For five years in succession, China's car industry production has basked at the summit of the global ranking. But the growing production has not been in tandem with export numbers. China's vehicle exports have virtually stalled, and at times even plummeted.
Only 585,000 vehicles were sold outside China in the first eight months of this year, representing a fall of about 8 percent. On average, China's car exports account for a paltry 5 percent of the total production. This is way below the figures China's main economic rivals command.
The main reasons behind the unappealing sales in foreign markets are the yuan exchange rate, rising labor costs and poor marketing strategies.
In particular, the strengthening of the yuan continues to put pressure on Chinese vehicle exports, as this has pushed up production costs and eroded prices advantages.
Rising labor costs have inhibited the thriving of the automobile industry, as China experiences fast-rising wages, worker activism and erratic labor shortages. This means for the world's second largest economy's vehicle exports to grow, it has to change to an intensive growth model that uses resources more efficiently.
However, these risks cannot outweigh the competitive advantages China has in foreign markets. Chinese products enjoy a considerable price advantage. Their vehicles are also known to be fuel-efficient and environmentally friendly, making them suitable for emerging demands in developing blocs such as Africa.
But China still needs to broaden its export markets beyond Asia. For a long time, Chinese vehicle sales have been constricted to Japan, South Korea and some African countries such as Algeria, Angola, Egypt and South Africa. Yet the pace at which the sub-Saharan Africa economy is growing presents huge potential for Chinese vehicles. This year, the region's growth is forecast to accelerate to 5.2 percent, driven by increasing investment to exploit the natural resources and develop infrastructure.
And the need for improvements still remains. Today, Africa's largest infrastructure deficit is in the power sector. Whether measured in terms of generation capacity, electricity consumption, or security of supply, the continent's power infrastructure delivers only a fraction of the service found elsewhere in the developing world.
The road density is no better. Only one-third of Africans living in rural areas are within two kilometers of an all-season road, compared with two-thirds of the population in other developing regions.
The cost of redressing these infrastructure deficits is estimated at $38 billion of investment annually. They further require $37 billion per year in operations and maintenance, bringing an overall price tag to $75 billion, about 12 percent of Africa's GDP.
These deficits present a massive market for China-made earth moving machines and light trucks.
While global brands such as Toyota have deeply penetrated Africa, the current environment presents Chinese automakers with superb opportunity to outdo their rivals. What they need to do is to ride on affordability and come up with vehicles that perfectly fit Africa's rough terrain.
Crucially, the internationalization of Chinese automakers in Africa should start setting up manufacturing plants within the continent. This could be done by joint ventures in some important markets, such as Kenya, Nigeria, Ghana and South Africa. This way, China will be brushing off the harsh impact of the yuan appreciation and spare the locals high duties.
Chinese automaker SGMW, under a partnership with SAIC, Wuling Motors and General Motors, has set the pace for this revolution by establishing a subsidiary in Egypt.
This signals the beginning of a new era, in one which will see global carmakers pitch their tents in Africa. But it needs government support, such as extending tax holidays on a need basis and smoothing the process of establishing new businesses. That can really kick the African auto industry into high gear.
The author is a journalist and a security analyst in East Africa. opinion@globaltimes.com.cn