The rapid development of China's automotive industry has attracted many new investments oriented towards automotive sheet production. As a result of the vast investments in question, the Chinese automotive sheet market may soon be transformed into an arena of fierce competition, in particular as foreign mills are seeking a bigger slice in this market.
With the development of China's automotive industry, competition in the domestic automotive market has seen great change. Currently, there are over 130 automobile assembly factories in the country. Compared to other countries across the globe, this figure is excessively high, even despite the fact that China has the most rapidly growing automobile market in the world. Consequently, a series of important M&As and restructuring moves have come on to the agenda of the auto corporations involved in the industry.
In the first half of 2007, vehicle sales in China increased at a remarkable speed. For instance, the growth rate of passenger vehicle sales reached 26 percent year on year for the period in question. Making estimates according to the figures for the first six months, China's total output and sales of vehicles for the whole of 2007 is thought likely to be over nine million sets. However, almost 84 percent of sales are shared by just 10 corporations. As to the other 120 or so corporations, the yearly sales of most of them come to less than 10,000 units. These manufacturers are having to face serious pressures which threaten their very survival. Meanwhile, the leading vehicle makers are striving for increased market shares, pursuing the strategy of capacity expansion. In this context, it is clear that the time has come for the restructuring of China's automotive industry.
China's automotive steel sheet market is currently dominated by the top domestic steelmakers. As the largest automotive steel sheet supplier in China, Baosteel accounts for nearly 50 percent of the local market. Angang, Wuhan, Guanggang and a few other major steelmakers account for 35 percent of the market. However, due to technological issues, for the moment these top steelmakers are not able to produce some special sheet products. Instead, such products are manufactured by the joint ventures which the aforementioned steel producers have established with foreign mills. Cases in point are the joint ventures formed by Baosteel, Nippon Steel and Arcelor-Mittal, and by Guanggang and JFE.
According to the latest indications, the world's top steelmakers are planning to further expand their automotive steel sheet output in the years ahead. Taking the Japanese steelmakers for example, four major producers - Nippon Steel, JFE, Sumitomo Metal and Kobelco - plan to double their output of automotive steel sheet for the overseas market within the next three years. As one of the key global markets, China is inevitably a top priority for these producers. Consequently, besides increasing their direct exports to China, they will also be striving to up their direct investments in the country and to expand the outputs of their China-based subsidiaries and joint ventures.
The upcoming M&As and restructurings in China's automotive industry will afford big opportunities to the steelmakers who already have close ties with the top auto corporations. Due to the strong influence of local governments, the big auto corporations prefer to purchase their auto steel sheet from nearby big local steelmakers. Baosteel, Angang, Wuhan Steel and Guanggang all have big auto corporations located in close proximity. Due to increased cooperation with overseas steelmakers and improvements in technology and manufacturing skills, the gap in product quality between these big steelmakers is disappearing gradually. In this context, Baosteel's current leading status will meet serious challenges in the future and the local auto steel sheet market will perhaps be equally shared by several local steelmakers and their overseas collaborators.