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Home » City specials » Chengdu

'Can-do' spirit fuels Chengdu auto industry

LEAPFROGGING usual industry benchmarks, Chengdu's production of vehicles has surged to 375,000 units last year from 800 farm vehicles 10 years ago.

Or put another way, the city achieved in a decade what would normally take 40 years to accomplish.

That's the "can-do spirit" of China's "Go West" policy.

By 2015, the capital of Sichuan Province is aiming for the 1 million mark in automobile manufacturing capacity. That's what the city's current Five-Year Plan (2011-15) says.

Auto production is a rising star in Chengdu's economy. The industry's output value soared 46.8 percent in the first quarter to 8.98 billion yuan (US$1.45 billion), the fastest of any manufacturing segment.

The state-level Chengdu Economic and Technological Development Zone in the Longquanyi District is the heart of the city's auto industry.

This hub, 13 kilometers east of the downtown, is home to global giants like Volkswagen, Toyota, Volvo, Bosch and Harman - companies quick to seize the opportunities of China's westward-ho development initiatives.

Though a latecomer to the auto industry, Chengdu is a well-established commercial center and a key market for car sales in western China - an area relatively underdeveloped compared with China's wealthy eastern seaboard. Car sales growth in the west has been outpacing traditional coastal markets for five years.

To entice investors to stay close to this emerging market, Chengdu offers efficient services, an amicable business culture, easy logistics and relatively lower labor costs.

Among the first arrivals in the city was Volkswagen, whose former China president and CEO Karl-Thomas Neumann once predicted the city would evolve into another Wolfsburg, the home town of the German company.

Volkswagen's joint venture with Chinese carmaker FAW located its second manufacturing site in Chengdu, flanked by an industrial chain that provides parts, engine production, vehicle assembly, logistics and IT support. Completion of the final stage of the facility in January brought VW's total investment in the city to 16.3 billion yuan. FAW Volkswagen Automotive (Chengdu) Co has ramped up annual production capacity to 540,000 units a year.

Chengdu is of strategic importance for FAW Volkswagen's development in China, said An Tiecheng, company general manager and board member. With its world-class modular production systems running in plants built to the most advanced standards, the company turned out 100,000 new Sagitar and Jetta sedans in Chengdu in the first quarter, the equivalent of one-third of its nationwide sales.

The presence of FAW Volkswagen in the city has been a drawing card for other international carmakers eager to expand their footprints in China, now the largest auto market in the world.

Whole chain

Toyota, the No. 1 auto seller in the world last year, produces cars in Chengdu with its Chinese partner FAW, while Volvo, the Swedish luxury car brand now owned by China's Geely Auto, chose Chengdu to set up its first Chinese plant. Massive production is expected to begin in October.

Chengdu is not content with just making cars. It wants to become a major hub for the whole chain of auto production and a leader in industry research and development.

In the Chengdu Economic and Technological Development Zone, Bosch, a global supplier of technology and services, is putting the finishing touches on a second plant for its chassis systems control division in China. The facility is designed to produce 1.4 million ABS (anti-lock break system)/ESP (electronic stability program) and 19 million wheel-speed sensors a year in its initial production phase. The whole project is pegged at a cost of 880 million yuan.

"The products produced in the new Chengdu plant will further serve the rising demand of active safety technology from Chinese original equipment manufacturers," said Dirk Hoheisel, executive vice president of Bosch Chassis Systems Control. "Our choice of Chengdu is based on the city's favorable investment environment, its good infrastructure and the solid foundation of its auto industry."

Harman International Industries Inc, a global provider of in-vehicle infotainment and audio systems, opened a research and development center in Chengdu last year - its second largest in China after Shanghai.

"Locating an R&D center in Chengdu allows our company to communicate with clients because so many multinational and local auto manufacturers are here," said David Jin, chairman and president of Harman's Northeast Asia and China operations. "By being closer to our customers, we can provide the most-needed, the most innovative and the highest quality products and services."

The company said it considers Chengdu a perfect place for "reverse innovation" - that is, innovation set in emerging markets for application in more developed ones.

Other auto-related companies agree on Chengdu's credentials as a great place to invest. KH Automotive Technologies, a car research and development agency founded by Guo Konghui, a member of the Chinese Academy of Engineering, has set up its western headquarters in Chengdu. IAT Automotive Technologies, the second largest auto-design company in China, has targeted the city as a major export center for its expertise.

It took only four months for the company to choose Chengdu over other potential sites for its center. Among the vying for the investment were traditional auto hubs like Changchun in the northeastern province of Jilin and Nanjing in Jiangsu Province.


 

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