CHINA'S auto industry grew to a record size in 2011 and remained relatively buoyant despite the global economic slowdown. After two years of explosive sales growth, the overall passenger-car market did slow, but customers of high-priced luxury cars were waiting for delivery as demand outstripped supply.

Foreign carmakers are getting smarter about doing business in China, launching lower-priced indigenous brands. Chinese carmakers are finding new markets overseas.

One thing domestic and foreign auto companies have in common: both recognize the importance of alternative fuel and hybrid cars and development of "green" cars is in full swing.

Shanghai Daily presents a selection of industrial highlights for 2011 to wrap up the concerns, surprises and expectations as the auto market powers ahead.

Vehicle sales growth slows

China's auto sales rose 2.6 percent to 16.8 million units during the first 11 months. Though the world's largest auto market kept its momentum, the growth was far less than the 32 percent surge for 2010, blamed on slower economic growth and the end of small-car purchase incentives this year. Dong Yang, head of China's Association of Automobile Manufacturers, estimated that overall vehicle sales "is likely" to grow less than 2 percent this year.



Opinion: It's not realistic to expect China's auto market to always maintain spectacular sales increase. But clearly government incentives have a substantial impact on domestic demand. The end of the stimulus will help the industry prepare for healthier growth and may signal government's intention for industry sustainability.

Luxury vehicles are hot

The world's luxury carmakers Mercedes-Benz, BMW and Audi all reported record China sales during the first 11 month, with year-on-year growth over 35 percent, far above market average. The growing number of wealthy Chinese offered huge opportunities to global premium carmakers, which expanded product mix and dealerships in hopes that China will become their No. 1 market.



Opinion: "The premium and the costlier, the better" describes Chinese consumers' perception of vehicles and partly explains the high demand for premium autos this year despite economic uncertainty. Considering their large customer base, luxury automakers should put more effort into after-sale services and customer satisfaction since brand loyalty is emerging among maturing Chinese customers.

Beijing curbs plate supply

The Beijing municipal government introduced a policy of tighter plate supply in January in its effort to ease traffic jams. However, the new lottery policy also directly impacted car sales, and vehicle sales may drop by two-thirds to 240,000 units this year. Beijing was followed by Guiyang, capital of southwest China's Guizhou Province, which announced a new policy to restrict car purchases for traffic and environmental reasons in July.



Opinion: There's an old Chinese saying, "Better to divert than block." In addition to controlling vehicle numbers, traffic congestion can be eased by well-developed transport, reasonable traffic planning and responsible driving habits.



.Pang Da and Youngman hungry for Saab

Two little-known Chinese auto companies, Zhejiang Youngman Lotus Automobile Co and Pang Da Automobile Trade Co agreed to pay 245 million euros (US$317 million) for a majority stake in the nearly bankrupt Swedish car brand Saab in July. The investment plan was revised to 100 million euros for all Saab's shares in October. It's now blocked by General Motors, which still has preference shares in Saab, over concerns over its technology licenses, an IP issue. The latest news is that Saab filed for bankruptcy on Monday.



Opinion: Financially well positioned Chinese automakers are extremely eager to acquire advanced technologies from international automakers, even though the Saab brand is widely believed not worth rescuing. Pang Da and Youngman should learn a lesson: to get better prepared for an international acquisition. Sitting on a pile of cash is not enough.

Electric vehicles in fast lane

The central government has declared the electric vehicle industry a top priority and is reportedly investing 100 billion yuan (US$15.75 billion) in the next 10 years to transform the country into a world leader in clean-vehicle production. Volkswagen plans to produce EV in China in 2013 when another EV model jointly developed by Daimler and BYD will hit the market. General Motors started to import Chevrolet Volt plug-in electrics to China, while Nissan, Honda, BMW have all initiated road tests of EVs in China.



Opinion: The Chinese market has vast potential but development of EV also relies on improved infrastructure and technology.

Independent JV brands on the rise

The Chinese venture of General Motors introduced the Baojun 630 mid-size sedan at the Shanghai auto show in April, joining other foreign carmakers in launching local brands in China. Those dedicated indigenous JV brands help foreign carmakers extend their reach to the lower-end of the market with price-competitive models. Besides Dongfeng Nissan's Qi Chen, or Venucia, and Li Nian from Guangqi Honda, other players such as FAW-Volkswagen, Dongfeng Honda and Beijing Hyundai all plan to manufacture local brands.



Opinion: The government's original intention in allowing development of independent JV brands was to help Chinese companies boost their exposure to foreign engineering skills. But now it appears that many international carmakers are taking advantage of their older technologies to try to kill off domestic carmakers.

BYD's layoff

BYD Co reportedly laid off 70 percent of sales staff after auto sales plunged, an unidentified laid-off employee said on his microblogging site in August. The battery and car manufacturer has plans to cut the workforce at the sales unit to 800 from 2,600 and initially about 1,000 employees would lose their jobs, the employee said. The company acknowledged there was a personnel transfer to improve service and enhance efficiency, but declined to be specific.



Opinion: BYD has been aggressive in expansion over the past few years after it was spotted by United States billionaire Warren Buffett. There is no easy success, particularly for China's late-starting automakers, unless they can offer high quality and competitive pricing to make each model a real hit on the market.

Recall regulation in process

China is working on the nation's first regulation on the recall of defective vehicles, which may involve mandatory recalls of complete vehicles as well as key components including tires. Automakers have been criticized for their reluctance to recall vehicles in China because of a lack of industry regulations. Penalties for violators are far lower than in overseas markets.



Opinion: China's slowness in adopting and enforcing tougher safety standards is coupled with an attitude by some automakers that making money is more pressing than ensuring safety. The rising tide of consumer anger over defective vehicles will do more harm to brand images if no recall system is put in place.



Japanese imports shaken

Japanese carmakers including Toyota, Honda and Nissan all reported slower sales growth this year, mostly due to the 9.0-magnitute earthquake in March. Production at the carmakers' Japanese plants was suspended after the quake, delaying deliveries to Chinese customers. Domestic production in China was also impacted with a shortage of core components.



Opinion: Japanese companies maintained very tight relationships with domestic parts-supplying partners, which created difficulties for other companies trying to break into the supply chain. The disaster may prompt more Japanese companies to speed up expansion to other countries amid a global supply chain strategy.

Geely improves quality

The Emgrand EC7 made by China's Geely Automobile won an overall four-star rating in the Euro New Car Assessment Program, the highest score for a Chinese-made vehicle. The model won five stars, the maximum possible, in the protection of children, pedestrians and safety assist after front, side and rear crash tests. It failed to gain five stars in the protection of adults. The five-door saloon was a higher-end model rolled out by Geely.



Opinion: Strong competitiveness of Chinese vehicles should not only be reflected through large sales volume but also advanced technology and high quality.