World Biggest Auto Market?

Posted by: Dexter Roberts on December 12, 2006

Now just one day after the fifth anniversary of China’s entry into the World Trade Organization, People’s Daily Online (the paper version is the official mouthpiece of the government) is reminding us once more that China may have opened its economy to foreign investment, but for many an official in Beijing, the number one goal still is to build strong local industries—and that is certainly true for the auto sector.

Under the seemingly innocuous, but perhaps overly bold headline “China to be the world’s biggest auto market in 2009,” People’s Daily Online quickly gets to the point: “Five years after entering the WTO, sales of locally made vehicles have almost doubled, and sales of sedans have more than quadrupled. The national car enterprises quickly became large and strong, the market share of own-brand cars” [here they are referring to the likes of Geely, Chery, FAW and SAIC, which have all launched their own brands, to mention the most notable of the local players], have reached 26.4% this year, up from less than five percent in 2001, the article goes on to proudly point out.

“Following the unveiling of self-designed medium and high-end cars by First Automobile Works and Shanghai Automotive Industry Corporation, more and more carmakers have made breakthroughs this year in terms of engine and transmission systems. During the first three quarters, the market share of locally designed sedans rose from less than 5 percent in 2001 to 26.4 percent, leading other countries in growth rate. “

I guess there is no harm in pointing out the successes of the local brands (although that’s not what the headline advertised), but I don’t think the likes of GM, VW, Honda and Toyota who together have pumped billions of dollars into China manufacturing and sales would find this emphasis reassuring. It smacks too much as if Beijing, five years after entering the WTO, is most concerned with nurturing its own national champions, necessarily to the detriment of the foreign players. Trouble is, there are plenty of signs that they are indeed doing so. Today’s People’s Daily article is one more reminder of that.

Reader Comments

Brandon W

December 12, 2006 7:41 PM

And for years the Japanese did (and still do) pump-up their own brands at home. Maybe if we did something of that sort at home then GM, Ford, and ex-Chrysler wouldn't be where they are today. Rather, we'd prefer to sacrifice our economy at the altar of "free market" capitalism (a marketing term if I ever heard one; all markets have structures and we've just chosen to worship one beneficial to the ownership socioeconomic class, detrimental to the vast majority of us, completely unsustainable, while mindlessly chanting "free free free" because it sounds like "freedom").

nanheyangrouchuan

December 13, 2006 12:44 AM

China's growth in consumption of domestic brands is helped by a 25% to 40% tariff on foreign brand cars, not a preference for chinese brands.

As for the failures of US automakers: gross executive compensation, boring designs and lower quality lead to a decline in sales.

Besides, buying a japanese car, a hyundai or now a mercedes means buying a car made by americans. Buying a car made by an american company means that only a few americans did the final assembly but the car was made everywhere else (including China).

Nikolay

December 27, 2006 11:14 AM

Living in China you will see that majority of vehicles on the road are still foreign/import brands. Majority of these vehicles are assembled in China (via JVs) and come to the factories in kit form. So all in all I can understand why the Chinese gov't and economy planners are promoting local designs and local brands -- they must feel an urgency to develop the local brands as fast as possible so they can participate in the still growing auto market.

At any rate, all it takes is some driving around Beijing for example in a couple of days period and you will see what are the vehicles on the road:
Shanghai Buick (sedans and minivans), Shanghai Volkswagen (Santana, Jetta, Passat), BMW (JV produced (for the 3-series), imports for the rest), Audis (most gov't cars appear to be Audis), Honda (both sedans and minivans)....and significantly fewer local brands (like Geely)

John Acheson

December 28, 2006 12:22 AM

I've got two questions in response to comparing China to her neighbors or other developed countries. Name one Chinese organization of over 100 people? Do the same for each country down the list. This gives a good idea of macro potential. That is the ability to manage conglomerates, for example Honda is over 500 companies and tens of thousand of workers going in the same direction. Can Chinese companies work together in large teams and produce consistent quality? The other main question asks is population a market. NO! A market is units or units times price sold. You can look at a future market bottom up (units you are ramping up in production) or the more common and incorrect way (a % of some other assumption like population). The best way to look at the world's largest market is in terms of vehicle models. The Toyota Corolla has sold over 35 million units. Tell me what the best selling model is in the so called world's largest market? Better yet, name the top 10 and then rewrite this blog.

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