SHANGHAI – Phase one of the Sino-U.S. trade deal signed Wednesday has left the United States’ 25 percent tariffs on China-made light vehicles untouched. And China’s new-vehicle market is likely to contract for the third straight year in 2020.
Many automakers are operating well below all the production capacity they added in China when the market was booming. To boost factory utilization, more of them will step up efforts to ship vehicles from China to markets other than North America.
Some have already started.
Dongfeng Yueda Kia, Kia Motors’ joint venture, exported some 31,200 vehicles under the Kia brand to emerging markets, including North Africa, Southeast Asia and South America, in 2019.
The joint venture, which can produce up to 750,000 vehicles a year, sold fewer than 300,000 vehicles in and outside China last year.
To improve utilization, Dongfeng Yueda Kia plans to explore more overseas markets with the goal of hiking annual exports to 100,000 within three years, according to Kia’s local partner, Jiangsu Yueda Group.
Like Kia, PSA Group also faces a pressing need to help its joint venture with Dongfeng boost exports.
The joint venture, Dongfeng Peugeot Citroen, began shipping vehicle kits to be assembled in Vietnam and Malaysia in 2017. The next year it also started shipping a 1.2-liter turbocharged engine to PSA plants in Europe.
But the steps were too small to offer much benefit to Dongfeng Peugeot Citroen. With sales stuck in a downward spiral, the joint venture lost more than 2.5 billion yuan in the first half of last year, according to Dongfeng.
In 2019, Dongfeng Peugeot Citroen, which has annual capacity of 700,000 vehicles, only sold 113,579 vehicles.
To rescue the partnership, PSA has pledged to help increase exports under an agreement signed with Dongfeng in December.
Meanwhile, two major players in China’s auto industry -- SAIC Motor Corp. and General Motors -- are also striving to ramp up exports.
SAIC delivered some 139,000 vehicles under the MG brand outside China in 2019, an increase of 90 percent and representing 47 percent of the brand’s total sales.
U.S. President Donald Trump’s tariffs have made it virtually impossible for GM to ship the Buick Envision crossover and Cadillac CT6 plug-in hybrid sedan assembled at its joint venture with SAIC back to its home market.
But the Detroit automaker continues to export vehicles from China to other emerging markets such as Latin America and North Africa.
GM, whose China sales fell 15 percent in 2019, is also collaborating with SAIC to make a new assembly plant run by their light-vehicle partnership SAIC-GM-Wuling, in the southwest China municipality of Chongqing, a major export center.
Entry-level vehicles built at the factory will be distributed in emerging markets as rebadged Chevrolets, according to SAIC-GM-Wuling.
With GM’s support, SAIC expects to raise exports under its proprietary brands and the vehicles assembled at its two joint ventures with GM to 1 million annually in 2025, from 350,000 in 2019.
GM is not the only U.S. automaker that exports from China. Last year, Ford Motor Co. started shipping the Escort sedan built at its car partnership to the Middle East, a year after it launched exports of the EcoSport crossover from the same venture to the Philippines.
With its China sales dropping just short of 570,000 last year, about half of the volume in 2016, Ford now has a greater need to help its local joint ventures expand exports.
Other global automakers such as Hyundai Motor Co. and Renault SA face the same pressure, with their China operations saddled with excess production capacity.