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Business

Chinese automakers seek ways to kick-start sputtering growth

Leading players turn to AI, exports, ride-sharing

Guangzhou Automobile Group exhibited the Trumpchi GS7 at the Shanghai International Automobile Industry Exhibition in April. It aims to have exports account for 10% of sales of the brand by 2020. (Photo by Akira Kodaka)

CHONGQING -- At the Global Automotive Forum that kicked off here Wednesday, executives at top Chinese automakers discussed how to engineer continued growth in a maturing market.

Though new-car sales volume in China rose by double digits in 2016, factors such as reduced tax incentives for small cars have sparked concerns about whether this will continue, with a sales decline in April adding fuel to the fire.

AI behind the wheel

"The time is coming when drivers and cars will become one, like in the days when people rode horses," declared Yuan Mingxue, a vice president at Chongqing Changan Automobile. Artificial intelligence is key to this vision, and Yuan said the automaker will invest 21 billion yuan ($3.09 billion) in the technology over the next decade.

Changan has teamed up with Silicon Valley startup accelerator Plug and Play Tech Center to connect with fledgling companies with AI expertise, seeking to expand its Silicon Valley research division to 2,000 people. The automaker has also partnered in this area with Baidu, operator of China's top search engine, and aims to have a fully autonomous vehicle on the road in 2025.

Li Wei, a vice president at Chongqing Changan Automobile, said the automaker will invest 21 billion yuan in artificial intelligence over the next 10 years.

Changan, which operates joint ventures with Japan's Suzuki Motor and Mazda Motor as well as Ford Motor of the U.S., sold 3.06 million vehicles groupwide last year. The automaker will speed up development of such technologies as electric vehicles, focusing on AI in particular, with an eye toward roughly doubling sales to 6 million vehicles in 2025.

German autoparts giant Robert Bosch's Chinese arm will accelerate adoption of AI in manufacturing, said Xu Daquan, an executive vice president. The company has improved productivity at a plant in Suzhou by 20% directly and by 40% indirectly by connecting systems involved in every process, from design to shipping, to the internet and analyzing the data via AI, according to Xu.

Seeking growth abroad

Guangzhou Automobile Group General Manager Feng Xingya stressed plans to expand overseas operations as the domestic market matures.

"The Chinese market is the world's largest and will continue to serve as a driver, but growth is slowing," he said, adding that even the group's chief is working to snag talent abroad.

The automaker aims to have exports account for 10% of sales volume for its Trumpchi brand in 2020, Feng said.

Guangzhou Automobile says it exports vehicles to 14 countries in such regions as the Middle East, Southeast Asia and Eastern Europe. It has gained a foothold in emerging markets, and Feng said it is eyeing developed countries as well. The company will work quickly to prepare for a planned U.S. debut in 2019, including building a sales network and devising a brand strategy.

The Belt and Road Initiative championed by Chinese President Xi Jinping is expected to boost exports to countries along the envisioned land and sea routes linking China and Europe, with infrastructure construction likely to feed automobile demand. Du Weiqiang -- executive deputy general manager of Chery International, an export-focused unit of Chery Automobile -- sees the market in these countries reaching at least 30 million vehicles in 2020.

Chinese auto exports topped 1 million in 2012 but have since stagnated, with just 800,000 vehicles sold abroad in 2016. Chery led the pack in 2016 with nearly 90,000 vehicles exported.

"Foreign markets are riskier than the domestic market," Du noted. "It's important to rack up small successes."

Branching out

"Innovation will be a driving force behind growth," said An Tiecheng, a deputy manager at Dongfeng Motor Group. "We'll actively pursue not just electric vehicles and self-driving cars, but also new businesses, including getting into ride-sharing on our own."

Dongfeng Motor is working on such a project with partners including the government of Wuhan -- the capital of Hubei Province, where the automaker is based -- with 500 electric vehicles and 100 pick-up and drop-off locations set up by the end of last year.

Central to this expansion into new fields will be Dongfeng Motor's partnership with First Automobile Works Group, with which it develops technologies for reducing vehicle weight and other applications. Though An gave no specific examples of how the two will collaborate, new areas of cooperation could include car-sharing and autonomous-driving technology.

Dongfeng Motor sold 4.28 million vehicles in 2016 and targets sales of 5.6 million vehicles in 2020. An said the company spent 7.2% of revenue on research and development last year and plans to ramp up R&D investment further going forward. "Innovation itself will guide change in the industry," he said.

Zhejiang Geely Holding Group, parent of Geely Automobile Holdings, will roll out vehicles made for ride-sharing under the Lynk & Co. brand in China this fall. The new vehicles will come with a button to make them available for sharing when not in use. Riders can use an app to search for idle cars, which can be unlocked with an electronic key.

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