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China tops investment choice for global automakers

2013-01-11 08:03 Xinhua     Web Editor: qindexing comment

China is a top investment destination for global automakers due to its domestic demand and export opportunities, according to a survey of 200 automotive executives released on Thursday.

Seventy percent of respondents interviewed by advisory firm KPMG view China as their top choice for investment, ahead of other BRIC countries - India (63 percent), Russia (54 percent) and Brazil (48 percent), according to the survey.

Additionally, 94 percent of respondents expect the country to see growth in domestic vehicle sales, due to the rising middle class and growing urbanization, KPMG said.

"China remains a highly attractive market due to its long term growth potential. It is no surprise that automakers are placing some big bets in China, and doing so ahead of the other BRIC markets," said Andrew Thomson, a partner with KPMG China and head of the firm's automotive practice.

The survey also indicated that four Chinese manufacturers are expected to be among the top 10 companies to gain global market share over the next five years.

Sports utility vehicles (SUVs) are the fastest growing car segment in China, according to the survey.

Latest statistics from the China Association of Automobile Manufacturers showed that sales of SUVs rose 26 percent from January to November 2012 to 1.79 million units, outpacing the 7.1 percent growth in overall car sales recorded during the same period.

The Chinese auto industry also faces challenges, KPMG said.

It is getting more difficult to set up production facilities in China as well as other BRIC markets, reflecting concerns about the level of fragmentation in how the automotive industry is structured in the country.

Respondents also said that environmental restrictions will increase more than any other barrier, with 74 percent of executives indicating that such obstacles will become greater in China, up from 65 percent in 2012.

Additionally, 52 percent respondents expect government intervention to increase in 2013, while 54 percent believe import and export duties will rise in China.

Meanwhile, overcapacity remains an ongoing challenge for the sector, KPMG said. One-fifth of respondents consider the risk of overcapacity in the BRIC markets as high or very high, with China being rated even higher at 26 percent.

In terms of emerging technologies, 36 percent of global respondents believe plug-in hybrid vehicles will attract the most consumer demand by 2018, ahead of conventional hybrids (20 percent), which topped the chart in previous surveys.

For China though, fuel cell technology was rated the most popular future option (44 percent), according to the survey.

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