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. Last Updated: 07/27/2016

Germans Vie for Chinese Auto Market

BEIJING -- Luxury car makers Mercedes-Benz and Porsche are among 12 global car companies that have entered an informal contest for the chance to make a boxy, cheap vehicle destined to become China's "family car."

Both leading German companies covet China's increasingly voracious market for private cars, where 1994 sales will hit 350,000 and are seen soaring to 3 million by 2010.

Getting in now, they said, was crucial to taking a share of a long-range market described by the official China Daily as "about 300 million potential car owners."

Both unveiled their entries at Beijing news conferences Tuesday and were to give detailed, private presentations to contest sponsors at the Machine-Building Industry Ministry.

Mercedes-Benz, Porsche and other European, U.S and Japanese car makers will use the private meetings this week to push their vision of the perfect car for the Chinese family.

The competition was announced in May when Beijing, reversing decades of support for public transport, decreed that a capital-intensive family car industry would become an economic pillar of its emerging "socialist market economy."

The Mercedes and Porsche entries were similar -- boxy mini-cars with advanced technology and prices low enough for China's emerging consumer classes -- but their strategies differed sharply.

While Porsche is loath to lend its precious name to a cheap Chinese-made car, Mercedes is warmer to the idea, seeing the China market as central to its long-term strategy and even its corporate survival.

Board member J--rgen Hubbert said market realities were forcing Mercedes to accept change. "Research shows that demand in developed countries will not go much beyond 36-37 million cars a year, while in the next 20 years all growth will be in China, Southeast Asia and similar places," said Hubbert, who oversees car production. "To participate in this growth, you have to produce cars at a cost level that people here can afford," he added.

"We have to understand that with this kind of development we cannot remain only as an upper-luxury car maker."

The question is whether the Mercedes name and logo should grace the hood of a Chinese-made mini-car selling for as little as $10,000.

Mercedes has begun moving toward a car for the masses with the unveiling of its A-class in Europe, a design Hubbert said would be adapted easily for China.

The Mercedes line is being "stretched" in Europe to include the low-priced A-class, but Hubbert said making cars under different names was another option.

Porsche is taking another tack that it hopes will protect the exclusivity of the elite Porsche marque, even while enabling the firm to tap China's vast market potential. "We are not changing the nature of our business," said Porsche president and chief executive officer Wendelin Wiedeking.

"We do two things. We make sports cars and we also provide automotive engineering to others," he said. "The Porsche brand means engineering competence and sports car competence."

Acknowledging that Porsche's aim was to forge a "full-blown joint-venture" to make mini-cars in China, Wiedeking conceded this would represent a third business -- mass-market production for a developing country.

"Yes, this could bring Porsche into an entirely new dimension -- there's no doubt about that," he said.