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Slower sales, foreign competition endanger domestic car prospects
By Lu Nengneng |
July 23, 2012, Monday
|
Print Edition
Print Edition
STRUGGLING to secure a foothold in the mid-to-upper market range, Chinese auto brands find themselves in fierce competition with foreign rivals in a slowing sales environment.
In the first half of this year, sales of passenger cars from domestic auto brands dropped 0.2 percent from a year earlier to 3.2 million units, compared with overall 7 percent growth of brands from all origins.
German brands led the pack, with 20 percent sales growth.
As a result, the market share of domestic brands in the passenger car segment declined 3 percentage points to 41.4 percent at the end of June.
Overall in the first half of the year, China's total auto sales slowed to their most sluggish pace in 14 years, up only 2.9 percent from the previous six months.
Only two Chinese brands, Chery and Geely, ranked among the top 10 best-selling cars.
Like many of their compatriots, both automakers are now struggling to meet the halfway point of annual sales targets for 2012.
"Domestic car brands may face even harder times in the second half of this year," said Dong Yang, secretary general of China Association of Automobile Manufacturers. "Half of the Chinese players could get knocked out of the game in the next three to five years if no policies are introduced to stop foreign competition from making further inroads in China."
Low-end buyers
A study by market research firm J.D. Power shows that indigenous brands are no match for foreign nameplates in terms of prestige, design and quality, but they do have a certain appeal for low-end buyers because of their cheaper sticker prices.
Their competitive advantage is diminishing as traditional mid-to-upper range players, such as General Motors, Nissan and Honda, are developing joint-venture brands with their Chinese partners, targeted at the entry-level market in smaller cities and inland areas.
Xu Heyi, chairman of national brand BAIC Motor, said developing more upscale vehicles could help Chinese car brands gain ground because their reliance on selling cheap copycat models has proved shortsighted.
Dong disagreed, saying domestic brands are aiming too high.
In fact, many falter on inadequate research and development when trying to climb the value chain in the car market.
But the market doesn't wait. Increasing restrictions on car ownership in major Chinese cities are putting the squeeze on sales, and domestic brands stand to lose the most.
Following in the footsteps of Beijing, Shanghai and Guiyang, the southern city of Guangzhou has decided to cap monthly new car licenses at 10,000 units, starting this month. The quota will be administered through lottery and auction.
Market observers caution this may be only the beginning, as urban areas try to control smog-clogged, traffic-congested streets.
"With their options narrowing, consumers may choose to buy premium cars once and for all," said Luo Lei, deputy director of China Automobile Dealers Association.
"The mid-to-low end of the market will be reducing, and the pressure is on for domestic brands."
In the first half of this year, sales of passenger cars from domestic auto brands dropped 0.2 percent from a year earlier to 3.2 million units, compared with overall 7 percent growth of brands from all origins.
German brands led the pack, with 20 percent sales growth.
As a result, the market share of domestic brands in the passenger car segment declined 3 percentage points to 41.4 percent at the end of June.
Overall in the first half of the year, China's total auto sales slowed to their most sluggish pace in 14 years, up only 2.9 percent from the previous six months.
Only two Chinese brands, Chery and Geely, ranked among the top 10 best-selling cars.
Like many of their compatriots, both automakers are now struggling to meet the halfway point of annual sales targets for 2012.
"Domestic car brands may face even harder times in the second half of this year," said Dong Yang, secretary general of China Association of Automobile Manufacturers. "Half of the Chinese players could get knocked out of the game in the next three to five years if no policies are introduced to stop foreign competition from making further inroads in China."
Low-end buyers
A study by market research firm J.D. Power shows that indigenous brands are no match for foreign nameplates in terms of prestige, design and quality, but they do have a certain appeal for low-end buyers because of their cheaper sticker prices.
Their competitive advantage is diminishing as traditional mid-to-upper range players, such as General Motors, Nissan and Honda, are developing joint-venture brands with their Chinese partners, targeted at the entry-level market in smaller cities and inland areas.
Xu Heyi, chairman of national brand BAIC Motor, said developing more upscale vehicles could help Chinese car brands gain ground because their reliance on selling cheap copycat models has proved shortsighted.
Dong disagreed, saying domestic brands are aiming too high.
In fact, many falter on inadequate research and development when trying to climb the value chain in the car market.
But the market doesn't wait. Increasing restrictions on car ownership in major Chinese cities are putting the squeeze on sales, and domestic brands stand to lose the most.
Following in the footsteps of Beijing, Shanghai and Guiyang, the southern city of Guangzhou has decided to cap monthly new car licenses at 10,000 units, starting this month. The quota will be administered through lottery and auction.
Market observers caution this may be only the beginning, as urban areas try to control smog-clogged, traffic-congested streets.
"With their options narrowing, consumers may choose to buy premium cars once and for all," said Luo Lei, deputy director of China Automobile Dealers Association.
"The mid-to-low end of the market will be reducing, and the pressure is on for domestic brands."
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