Emerging Markets: Company to Watch: Dongfeng Motor/China

Dongfeng Is Plugged Into China’s Electric Car Market

By Gordon Platt

Dongfeng Motor, one of China’s largest automobile manufacturers, has been a leader in designing hybrid electric vehicles, including a city bus that delivers 30% better fuel efficiency than standard city buses. The company’s research and development efforts could soon begin to pay off in a big way, as the Chinese government plans to subsidize the purchase of “green cars” in major cities.

Dongfeng Motor’s passenger car sales rose 46% in 2009 to more than 1 million units, as Beijing’s economic stimulus programs kept the economy humming and automobile demand growing. Sales for December were up 64% from December 2008.

The company has joint ventures with many foreign manufacturers, including Nissan, PSA Peugeot Citroën, Honda and Kia. It is already selling the Honda Civic hybrid in China.

The government has cut the sales tax on small cars and provides subsidies for buyers in some rural areas. At the same time, it raised taxes on fuel-inefficient vehicles.

China has recently become the world’s largest automobile market, and Dongfeng has some appealing new vehicles to offer, including the products of its joint ventures. Sales by its PSA Peugeot Citroën venture rose more than 50% last year. New car sales in the US, by contrast, fell 20% in 2009.

China says it will offer rebates on environmentally friendly vehicles sold in five cities under a pilot program. It also expanded another pilot program to subsidize the purchase of clean-energy vehicles for public transport, including electric, hybrid and fuel-cell-powered vehicles.