Weakened yuan expected to help nation's car exports

After a three-day sharp slide in the renminbi exchange rate against the US dollar, some industrial experts and auto executives are reportedly expecting the lower exchange rate to stimulate more vehicle exports.

However, Dong Yang, secretary general of the China Association of Automobile Manufacturers, said the renminbi exchange rate is still high compared with the Japanese yen and South Korean won.

He said because Chinese carmakers compete with Japanese and South Korean car exporters, new Chinese cars that used to be the same price as many used Japanese or South Korean cars are now similar prices to new Japanese or South Korean cars.

"Despite the fact the renminbi exchange rate against the US dollar dropped, it was still rather high, so the slide of renminbi rate against the US dollar won't work for Chinese carmakers," he added.

Japan and South Korea have applied a series of monetary easing policies to make the Japanese yen and South Korean won low compared with the Chinese renminbi.

Before the significant depreciation of the yen and won, a trader could import a new Chinese car for the same amount of US dollars that could buy a used Japanese or Korean car. Now a new Chinese car has a similar price tag to a new Japanese or Korean car, according to Dong.

A weaker yuan is expected to help made-in-China vehicle exports, which have shrunk in the past two years and were down 14 percent in the first seven months of this year.

Chery, China's biggest vehicle exporter, said the move to devalue the yuan will help its sales overseas and shipments will rise by 20 percent this year, Yin Tongyue, chairman of Chery, told Bloomberg.

In terms of Chinese carmakers going overseas, Dong said it takes at least two to three years to fully set up a plant abroad.

"Only until the products and technologies hit standards, a reasonable currency level, mature policies as well as sufficient production capacity are ready, they can achieve their targets to make their footholds," he said.

Domestic surge

July saw Chinese consumers buy the fewest passenger vehicles for 17 months, extending a slump in the world's largest auto market as deeper discounts failed to revive demand.

Figures from the China Association of Automobile Manufacturers showed passenger vehicle sales declined 6.6 percent, also to a 17-month low.