiangling Motors' current and planned model launches

Hafei Automobile's current and planned model launches

Chinese government approves the split plan of Changan Ford Mazda

 In August 2012, Changan Automobile, Ford, and Mazda jointly announced that they have received an approval from the National Development and Reform Commission (NDRC) for the separation plan of their joint venture into two.

 The announcement revealed that Ford and Mazda will each create a new joint venture with Changan Automobile with equally-split investments under this plan. With the split, both companies' shareholding will increase from the current three-way joint venture, giving them a stronger voice in the new joint ventures. However, the OEMs still need to go through an approval processes with the appropriate officials, such as the Ministry of Commerce and the State Administration for Industry and Commerce to complete the establishment of these new joint ventures.

Overview of separation plan

Ford to increase its investment into Chinese market

 Ford announced that it will launch 15 new models, and 20 state-of-the-art powertrains by 2015 in the Chinese market and it is aggressively constructing new plants with its local partners. The construction of engine and powertrain plants began in Chongqing in 2011. In addition to the production starting at the Chongqing second plant in February 2012, the construction of the Chongqing third plant and the Hangzhou plant started in August. The amount invested into these new projects exceeds 3.1 billion dollars.

 Of the 15 new models, the first model, the New Focus, was released in April 2012. The table below is an overview of new models scheduled to be released, including the high-end brand, the Lincoln, which was announced to be launched in the latter half of 2014. It also includes estimates based on media reports.

Ford Brand

Lincoln Brand

Note: In addition to the models above, the local media reports that Ford is planning to introduce fully remodeled versions of the Mondeo and S-Max, a face-lifted/fully remodeled version of the Fiesta, and a locally produced version of the Edge. In addition to the existing models, new models such as the Ka (based on the concept car, the Start), Taurus, Mustang, B-MAX, C-MAX, Galaxy, and Flex are also expected.

Ford to enter into truck market

 In August 2012, Jiangling Motors, which Ford owns 30% as the second largest shareholder, announced that it will merge Chang'an Heavy Vehicle (Taiyuan in Shanxi Province) into its group. With this merger, Chang'an Heavy Vehicle, previously directly owned by Changan Automobile Group (owned 80% by Changan Automobile Group and 20％ by China South Industries Group Corporation), will become Jiangling Motors' wholly owned subsidiary. Jiangling Motors is thought to have received much support from Ford with this merger, and the media reports that there is a high possibility that Ford trucks will hit the Chinese market in the future.

 In November 11, Changan Automobile Group and PSA established a joint venture, Changan PSA Automobiles Co., Ltd. (Changan PSA) in Shenzhen, Guangdong Province. The capital funding of four billion RMB will be split equally by the two companies. The company currently sells Citroen's high-end series, the DS Line, only, and the local production is scheduled to begin in mid-2013. Both companies feel that the current car owners in China, especially in the high-end segment, are more focused on originality, and aim to expand its market share with the release of the DS Line characterized by its unique design.

Model launch plans

Organizing production facilities

Establishment of sales network

 Due to anti-Japanese protests in September, Changan Suzuki's Chongqing plant cut production, limiting it to the daytime only. Chongqing Ford Mazda's Nanjing plant, which produces Mazda brand vehicles, went into a break for the National Day of the People's Republic of China two days earlier, explaining that the shutdown was to prepare for the production of the CX-5 scheduled to be launched in 2013. On October 8, the day the break ended, both plants were confirmed to have started normal operations, but the situation continues to be uncertain.

 With the downfall of all Japanese brands, sales volumes on a single month basis for September dropped for both Mazda and Suzuki's joint ventures. The sales volume for Changan Suzuki dropped 48.3% y/y to 10,649 and that for the locally produced Mazda2 and Mazda3 dropped 27.7% to 4,299 units for Mazda (data based on factory shipments).

 Despite the slow sales, Mazda released face-lifted vehicles, and Suzuki released new models in October. The table below is a summary of launching plans of new models by both companies.

Mazda' current and planned model launches

Suzuki' current and planned model launches

Note: Changan Suzuki will launch seven new models including the Ertiga, an SUV, and a B-class vehicle by 2015.

<Automotive Industry Portal MarkLines>