Chinese manufacturer Changan Automobile said on Tuesday it had opened a new European office in Germany, facilitating the company’s entry into the world’s third largest regional market where peers such as BYD and Chery are also forging ahead.
Why it matters: The move is part of Changan’s ongoing efforts to sell vehicles overseas and improve its financial performance as cutthroat competition in the home market weighs on its margins.
- Changan last week reported (in Chinese) a 5.9% fall in net profit of around RMB 1.2 billion ($160 million) attributable to a deduction in non-recurring profits or losses for the first half of this year.
- Gross margins for overseas business sat at a decent 26.91% while that number for domestic car sales was 10.1%, generating an overall gross margin for the period of 13.8%, down 2.5% from a year prior.
Details: Changan Automobile Deutschland, Changan’s Munich-registered subsidiary, will cover market research, product engineering, testing or homologation work, as well as sales and customer services, the company said in an announcement (in Chinese).
- The automaker also said on Wednesday that its first regional plant for electric vehicle manufacturing in Southeast Asia will start operations in Thailand in the first quarter of next year. The 8.8 billion Thai Baht ($241.7 million) facility will have an initial capacity of 100,000 vehicles annually.
- Changan, a manufacturing partner of Ford and Japan’s Mazda in China, added it is considering setting up production facilities in Europe, as well as Central and South America, without revealing further details. Its vehicle exports grew 67.6% annually to 228,607 units from January to July.
- China’s fourth largest automaker by sales volume said (in Chinese) last March it planned to introduce five EV models in Europe in 2024, including the Avatr 11, a luxury sports utility vehicle, as well as the more affordable Deepal S7 crossover. Avatr and Deepal-branded cars feature Huawei’s in-car technology at home.
Context: In addition to the two-decade car production partnerships with Ford and Mazda in China since the beginning of this century, state-owned Changan has been working closely with Chinese tech giant Huawei for assisted driving and infotainment over the past few years. The two companies last month reached a RMB 11.5 billion deal for Changan to take a 10% stake in Huawei’s automotive business unit.
- More Chinese automakers are making forays into the European market. BYD said on August 30 that it expects to close the acquisition of its German distributor Hedin Electric Mobility in the fourth quarter of this year, according to Reuters. Land Rover’s partner Chery in April reached a joint venture deal with Spain’s EV Motors to produce cars at a former Nissan plant in Barcelona later this year, China Daily reported.
READ MORE: Chinese carmakers to become dominant globally despite tariffs – AlixPartners
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