Local brands seen as key to the future
By Lydia Chen |
April 22, 2011, Friday
|
Print Edition
Print Edition
CHINESE auto makers and their foreign partners are rolling out dedicated local brands at this year's Auto Shanghai 2011, a move analysts said could help them extend their reach to smaller cities and support sustained growth in the world's largest auto market.
General Motor China said its new Baojun 630 mid-size sedan, a brand owned by GM's joint venture with SAIC and Wuling Motors, is expected to hit the domestic market right after the auto show and should cost around 100,000 yuan (US$15,314).
The family car will complement the joint venture's other high-end brands and soak up demand for affordable modes of transport in secondary cities, said Kevin Wale, president and managing director of the GM China Group.
Nissan's first domestic brand, the Venucia, or Qi Chen in Chinese, built in partnership with Dongfeng Motor Group, is expected to go on sale early next year at prices rumored to be from 50,000 yuan.
The trend for Chinese manufacturers to develop their own brands with help from their foreign partners can be traced back more than three years when Guangqi Honda Automobile Co unveiled the industry's first indigenous brand - the Li Nian S1 - at the 2007 Guangzhou Auto Show. The Honda unit introduced its China-only compact sedan to the market last Sunday at prices ranging between 70,000 yuan and 100,000 yuan.
Other market players such as FAW-Volkswagen, Dongfeng Honda, Beijing Hyundai, Changan Suzuki and Changan PSA all say they are planning to manufacture local brands.
Green light
Analysts says the reason for the rise in the development of own brands could be narrowed down to one word - market.
If a joint venture has a local brand that could mean a green light from the government for their future business expansion in the vast Chinese market.
According to an industry regulation in 2006, approval for the construction of any new automobile plants would be preferred to be given to those committed to building domestic brands in China.
The regulation was seen as a part of China's determination to push foreign car makers to bring their vital production technologies to China rather than having local plants only for assembly or other minor tasks.
"The government's idea is to encourage foreign car makers to transfer their technology to China in using the domestic market to exchange for advanced technology so that China's national automotive industry could catch up with international advanced levels," said Zhang Yu, managing director of AutoForesight (Shanghai) Corp Ltd.
The regulation was seen by many insiders as probably the main reason for the delay of construction of a new plant proposed by FAW-Volkswagen last June. The company planned to build a new factory in Foshan, Guangdong Province, which could have an annual production capacity of up to 300,000 cars in 2013.
So far the project is still waiting for approval from National Development and Reform Committee, China's top economic planning body.
Also, with an original brand, a joint venture may be able to join their Chinese rivals and be listed as a supplier of vehicles for government officials. Officials at all levels can only buy domestic brands for work, according to a policy designed to support the country's own car makers.
With sales growth in big cities such as Shanghai and Beijing starting to slow because of worsening traffic conditions, second and third tier cities, where the demand is for low or middle-end cars, hold the key to the future.
"The indigenous brand gives foreign car makers a good reason to build cheaper cars to expand their presence in the lower-end market now dominated by their Chinese rivals," Zhang said.
China's vehicle sales are expected to rise to 23 million units by 2015, up 27 percent from their level in 2010, Su Bo, vice minister of the Ministry of Industry and Information Technology, disclosed at a seminar ahead of the Shanghai auto show.
More affordable
Many car makers at the show all agreed that smaller cities in China would be big contributors to growth, one of the reasons to propel foreign car giants, who are mostly selling high-end autos, to launch cheaper and more affordable domestic brands to attract potential buyers in inner cities.
However, Lu Feng, a professor with the School of Government of Peking University, told Southern Weekly he doubted whether all the so-called home-brands by these joint ventures could really be China-made when all the key components were outdated foreign technology.
For example, the Li Nian S1 is similar to Honda City, a car dating back to 1981.
That domestic brands are foreign at heart is because all the key technologies are in the hands of foreign car makers, Zhang said.
"Chinese partners don't really have a lot of stake in negotiating with their foreign counterparts because of their lack of influence in R&D fields," Zhang said.
