LAST year was a rocky year for China's auto industry, with much to be proud of and also some disappointments.

The world's second-largest auto market could not be shielded from the global financial crisis as vehicle sales slowed and car makers' profitability suffered.

The biggest concerns of the auto manufacturers were how to rev up sales and whether the sluggish market would continue this year.

As vehicles consumed 50 percent of the nation's total fuel consumption, the government raised vehicle consumption tax on big cars and reformed the fuel pricing scheme as part of its efforts to encourage more people to buy fuel-efficient vehicles.

The year was also a proud one for China with the successful staging of the Beijing Olympics. Chinese car makers took advantage of the event to showcase their development of eco-friendly vehicles which were used to ferry athletes and overseas friends in the Olympic Village.

Some Chinese car makers unveiled their self-developed and self-designed green vehicles in the domestic market last year including BYD's F3DM, a fuel cell hybrid.

Shanghai Daily is running a special edition to review the performance of car makers and picked the top 10 news events that influenced the industry the most.

Hopefully, it will give insight into future trends of the industry.

We reviewed five today and will run the balance on January 20.

1. Market downturn

Although China may report its first single digit growth in vehicle sales last year in seven years, total sales will still fall short of an earlier estimate of 10 million units.

The end of what used to be more than 20 percent growth in sales stemmed from a series of negative factors including natural disasters such as snow storms and devastating earth quakes.

Rising fuel prices and record-high inflation also deterred people from buying big items.

In the second half of last year, demand for vehicles continued to be weak as a global financial crisis slowed the economy, undermined consumer purchasing power and hurt vehicle exports.

According to the China Association of Automobile Manufacturers, vehicle sales totaled 8.63 million units for the first 11 months of last year, an increase of 8.52 percent from a year earlier.

In August, vehicle sales posted the first year-on-year decline in three years, slowing China's fast-growing auto market.



Opinion: Analysts are split over the outlook for the vehicle market this year, with some thinking it will remain flat while others expect a rebound in the second half. Amid the slow demand, paying more attention to after-sales services will not only maintain brand loyalty but will also generate new profits.

2. Higher tax on big cars

The central government doubled the sales tax on big cars to as high as 40 percent while cutting it on small cars in September in its drive to cut energy use and emissions.

The vehicle consumption tax for passenger cars with engine capacities between 3 liters and 4 liters was raised to 25 percent from 15 percent, with the rate for cars with engines of more than 4 liters doubling to 40 percent. The rate for cars with engines that are 1 liter or less fell from 3 percent to 1 percent.

Opinion: With the new policy, the government intends to encourage people to buy more small cars to save energy and keep the environment clean. But many people question its real effect as it only targets two small market segments. Auto buyers are less attracted to the 2 percent rate cut for small cars while those who are able to afford gas-guzzling vehicles are usually less price sensitive. More measures such as cutting 10 percent in the vehicle purchase tax are expected this year.

3. New energy vehicle boom

Seeing their Western auto maker counterparts struggling to survive a sales slump on gas-guzzling vehicles, 2008 marked the influx of eco-friendly vehicles in China.

During the Olympics, 500 fuel-efficient new energy vehicles including electric buses, hybrid sedans and fuel cell cars started trial operations. The models were developed by eight car makers such as FAW, Dongfeng, Shanghai Volkswagen and Chang'an after investing heavily on research and development.

A total of seven Chinese-made new energy vehicles have been granted production permits including Shanghai General Motor's hybrid LaCrosse sedan and Chang'an Jie Xun hybrid. New regulations have been drafted for the new energy vehicles including hybrid cars, fuel cell vehicles and models using alternative fuels.

The government expects 60,000 new energy vehicles to be on the roads nationwide by 2012 with subsidies and favorable taxes to support the development of clean cars.



Opinion: Everybody knows the benefits of clean energy vehicles to society and the next generation, particularly when crude oil prices may possibly hit another record. For the industry, clean energy vehicles could be a golden opportunity for China to gain an advantage against international rivals.

4. BYD's F3DM

When Chinese car maker BYD Co rolled out the world's first mass-produced hybrid electric vehicle, the F3DM, it made a splash in the global auto market.

BYD's plug-in F3 dual-mode sedan can travel up to 100 kilometers using only its electric engine, with a top speed of 100 kilometers per hour. A gasoline engine is activated when it is low on power.

The battery can be fully charged in nine hours at any household electrical outlet and in 10 minutes if charged at BYD's own charging station. BYD's F3DM gained an advantage over Toyota Motor Corp and General Motors Corp as it led several breakthroughs in new technologies.

The car manufacturer, which used to make batteries and is nearly 10 percent owned by a subsidiary of Warren Buffett, sells the F3DM for 149,800 yuan (US$22,000).



Opinion: It's really a moment worth cheering for BYD's efforts on new energy vehicles. As a newbie, the BYD F3DM still needs time to prove its safety, durability and technologies.

The firm sold the first 50 units to government and industrial institutions. But there are hopes individual auto buyers will be able to buy the vehicle as soon as possible.

5. Doubts over C-NCAP

China's New Car Assessment Program, which is regarded as a major vehicle safety index for consumers, has been accused of impartiality.

A program on China Central Television said China Automotive Technology & Research Center, the operator of the vehicle crash tests under C-NCAP, took money from car makers to fund the tests they do on models.

CATRC is also criticized for selling test results to car makers if their cars received low ratings in the crash tests.

The report aroused heated discussions among consumers who have begun to pay more attention to vehicle safety. CATRC later admitted a lot of work needs to be done to perfect the mechanism but insisted all the test results it had conducted were objective.

Opinion: It's the duty of an institution to balance profitability and objectiveness. But the creation of the C-NCAP helped car makers to know how safe their models were.