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Business

Shanghai auto show to kick off amid changing landscape

Environmental regulations, technical innovation shaping China market

More than 1,000 automakers from around the world will show off about 1,400 cars when the 17th Shanghai International Automobile Industry Exhibition begins on Wednesday, with 113 of them making their global debuts.

Environmental regulations and technical innovation are bringing a significant changes to China and many automakers have been swift to react to developments in the world's largest auto market.

On April 1, Toyota Motor set up a "Business Planning & Operation" to integrate the planning and sales operations of its "Toyota No. 1" unit, which handles North America, Europe, Africa and Japan, and "Toyota No.2," the unit for developing markets including China, the Middle East, North Africa, East Asia, Oceania, Latin America and the Caribbean, which launched in 2013.

A Toyota executive said the rationale for running separate units has become less relevant as the difference between developing and developed countries has blurred in terms of factors like fuel consumption regulations.

The Chinese government has promoted the spread of greener plug-in hybrid cars and electric vehicles with hefty subsidies.

From 2018, Beijing will require automakers produce a certain number of "new energy vehicles," with penalties in place on those who do not comply.

Western auto giants have been quick to react. Volkswagen and General Motors secured much bigger exhibition spaces than their competitors at Shanghai to showcase popular sport utility vehicle-type PHVs and EVs.

The two companies sell around 4 million cars in China, accounting for nearly 40% of their total sales. Their exhibition strategies indicate sense of urgency in dealing with changing environmental regulations.

Japanese automakers are going on the offensive, too. Toyota plans to announce its strategy for fuel-cell vehicles and other new energy vehicles on Tuesday, the day before the opening of Auto Shanghai. Honda Motor and Nissan Motor will also unveil concept models of EVs and other vehicles.

Car-sharing wave 

Thanks to tax breaks for small cars, China's new car sales jumped 14% on the year to 28.02 million units last year, helping the country remain the world's largest auto market for the eighth straight year.

But change is underway. The dividing line between developing and developed markets in terms of environmental regulations and usage is not as clear-cut as it once was.

U.S. consultancy Accenture last year released survey results showing some 70% of youngsters in Beijing and Shanghai have an interest in car-sharing, indicating that the shift from ownership to sharing seen elsewhere is happening in China, too.

Although many consumers still aspire to, owning a car has become something of a luxury due in part to license plate auctions introduced in urban areas to ease traffic. Soaring ownership costs are prompting many Chinese to look at car-sharing instead.

Automakers cannot ignore the change. China's Zheijiang Geely Holding Group, owner of Sweden's Volvo Cars, has launched Lynk & Co., a new brand for internet-connected cars.

Lynk & Co. will go completely keyless, replacing keys with a smartphone app connected to the cloud. This will allow a group of people to collectively buy and own one Lynk & Co. car, and owners will also be able to lease the vehicle out when it is not in use.

Smartphone-based bike-sharing services, which have become hugely popular in China's big cities, provide an interesting precedent.

A local executive of a Japanese automaker said bike-sharing has become widely used very quickly, and it is possible that something unexpected may happen to the car market as well.

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