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Automakers covet more of China's huge market
by Staff Writers
Detroit, Michigan (AFP) Jan 11, 2011

Renault executives deny espionage charge
Paris (AFP) Jan 12, 2011 - Three Renault executives suspected of spying on the French carmaker have denied the accusations, after China angrily dismissed allegations that it was involved in the scandal. "Renault is making very serious accusations against me which I totally refute. The facts were outlined to me and I refute them as well," one of the executives, Michel Balthazard, told reporters. He made the denial after he was summoned to a meeting with Renault bosses along with two other senior managers suspected of industrial espionage, reportedly involving the company's electric car programme. "Today, I consider myself the victim of an affair that is beyond me," said Balthazard, promising to cooperate with any investigation.

Matthieu Tenenbaum, the joint head of Renault's electric vehicles programme, said through his lawyer that he was still waiting to hear exactly what he was accused of having done. His lawyer, Thibault de Montbrial, on Tuesday alleged that an anonymous letter was at the heart of the allegations. His client was accused "on the basis of an anonymous letter... (that) indicated, conditionally, in an indirect and implicit way, that he had received bribes and committed unethical acts." Bertrand Rochette, the third man suspended by Renault, also said he had nothing to do with the affair. Rochette, who worked as a deputy to Balthazard's number two, said he was "living a nightmare". Renault meanwhile issued a statement outlining the action it would be taking on Wednesday, but provided few details.

"Renault will file a complaint tomorrow," the company said. "From this date, the facts of this case will therefore be in the courts' hands." The company said it had met the three managers "in conformity with labour legislation" in a "discussion in advance of a decision of dismissal for serious offences". Renault last week suspended the three executives over suspicions they had leaked strategic information. Reports said the secrets concerned details of the company's electric cars. Le Figaro newspaper reported on Tuesday that a Chinese firm had paid undisclosed sums into Swiss and Liechtenstein bank accounts opened by two Renault executives implicated in the inquiry. But Chinese officials angrily rejected such claims. "As for this so-called story that China is involved, we believe this is totally groundless, irresponsible and unacceptable," foreign ministry spokesman Hong Lei told reporters on Tuesday.

The reports of a Chinese bid to obtain Renault's secrets follow a long history of similar allegations widely attributed to Beijing's goal of closing the technology gap with the West. French government spokesman Francois Baroin has insisted Paris is not pointing the finger at any country in the affair. "It is a process of inquiry," Baroin told Europe 1 radio. "Renault, like others, is the victim of an economic intelligence war." Officials have said French intelligence services are monitoring the case. The firm says it did not lose any major trade secrets in the affair and has not commented on allegations about China. Renault number two Patrick Pelata told Saturday's Le Monde daily that its inquiries showed it had been targeted by an "organised international network". Le Figaro, which did not identify its sources, reported that private investigators hired by Renault uncovered a Swiss bank account containing 500,000 euros ($646,000) and another in Liechtenstein with 130,000 euros.

Huge opportunities remain to be mined in China's auto market which has yet to reach its full potential and is a coveted El Dorado for global automakers eager to elbow out Chinese brands.

"China will be the number one" again in 2011, insisted new Porsche chief executive Matthias Mueller, on the sidelines of the North American Auto Show.

He predicted that in the long run the Asian economic powerhouse will become the top market for the German luxury sports car maker, whose models carry a hefty price tag.

Auto sales in China rose more than 32 percent in 2010 to 18.06 million units, a new record for the world's largest car market.

Sales in December rose 17.9 percent from a year earlier to 1.67 million units, the China Association of Automobile Manufacturers (CAAM) said in a statement.

China overtook the United States in 2009 to become the world's largest car market and General Motors, Ford and Volkswagen all posted record sales in the country last year.

"The potential in China is just enormous," agreed market analyst Rebecca Lindland, from IHS Global Insight.

CAAM forecast sales and production would however grow at a steadier pace in 2011, by between 10 and 15 percent, after the government raised the purchase tax for small cars to 10 percent and Beijing slashed the number of new registrations allowed in the capital this year.

US auto giant General Motors said its sales in China increased 28.8 percent year-on-year in 2010 to a new annual record of 2.35 million vehicles -- more than the 2.2 million vehicles it sold in its home market in the United States.

Volkswagen said its sales soared 37 percent year-on-year in 2010 to an annual record of more than 1.9 million cars.

Last year Chinese companies still represented 45.6 percent of the local market, but foreign manufacturers are hoping to win a bigger slice of the pie.

"We are going to initiate a four-passenger car brand in China" with local partner Baojun, General Motors head Tim Lee said Monday. "Demand in China is so strong."

The smallest of the Big Three US automakers, Chrysler, is looking to its iconic Jeep to help conquer the Chinese market, with the first boatload of Jeep Grand Cherokees exported from Detroit set to arrive soon.

"Jeep is one of the best-known brands in world -- it's as recognizable as Coca-Cola," said Mike Manley, president of the Jeep brand.

Sales in China of the legendary four-wheel drive vehicle have surged as Chrysler, with Fiat's help, has resumed Asian sales. In 2010, Jeep sales increased 10 percent to 149,000 vehicles.

On the luxury end of the market, Porsche is looking to its Cayenne and Panamera models to conquer the Chinese market, but sales of sports vehicles have remained soft.

"We want to improve the sport car market," said Mueller, adding Porsche hoped to triple sales within the next five years and aimed to open 100 concessions in China in the same time span.

Although the German automaker does not plan to develop specific models for the Chinese market, it is aiming "to teach them what sports cars are," he said.

By comparison, no Chinese manufacturers have yet won a toe-hold in the United States, said Lindland.

Chinese automaker BYD -- Build Your Dreams -- delayed the introduction of its E6 fully electric sedan after initial feedback showed it was not ready for the US market.

One significant problem was that there was a higher step in the back seat -- something which didn't bother Chinese consumers, but which BYD learned would annoy Americans.

Lindland said the Chinese company could however swiftly make inroads into the US market.

"Certainly it's naive to expect it would take a Chinese manufacturer a couple of decades, like it did for Hyundai and Kia," she said.

"One thing the Chinese do very well is that they learn vicariously through others."

BYD recently introduced a test fleet of its F3DM plug-in hybrid and plans to begin sales to retail customers in the beginning of 2012.

But vice president Mike Austin said BYD does not underestimate the challenges it faces in winning over the "finicky" and highly competitive US market.

"We're in no rush to launch bad vehicles in the US market," Austin told reporters on the sidelines of the auto show. "We want to get it right."


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