March 14, 2008 -- Local governors are positioning Wuhan City as the automotive capital of Central China in view of brisk sales from the presence of global automotive giants in this historic industrial hub. The move began in 2006 when automotive output dislodged the iron and steel industry as the pillar of the local economy. By next year, the local automotive industry should turn up 100 million yuan (US$14 million), according to Luo Changgang, administration head of the Wuhan Economic & Technological Development Zone where global brands Honda, Citroen and Nissan are located.

"Wuhan's location is perfect for the blueprint of the central 'Automotive city'. The well-organized infrastructure and convenient transportation can support the supply of raw materials for the industry," Lingyun Zhao, dean of Hubei Academy of Social Sciences, told Emerging China. Unlike the export-oriented coastal cities as Guangzhou and Shanghai, Wuhan is more focused on the domestic automotive market, he noted.

"The experts and talents storage within the automotive specialty in local colleges are very good resources for further development of the industry," Zhao added.

The main driver is the presence of global brands. "A large number of foreign companies, such as Honda, Nissan and Peugeot Citroen, are participating in the construction of the automobile market in Wuhan. The auto market is full of joint-stock automobile models, and lack of independent self-developed car brands," Lingling Yuan, the executive manager for automotive market of Wuhan Zhuyeshan Group Co. Ltd., told Emerging China.

The three global brands have formed joint venture firms separately with Dongfeng Motor Corp., one of the Big Five Chinese automakers. In January, Dongfeng Honda Automobile Co. Ltd. reported double-digit growth rates in output and sales volume from 2006 levels, according to the official website of the Wuhan municipality. Meanwhile, Dongfeng Peugeot Citroen Automobile Company noted in its 2007 financial report that both output value and sales hit 20 billion yuan (US$ 2.81 billion), as gross output volume exceeded 200,000 last year.

The presence of foreign car manufacturers is good news for consumers as well. The consumers would have more options and higher quality products when they want to buy cars to meet different needs, according to Yuan. "There exists great consuming potential in the Wuhan auto market. People here prefer to choose the cars that are priced around 100,000 yuan (US$ 14,072), different from Chengdu's auto market where people intend to buy the low-end cars, the price is from 30,000 yuan (US$ 4,221) to 40,000 yuan (US$ 5629)," Yuan added.

But Hubei Academy's Zhao noted that it would take about five years to attain "Automotive City" status for Wuhan. "We can learn from the foreign partners with the advanced technology and management, but to explore the new energy-saving and environment-friendly self-owned automobile is the main trend. However, the incomplete financial system and the technical constraints hinder the expanding of the auto industry in Wuhan to some extent," he said. The automobile manufacturing industry itself requires a large amount of funds, which the financial system might not be able to meet, according to Zhao.

"Furthermore, as a firm trend that the innovative and self-developed automobile will replace the current auto market domestically," Zhao said.

As of now, Dongfeng Peugeot Citroen Automobile Company has already developed a number of self-owned automobile brands. For instance, the company manufactured its very own Fu Kang 2004 and 2005 vehicle models, as well as Elysee 2005 and dual-fuel saloon car models. The dual-fuel saloon car is a type of new energy-saving, environment-friendly vehicles.

While the development of independent automotive products is still at a very early stage, it will be further strengthened in the near future, according to Wuhan Zhuyeshan Group's Yuan.