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Beijing Auto Show spotlights green cars amid demand uncertainty

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The Beijing Auto Show kicked off on April 25.   © Kyodo

BEIJING   Automakers in China are being squeezed on two fronts. Tighter emissions regulations mean they are having to spend big on developing eco-friendly cars, but the slowing economy is raising doubts about how robust demand will be in the long run.

Top vehicle manufacturers from around the world laid out their plans for new green offerings at the Beijing Auto Show, which kicked off on April 25 in the Chinese capital. The event features more than 1,600 companies and nearly 1,200 new models.

     Volkswagen, still struggling to recover from an emissions scandal affecting its business, was in the spotlight early on. "We will invest more than 4 billion euros ($4.5 billion) in 2016 alone in environmental and safety technology," said Jochem Heizmann, who heads the German company's Chinese operations.

     China is VW's most important market. The government is planning to adopt emissions regulations equivalent to the Euro 6 standard -- the world's strictest emissions controls introduced throughout Europe in 2015 -- for major Chinese cities beginning next year. Accordingly, VW intends to roll out 15 eco-car models over the next three to four years. It plans to begin full-scale production of a plug-in hybrid based on the Golf sometime around 2018.

     "Diesel doesn't play a big role here in China. That is why we are very optimistic this year for Volkswagen brand," Herbert Diess, chairman of the board of management of the Volkswagen Passenger Cars brand, told the Nikkei Asian Review. "We have a record-fast quarter in sales, and I think we will even speed up our sales because we have a huge amount of new products coming, up to 20 new launches," he added.

     Toyota Motor plans to build a plug-in hybrid version of the Corolla starting in 2018. "We've been working to coincide [our launch] with the launch of plug-in hybrids by other automakers," said Hiroji Onishi, head of Toyota's China operations.

     Honda Motor plans to begin production of an Accord hybrid this July and to release a plug-in hybrid in 2020. General Motors, the market leader in China, a year ago said it would spend 100 billion yuan ($15.4 billion) over a five-year period to promote sales of electric and other vehicles.

     China led the world in new-car sales for the seventh straight year in 2015, with 24.59 million vehicles sold. Even if market growth slows, many still see plenty of room for expansion, as the country has just over one car for every 10 people. Automakers are particularly keen to roll out new green models to take advantage of generous subsidies for eco-car purchases.

THE ROAD AHEAD   Sales of luxury brands, an area where European makers shine, are a bright spot in the Chinese auto market -- for now, at least.

     At the Beijing Auto Show, BMW unveiled a version of its new SUV model, the BMW X1, with a longer wheelbase tailored for the Chinese market. This country-specific offering is a "perfect example of our focus on the Chinese customer, as well as our commitment to the Chinese market," said Ian Robertson, a member of BMW's board of management. The newly launched model will go on sale from May 20.

     Automakers that enter the Chinese market soon discover the nation's preference for longer vehicles that provide more space and have a bulkier appearance. Such models are not quite so popular elsewhere -- internet users in other countries have called them "odd" and "strange" -- but catering to China's unique tastes is worth it. The country has become the largest single market for BMW and many other automakers, including Mercedes-Benz. The latter has adopted a long-wheelbase design for its new E-Class range, which made its global debut at the Beijing show.

     In the first quarter of this year, Mercedes-Benz sold a record 105,000 vehicles in China, a 39% increase from a year ago. "We are expecting an 8% increase in sales in China this year," said Nicholas Speeks, president and CEO of Beijing Mercedes. "Even if the Chinese economy is slowing down, its market is still growing, stronger than Europe, America or Japan."

     Still, the world's largest auto market is not as robust as it may appear. Overall demand is "solid for the time being because of the tax break on compact cars that started last October," said Nobuhiko Watabe, an executive officer at Mazda Motor.

     Deep discounting has already become the norm as dealers struggle to sell their stock of vehicles, and these price wars are squeezing automakers' margins. If the economic slowdown continues, it could start biting into the appetite for high-end cars, too.

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