China hopes to become big car manufacturer

BEIJING (AP): Tang Jinsheng's teenage recruits are putting together dreams: Chinese-made automobiles that their boss hopes will someday compete with Toyotas and Fords.

China cherishes great expectations for its auto industry, one of several sectors the government has declared essential for the country's development into an economic superpower.

Tang, a former specialist in military tanks, has made building a homegrown Chinese car his life's mission, and found favor with Beijing officials who want to make their city a key auto manufacturing center.

They have a long way to go.

Auto production remains a cottage industry in China, although the government has announced plans to consolidate the country's 126 carmakers and 4,000 parts factories into a handful of automotive giants.

Even the biggest and most modern companies -- joint ventures with foreign manufacturers like Volkswagen and Daihatsu -- turn out fewer than the 300,000 vehicles a year considered the minimum for a competitive carmaker.

China's combined annual output of some 1.5 million passenger cars is dwarfed by that of any of the biggest American or Japanese auto companies with their highly mechanized assembly lines.

Tang's China Bullet Head, a hatchback-shaped sedan made of fiberglass-like composite materials, is put together virtually by hand.

The young workers hoist a car body up and then drop it onto the chassis, which sits atop chunks of brick until the tires are mounted.

During the last stages of production, the cars are pushed by hand from station to station, as workers casually install windows, seats, windshield wipers.

Roughly a dozen sedans and hatchbacks roll into the parking lot each day.

"We're quite willing to start out small," says Tang. "We have to maximize what we can get out of the resources we use. If we make a huge investment, we'll end up with a huge capacity and not be able to sell the cars."

Tang, the 45-year-old son of a military official, started his Beijing factory in 1994, a couple of years after returning from a five-year stay in the United States. In America, he toured auto plants, studied engine design and put together from spare parts a dream car that now sits in a glossy showroom inside his factory's compound.

Tang wants his Bullet Head to become China's family car: an affordable, domestically made sedan for the mass market.

Most cars made in China now are produced by joint ventures.

Shanghai Volkswagen Co. is the largest, turning out 200,000 of its solid Santana sedans a year and taking about half the Chinese market.

Next comes No. 1 Automobile Group, based in the northeastern city of Changchun, which has ties with Volkswagen and Audi and has annual capacity of at least 150,000 vehicles, although it produces less.

Tianjin Automobile Industry Holding Co. teams up with Japan's Daihatsu to produce Charade cars.

Other competitors for the Bullet Head include the Citroen ZX, made by truck maker Dongfeng, and the Alto, the product of a venture between Japan's Suzuki and a subsidiary of Norinco, the Chinese weapons maker.

Tang is rankled by China's need to rely on foreign know-how, even for the Audi 100-inspired Red Flag, a sporty sedan resurrected in place of the lumbering limousines that used to sweep Communist Party dignitaries through Beijing's once-empty streets.

He hopes soon to start using engines of his own, instead of the Nissan engines installed in most Bullet Heads, so his cars will be entirely "Made in China."

"Chinese are smart. We can adapt. We can do anything the Americans can do," he says.

Despite its reliance on foreign technology and parts, China has limited the foreign stake in what it considers an important strategic industry. Joint ventures are restricted to a handful of firms and their products are required to have high ratios of locally produced parts.

One pothole in developing a strong national car industry is local protectionism.

Although the government has issued edicts against such practices, many areas restrict the sale and use of vehicles produced in other regions. Dozens of special taxes and fees on out-of-region cars can drive sticker prices up by a half, the state-run China Daily says.

In Beijing, privately owned Charades made an hour's drive away in Tianjin are banned from main streets on weekdays.

"I paid for a whole car, but I don't get to use it even half the time. It's outrageous," said one man obliged to bicycle to work because of the rule.

To give the Beijing-made Bullet Head a boost, the city's taxi office has made it the preferred car to replace miandi -- the tiny "bread loaf" taxis regarded as an embarrassment for a majestic capital. Drivers who replace their Charades and miandi' with Bullet Heads say they find it easier and cheaper to get a license.

Despite help from the bureaucracy, sales have not taken off. The company's sales manager, Han Wei, says sales for 1997 will be between 4,000 and 5,000, well below the target of 20,000.

Like other micro models invented in China -- the Little Squirrel, the Tint Dragonfly, the Lucky Star -- the Bullet Head has so far failed to find a market as an affordable family car.

It's partly a matter of timing. Just as Tang's factory was starting up, the car market hit a three-year slump, partly because of a graft-fighting ban on vehicle purchases by government officials.

Cost is also a factor. Prices have dropped by an average 20,000 yuan (US$2,400) in the past year. But a Santana still sells for the equivalent of $16,800 -- a fortune for Chinese city dwellers getting by on average wages of $600 a year.

Tang's Bullet Head is priced at a more affordable 50,000 yuan ($6,000) -- but even that may be beyond the reach of the low-end buyers most likely to settle for a fiberglass car whose hatchback does not even open.

There are no Bullet Heads at the Asian Games Village Automobile Exchange, Beijing's largest car market.

"Some taxi drivers buy them, but no one else does," says Yang Changyu, a salesman.

"There's no point in having them sent over from the factory unless someone wants to buy them."