# Asian Carmakers Reach Geneva Autoshow



## hkskyline (Sep 13, 2002)

*AUTOSHOW-Rising Asian might hangs over Geneva car show *
By Michael Shields, European Auto Correspondent

FRANKFURT, Feb 23 (Reuters) - Asian carmakers' growing might on Europe's eastern flank will serve as a troubling reminder for rivals at next week's Geneva auto show that crushing competitive pressure in the sector shows no sign of letting up. 

Hundreds of thousands of cars will each year churn off Asian companies' assembly lines in central and eastern Europe before the decade is out, twisting the thumbscrews on Europe's mass carmakers already beset by Asian imports and flat demand. 

"They are going to be looking to sell those partly in the new markets (of the region) but also in western European markets as well. In terms of pricing, they are going to be quite aggressive, and it could create a problem," said Carol Thomas, who tracks carmaking in the region for consultants JD Power-LMC. 

South Korea's Hyundai Motor Co. is on the verge of inking a deal to build a $1 billion car plant in central Europe -- most likely in the Czech Republic -- to make 300,000 cars a year from 2008. 

Its sister company, Kia Motors Corp., the fastest-growing car brand in Europe in 2005, aims to boost unit sales in Europe to half a million by 2008, helped by the opening of a new plant in Slovakia late this year. 

The Slovak plant will make 200,000 Kia mid-sized cars a year by 2008, rising by another 100,000 in 2009 and competing squarely for mass-market customers across the continent. 

Toyota Motor Co. has been cranking out small cars for a year at a Czech plant with PSA Peugeot Citroen. 

Asian companies also have well-established manufacturing bases in Turkey and are building up operations in Ukraine, Thomas noted, which is the last thing western carmakers need at a time they are slashing costs and jobs to shore up earnings. 

"Manufacturers in competing segments must be worried about their 1 or 2 percent yearly growth rate because that is what they are fighting against," Global Insight car sector analyst Christoph Stuermer said of the new Asian output. 

*BRANDS MATTER *

But western carmakers still have the edge when it comes to brand loyalty among customers, he said, adding it could take a decade or two for the Korean upstarts to establish their brand rather than rely solely on individual products to spur growth. 

"If the European manufacturers take their customers seriously and if they leverage all the knowhow and experience they have in the European market, then the Koreans are not likely to get a bigger foot on the ground easily," he said. 

The 76th Geneva show, which opens with media days on Tuesday and Wednesday, will drive home the trend for carmakers to keep using new models to fill ever-tinier market niches even at the expense of economies of scale that large production runs bring. 

Premium carmakers like BMW, Audi and Mercedes-Benz will again show new cars and offroaders with plenty of muscle, but fuel efficiency will also top Geneva's agenda at a time oil prices make it painful to fill up. 

Mitsubishi Motors will present a concept car with an electric motor for each wheel, while Mazda shows a multipurpose hybrid vehicle with a rotary engine that can run on either hydrogen or petrol paired with an electric motor. 

Loremo will display a diesel two-seater that uses lightweight technology and consumes only 1.5 litres per 100 km (157 miles per gallon) but can still hit speeds of 160 km (100 miles) per hour. 

Despite the huge challenges posed by stalled markets, a price war, high raw material prices and a weak dollar, European car stocks have had a good run this year amid hopes that a generation of star managers will get a firm grip on costs. 

The DJ Stoxx European car sector index has outpaced the broader market by nearly 5 percent this year. 

"We believe the restructuring stories (and the management teams behind them) represent the most compelling bull argument for the sector," Morgan Stanley said in a recent note. 

"However, we believe the stocks are pricing in too much of the benefit without looking at the risks to the environment ... DaimlerChrysler's disappointing 4Q results and 2006 outlook is a reminder that even powerful new management cannot control the competitive environment."


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