Brilliance China Auto, the partner of German luxury car firm BMW, yesterday said it has clinched a deal with a German auto trading company to sell a total of 158,000 own-brand sedans in Europe within the next five years.

According to the deal, which is worth 16 billion yuan (US$2.04 billion), Bremen-based HSO Motors Europe will be responsible for selling Brilliance's Zhonghua 2.0 and 2.4 litre sedans in one of the world's most competitive car markets.

The deal marks the biggest foray so far by a Chinese automaker into any Western market.

A Brilliance spokeswoman said yesterday the Hong Kong-listed company, which has plants in Northeast China's Liaoning Province, started to ship vehicles to Germany at the end of last month.

The carmaker plans to sell 3,000 Zhonghua sedans in Europe this year, and expects its annual sales to rise to 50,000 units by 2011, she said.

But the Brilliance spokeswoman added that the firm currently has no plans to manufacture cars in Europe.

Earlier this year, the company began to assemble the Zhonghua sedan in Egypt in partnership with a local firm with kits from China.

At present, Chinese automakers' major markets are in Southeast Asia, the Middle East, Africa and South America.

The Brilliance spokeswoman stressed the Zhonghua sedan had passed Europe's compulsory safety and exhaust emission tests.

To improve the quality of its vehicles, the firm in September hired a former vice-president from its joint venture with BMW as its chief quality officer.

The venture is making BMW's 3 and 5 Series sedans. Besides the Zhonghua, Brilliance's line-up includes own-brand mini vans and light-duty trucks.

Its sales surged 79 percent year-on-year to 174,000 vehicles in the first 10 months of this year.

The firm aims to boost annual sales to 500,000 vehicles by 2010, up from the 200,000 units anticipated this year.

Exports of China-made vehicles and spare parts have been growing rapidly in recent years thanks to domestic manufacturers' accelerated efforts to gain a presence in overseas markets.

In the first three quarters of this year, China's vehicle and spare part exports jumped 45.37 percent year-on-year to US$20.51 billion, according to industry data.

The nation's 2006 vehicle exports are forecast to reach 250,000 units, up from 160,000 units last year.

Vice-Minister of Commerce Wei Jianguo predicted last week that China's annual vehicle and spare part exports would grow to US$120 billion within the next decade from US$20 billion in 2005.

However, Michael Dunne, president of industry consultancy Automotive Resources Asia Ltd, said Chinese automakers face many obstacles as they venture out into the global marketplace, such as problems related to quality and overseas marketing and distribution, and the absence of industry consolidation.

"World-class quality, industry consolidation and marketing acumen do not occur overnight," Dunne said.

"It would be smart for Chinese companies to export to developing countries in the short-term and enter the United States and Europe only when they are really prepared to do battle with the best."

A top executive of Shanghai Automotive Industry Corp, China's biggest carmaker, said last week it has postponed plans to export its own-brand sedans based on Rover technology to Europe and the United States in an effort to focus on the domestic market.

The firm, a partner of both Volkswagen and General Motors, announced in April that it planned to sell its own-brand sedans in Western markets early next year.

Fellow Chinese carmaker Chery Automobile's plans to export cars to the United States next year have also been delayed after its US partner Visionary Vehicle LLC said last week that the two parties had halted negotiations to set up a joint venture to design, produce and sell cars.

With more than 100 vehicle producers and thousands of spare part companies, China's auto sector remains highly fragmented.

(China Daily November 29, 2006)