China's car sales boom, reshaping a way of life

In Zaozhuang, an hour south of Qufu, officials are building a theme park celebrating cars and road travel. The city is the birthplace of Xizhong, who according to Chinese records, invented the horse cart 4,200 years ago. "If you pray here, Xizhong will protect you and ensure a safe journey," promises Li Tianfeng, the curator of the Cart God Museum.

An infatuation with big cars

Auto companies gradually are learning to cater to Chinese tastes. One discovery: the small, fuel-efficient models that are best sellers in Europe and Japan don't do as well here.

"Both Chinese and American people like to buy big, luxurious cars," says Zhong Shi, an auto analyst in Shanghai. "It's a symbol they dream of achieving. In China, where cars are less widespread, they are even more of a decoration, to display wealth."

That's one reason why American auto companies have done relatively well here. Zhang, the CSM analyst, says that GM and other foreign companies have successfully targeted the midsize and high-end part of the Chinese market, leaving the low-cost, low-margin segment largely to Chinese automakers. GM agreed this month to sell its Hummer brand to a Chinese company, Sichuan Tengzhong.

The emphasis on big cars has fanned environmental concerns, especially because some Chinese cities such as Beijing already are plagued by smog. Despite the conversion to unleaded fuel nine years ago and auto emissions standards that are stricter in some respects than those in the USA, many worry the car boom could take pollution to a new level.

"We only have one planet, and we simply don't have the resources for Chinese people to live an American life," says Ailun Yang of Greenpeace China, a lobbying group.

U.S. companies must compete with other foreign automakers with units in China such as Volkswagen, BMW, Toyota, Honda and Hyundai. All have been aided by the Chinese government's new auto stimulus plan, which includes $730 million in subsidies for farmers to swap old vehicles for new ones.

The initiative also subsidizes the sale of minivans that can be used to ferry cargo. They're known colloquially as "bread vans," and they've gone over well in a country where small, mom-and-pop merchants still form the backbone of the economy.

GM makes the vans — 1 million were sold last year — as part of a venture with automakers in southwest China. Thanks to such successes, GM still plans to adhere to its target of doubling its sales in China to more than 2 million units within the next five years, despite the company's bankruptcy filing, says Karin Zhang, a GM spokeswoman in Shanghai.

"China has a critical, very strategic role for GM. It's growing very fast, and we are very well-placed in China," she says.

Chinese cars have 'matured'

Chinese automakers are making inroads, though, slowly shedding a reputation that their cars aren't as safe as foreign ones. At the Shanghai Auto Show in April, Lin Chen, 28, tested the seats of a Chery Riich M1, which costs $6,270 to $8,800.

"I didn't trust Chinese cars' safety before, but I think they have matured, and the price is very reasonable," Lin says.

Other local manufacturers have tried to break into the high-end market by offering special features. A new model from Geely with a single-seat massage chair/throne in the back attracted a lot of attention at the Shanghai show. "We want you to feel like an emperor," said Zhang Yanyan, a quality department employee. The car's price: $146,000.

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