Chinese Carmakers Plan Ghana Assembly Plants
Chinese carmakers are planning to open assembly plants
in Ghana in Africa so that they can export assembled cars
from Africa to markets in Europe and North America. The
move would take pressure off of direct exports from China,
and would benefit from duty-free status for imports to
those two major markets.
While Volkswagen and General Motors have been raising
their auto production capacity by major amounts in China,
their Chinese joint venture partners, including SAIC (Shanghai
Automotive International Inc.), are looking for other
markets to assemble Chinese-made car kits for export.
The difference in strategy is that while VW and GM are
looking at the Chinese domestic market for sales, their
Chinese partners are looking more closely at other countries
which they can export from into the markets of North America
and Europe.
The best country for auto assembly in Africa is Ghana
as the Chinese see it, and the Chinese companies are aggressively
planning on setting up assembly plants in that west African
country. Besides a quality labor force, exports from Ghana
qualify for duty-free import status to both NAFTA and
EU countries.
The Chinese are pushing for special incentives from the
Ghana government, including 5-10 year income tax-free
status. Current Ghana taxes on car parts imports are 10%
higher than those for cars. If the Chinese assembly plant
investments are to make economic sense, they will have
to push for revisions of these current regulations.
Some Chinese vehicles have already been sold in Ghana,
where they have acquired a reliability for low prices
and reliability.
While auto sales in China have gone up more than 50%
annually in the past three years in China, they have taken
a tumble since May because of government credit tightening.
As a result, there are large auto inventories sitting
all over China.
The Chinese companies also want to wrest the African
market for Japanese second-hand cars away with their low-cost
Chinese models. Currently, the African markets are dominated
by Japanese second-hand cars. Because of Japan's stringent
standards for auto license renewal, many well-maintained
Japanese cars have to be sold annually in Africa. The
Chinese believe that if they can capture the African markets
away from the Japanese second-hand market, then their
cars will have a reputation for low prices and good quality.
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