China's Home Appliance Makers to Enter the Automobile Industry
Oct 28, 2003
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Several of China's home-appliance companies have announced their intentions to enter the automobile industry.
Midea, one of the country's major air-conditioner makers, has signed an agreement with the local government of Kunming, capital of Southwest China's Yunnan Province, to invest 2 billion yuan (U.S. $241 million) in an automobile project during the next 5 years.
Midea, based in Guangdong Province, will merge three small bus plants in Kunming into one entity. The project's annual sales are expected to exceed 5 billion yuan ($604 million) over the next 5 years. Midea is also reportedly in negotiations to acquire a bus plant in Central China's Hunan Province; and in talks with Wuling Motor, in South China's Guangxi Zhuang Autonomous Region, to acquire a stake.
Sanxing Aux, another air-conditioner company in East China's Zhejiang Province, aims to have a controlling stake in one of two automobile companies in central Jiangxi Province. The two are Jiangxi Isuzu, Japanese firm Isuzu Motor Co's joint venture producing pickup trucks; and Jiangxi Fuqi, a local light sport utility vehicle producer. The company reportedly will set up a subsidiary specializing in the auto business. Sanxing Aux is also in negotiations with Nanjing Automobile Industry Corp in East China's Jiangsu Province. Other companies such as Hong Kong-listed home-appliance giant Greencool, refrigerator manufacturer Xinfei Electric, and Chunlan have also jumped on the bandwagon.
According to the China Daily, the average profit margin of the home-appliance sector in China is less than 5 percent, compared with 10-20 percent in the auto industry. In addition, profit margins in many home-appliance segments, such as color television sets and air-conditioners, have been shrinking as a result of fierce competition for many years. For example, the net profit in the air-conditioner segment—which has 400 makers—fell 30 percent last year from 2001.
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