China Overtakes Germany in Auto Output

China has become the world's largest car manufacturer, surpassing EU champion Germany and the US, whose ailing industries are struggling for survival amid the economic crisis.

China became the largest car producer in 2008, with a world market share of 17.2 percent, outranking Germany with its 14.7 percent and the US (14.6%), the German association of car manufacturers VDMA revealed on Monday.

A look at the profit shares also highlights the troubles in Western car industries compared to the Asian one: German companies had an eight percent increase, the US a loss of 10 percent, while Chinese car makers managed a 30 percent increase.

The sales slump in the US and Europe is still a distant prospect on the Chinese market, where in March, new cars sales reached a record of 1.11 million, according to statistics released by the China association of automobile manufacturers.

Luxury cars, which pile up in ports and in European car parks, are increasingly attractive for Chinese customers with big pockets.

Recent car sales in China have also been boosted by various incentives introduced as part of government stimulus plans, especially in the low-consuming segment, where taxes have been scrapped for cars with engines of 1.6 litres or less. The government is also subsidising the purchase of alternative energy vehicles.

The lack of a level playing field between European and Chinese car manufacturers will lead to even smaller profits for the EU's struggling industry, says John Fox from the European Council on Foreign Relations, a London-based think tank.

"European companies all had very big shares of the Chinese market previously, when they had the technological advantage, but the terms of the joint ventures forces the companies to hand over the technologies. Now the Chinese can produce the same technology without needing the European partners," Mr. Fox told EUobserver.

The only lesson to be drawn, according to the British expert, author of a recent study on EU-China relations, would be for Europe not to make the same mistake with other technologies where their companies still have the competitive advantage.

"The problem is that Europe doesn't see China as a competitor, it still sees it very much as a developing country," he said.

Japanese car companies, for instance, have all been signing up to a government-negotiated code of practice and were producing in China only car body parts, but not the high-tech engines such as for the Toyota Prius, Japan's cutting-edge eco-car.

European companies, however, were still very much competing with each other for a market share in China at any price although the profit outlook was increasingly shrinking, Mr. Fox explained.