Chinese carmakers accelerate into Brazilian market

Chinese carmakers have started to steer more business toward the Brazilian market due to growing appetite for cars in Brazil and booming vehicle production in China.

Central China-based Jianghuai Auto Co. (JAC) announced on Wednesday that it expects its factory in Brazil to begin operating in the next year with annual capacity at 100,000 units and total investment reaching 600 million U.S. dollars.

It is typical of the efforts major auto firms in China are putting into tapping the world's fourth-largest auto market, which has been dubbed a bridgehead for Chinese companies to start their global journey.

What intrigues Chinese investors most is the brightening market outlook, as consumer spending is forecast to surge around the 2014 FIFA World Cup and 2016 Summer Olympics in Brazil.

"A great opportunity" is how JAC vice president She Cairong describes developments in Brazil.

The rapidly advancing Chinese economy has enabled the country's car producers to extend their global reach with abundant capital and mature technology, said Hayle Gadelha, head of the Trade and Investment Promotion Office under the Embassy of Brazil in Beijing.

It was only in 2012 that Brazil dampened the prospects of Chinese cars in the country by fine-tuning its tariff policy, making it more favorable to local producers but harsher on auto imports. The move prompted Chinese carmakers, many of which were already eyeing Brazil, to instead quicken their localizing pace.

A lot can happen in the space of two years, however. JAC is not the only China brand to make a big move into Brazil.

BYD, leading China's new energy sedans, is also planning a 100-million-U.S.-dollar plant in Sao Paulo.

Beijing's BAIC Motor is mulling investing in an SUV plant, Gadelha disclosed to Xinhua, noting that the plan received a warm welcome from quite a few localities in Brazil.

However, even if factories are built and assembly lines start to roll, the road ahead for Chinese firms is not without bumps.

JAC's She thinks Chinese models will be heavily scrutinized in Brazil in terms of design, manufacturing, sales and service, as Brazilian drivers have become accustomed to high-end U.S. and European brands.

The company made over 200 adjustments to one of its popular models before taking it to the other side of the Pacific, to adapt to Brazilian tastes, She said.

Lu Shanming, a senior manager from BYD, said "barriers are everywhere" for Chinese producers, citing heavy taxation, strict regulation and high operating costs, especially given the turbulence of Brazilian tax policies concerning industrial products.

Of the 51 auto brands in Brazil, 12 are from China, an industrial survey showed recently. However, Chinese vehicles took a market share of less than 1 percent, indicating the difficulty in breaking into the market.

Chinese players would inevitably be confronted with pressures in Brazil, warned She.

To try to ride out the bumps, Chinese firms are figuring out a strategy of cooperating with experienced local companies. JAC has allied with the country's largest auto seller, SHC, which could help "open the market with rapid growth and deal with all kinds of challenges," according to She.