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China emerges as world's auto epicenter

Chinese auto sales are up, and this year China is projected to displace Japan as the world's largest car producer.
A model poses with a car from the Chevrolet brand under General Motors Corp. during an auto show in Beijing, China, on Friday. GM plans to begin exports of vehicles made in China to the United States within two years.Ng Han Guan / AP
/ Source: a href="" linktype="External" resizable="true" status="true" scrollbars="true">The Washington Post</a

America's auto titans are dismantling their global empires. But across the Pacific, it's as if the global economic forces that have pummeled Detroit never struck. Chinese auto sales are up, and this year China is projected to displace Japan as the world's largest car producer.

Now, the auto world is buzzing that China's auto industry may try to pick up the pieces of Detroit -- at a bargain.

Chinese companies have tried to dampen speculation, issuing regulatory filings that deny bids to buy Ford's Volvo or General Motor's Saab. But there's little doubt among analysts that Chinese automakers are interested in the United States and that Detroit's automakers are interested in them.

Buying up iconic brands such as Hummer or Saturn could supply Chinese automakers with the technological expertise to help them leapfrog past long-established competitors, said Kelly Sims Gallagher, a lecturer at Harvard University's Kennedy School of Government, who wrote a book on Chinese automakers.

"That's where Chinese firms are weakest," she said. "They have world-class business and manufacturing capabilities now. What they still lack is technological know-how, systems integration, being able to design new vehicles from scratch and get them to a manufacturing line."

China still suffers from its reputation of being a copycat manufacturer. An acquisition could lend clout to some of the nation's 100 car companies that are largely unknown outside their home country.

Such a deal would be "off-the-shelf legitimacy that you can purchase," said Aaron Bragman, an auto analyst with IHS Global Insight.

'Center of gravity is moving eastward'
The global auto industry is restructuring. Italy's Fiat is on the verge of taking control of Chrysler. Last year India's Tata Motors, already famous for its $2,000 Nano, acquired Jaguar and Land Rover.

And China's auto sector has emerged as a threat to the long-standing pecking order. Earlier this year, Geely Automobile, one of China's largest private carmakers, purchased an Australian drivetrain transmission supplier, a leading gearbox manufacturer. Weichai Power, one of China's top diesel engine manufacturers, acquired a French diesel engine producer. Another Chinese company, BYD, which counts Warren E. Buffett as an investor, launched a mass-market plug-in electric car, ahead of GM's anticipated Chevrolet Volt.

Detroit's annual auto show in January was somber, but Shanghai's show dazzled attendees with throngs of models, rock bands and light shows. This year, Nissan skipped Detroit and attended the Chinese event in April. Mercedes-Benz, BMW and Porsche all unveiled new-vehicle models in Shanghai.

"The center of gravity is moving eastward," Dieter Zetsche, chairman of Daimler, told reporters at the show.

"When we look back 20 years from now, the year 2009 is likely to be viewed as the year in which the baton of leadership in the global auto industry passed from the United States to China," Jack Perkowski, a Western transplant and former chairman of a Beijing auto parts company, wrote in his blog "Managing the Dragon."

Hurdles ahead for exports to U.S.
Some of China's bigger manufacturers, such as Chery Automobile, have trumpeted their intent to export Chinese-made vehicles to the United States in the next few years. To get there, they'll need to revamp their products to meet stringent U.S. emissions and safety standards.

That's no simple problem. Previous plans to ship Chinese cars to U.S. soil have crumbled. A company called Brilliance missed its goal of launching U.S. sales in 2009. BYD said it would introduce its cars to Americans in 2010, but has pushed their arrival to 2011. Other potential contenders have gone out of business or are struggling to stay afloat.

In 1994, Beijing released a plan to triple auto production by 2000 and reduce imports. The government lured foreign producers to bring their technology overseas and invest in Chinese auto parts firms. It aimed to modernize domestic manufacturing by creating joint ventures with foreign automakers such as GM.

As a result, China's auto sales took off in 2000. In 2002, they crossed the 1 million mark. More recently, the numbers have taken a hit in the economic crisis, forcing companies to curb exports to countries such as Russia and Vietnam.

Stimulus, growing middle class spur growth
But after the industry pressed Beijing for a bailout late last year, the central government responded with subsidies and slashed the sales tax on small, fuel-efficient cars, spurring demand. And analysts say the expansion of the country's web of roads and highways -- part of an economic stimulus package -- coupled with a growing middle class could fuel more sales for years to come.

In April, China's vehicle sales jumped 25 percent, compared with a year earlier, to a record monthly high of 1.15 million units. It was the third consecutive month that China has surpassed the United States in sales.

GM, which has two joint ventures in the country, also hit a monthly record in April with its sales jumping 50 percent from a year earlier. The automaker plans to import cars from China starting in 2011, according to a GM plan circulating in Congress.

But in the United States, auto sales fell 34 percent last month. And GM, which has received $15.4 billion in U.S. government loans, says it is likely to file for bankruptcy protection.