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Zonda Plans to Build New Factories Abroad

2008-10-16    Source:english.chinabuses.com

Mainland automobile company Zonda International Holdings plans to set up plants in foreign countries to manufacture automobiles to combat rising costs and fierce competition at home. Among other countries, Zonda has been eying are emerging markets such as Iraq, where there is a strong demand for heavy vehicles. Zonda now exports auto parts to 35 countries and regions. If everything works out as planned, Zonda will have five overseas plants.


Zonda has sealed a deal to develop a joint-venture automobile factory in Vietnam, but construction was delayed by six months because of economic instability. Hyperinflation and huge capital outflow plagued the Southeast Asian country since May as a result of overheating investment and global financial upheaval. However, the recession will reduce the cost to build the plant in Vietnam.


Zonda's foray into overseas markets came at a time when mainland automakers are vying with each other for bigger market shares under rapidly rising production costs. The company now has an 80 percent share in the mainland's double-deck bus market, but the domestic business environment is "getting tougher". The steel price, a major raw material for making cars, has surged by 70 percent this year.


The plans to set up factories overseas are aimed at boosting Zonda's manufacturing business, as profit margins for trading business are low. The gross profit margin of making maintenance equipment stands at 18 percent and that of making automobiles is 14 percent. Both are far higher than the 3 percent from trading business.


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