"Hopefully, the Chinese partners could involve more in the R&D area of future home-made brands, which will enable them to build true local brands as customers have wished for," Zhang added.
General Motor China said its new Baojun 630 mid-size sedan, a brand owned by GM's joint venture with SAIC and Wuling Motors, is expected to hit the domestic market right after the auto show and should cost around 100,000 yuan (US$15,314).
The family car will complement the joint venture's other high-end brands and soak up demand for affordable modes of transport in secondary cities, said Kevin Wale, president and managing director of the GM China Group.
Nissan's first domestic brand, the Venucia, or Qi Chen in Chinese, built in partnership with Dongfeng Motor Group, is expected to go on sale early next year at prices rumored to be from 50,000 yuan.
The trend for Chinese manufacturers to develop their own brands with help from their foreign partners can be traced back more than three years when Guangqi Honda Automobile Co unveiled the industry's first indigenous brand - the Li Nian S1 - at the 2007 Guangzhou Auto Show. The Honda unit introduced its China-only compact sedan to the market last Sunday at prices ranging between 70,000 yuan and 100,000 yuan.
Other market players such as FAW-Volkswagen, Dongfeng Honda, Beijing Hyundai, Changan Suzuki and Changan PSA all say they are planning to manufacture local brands.
Green light
Analysts says the reason for the rise in the development of own brands could be narrowed down to one word - market.
If a joint venture has a local brand that could mean a green light from the government for their future business expansion in the vast Chinese market.
According to an industry regulation in 2006, approval for the construction of any new automobile plants would be preferred to be given to those committed to building domestic brands in China.
The regulation was seen as a part of China's determination to push foreign car makers to bring their vital production technologies to China rather than having local plants only for assembly or other minor tasks.
"The government's idea is to encourage foreign car makers to transfer their technology to China in using the domestic market to exchange for advanced technology so that China's national automotive industry could catch up with international advanced levels," said Zhang Yu, managing director of AutoForesight (Shanghai) Corp Ltd.
The regulation was seen by many insiders as probably the main reason for the delay of construction of a new plant proposed by FAW-Volkswagen last June. The company planned to build a new factory in Foshan, Guangdong Province, which could have an annual production capacity of up to 300,000 cars in 2013.
So far the project is still waiting for approval from National Development and Reform Committee, China's top economic planning body.
Also, with an original brand, a joint venture may be able to join their Chinese rivals and be listed as a supplier of vehicles for government officials. Officials at all levels can only buy domestic brands for work, according to a policy designed to support the country's own car makers.
With sales growth in big cities such as Shanghai and Beijing starting to slow because of worsening traffic conditions, second and third tier cities, where the demand is for low or middle-end cars, hold the key to the future.
"The indigenous brand gives foreign car makers a good reason to build cheaper cars to expand their presence in the lower-end market now dominated by their Chinese rivals," Zhang said.
China's vehicle sales are expected to rise to 23 million units by 2015, up 27 percent from their level in 2010, Su Bo, vice minister of the Ministry of Industry and Information Technology, disclosed at a seminar ahead of the Shanghai auto show.
More affordable
Many car makers at the show all agreed that smaller cities in China would be big contributors to growth, one of the reasons to propel foreign car giants, who are mostly selling high-end autos, to launch cheaper and more affordable domestic brands to attract potential buyers in inner cities.
However, Lu Feng, a professor with the School of Government of Peking University, told Southern Weekly he doubted whether all the so-called home-brands by these joint ventures could really be China-made when all the key components were outdated foreign technology.
For example, the Li Nian S1 is similar to Honda City, a car dating back to 1981.
That domestic brands are foreign at heart is because all the key technologies are in the hands of foreign car makers, Zhang said.
"Chinese partners don't really have a lot of stake in negotiating with their foreign counterparts because of their lack of influence in R&D fields," Zhang said.
"Hopefully, the Chinese partners could involve more in the R&D area of future home-made brands, which will enable them to build true local brands as customers have wished for," Zhang added.
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