Poor Sale Finds Chinese Auto Brands

There are about 20 automotive manufacturers in China. They have launched over 100 types of cars in the market. In the first half of this year， they sold 1.3682 million units. This is not a proud figure since Volkswagen from Germany alone sold more than 1.8 million units in China.

The loss in the battle featuring 100 vs 1 is not all the shame comes from. According to the data from China Association of Automotive Manufacturers （CAAM）， the share of self-owned brands of China in the passenger car market and sedan market kept dropping for 11 straight months. Their share in the sedan market has dropped below 20%， the lowest point since 2009. Why did the self-owned auto brands fall into that trap？ This is worth considering.

The Dilemma of Self-owned Brands

According to the data from the CAAM， the Chinese automotive companies sold 1.5196 million units in the first seven months of 2014， down 16.1% compared with the same period of last year. In the same period， the German， Japanese， American， Korean and French brands respectively sold 2.0149 million units， 1.171 million units， 1.145 million units， 766.8 thousand units and 353 thousand units.

The increase and fall lead to the continuous drop of market share of Chinese automotive brands. It has become trendy in the past five years and this year they met the biggest fall in these years as their market share could drop 5-7 percent.

“The Chinese automotive brands have been in the most critical period，” says Dong Yang， standing vice president of CAAM. The Chinese auto market has been through the period of fast development and is now in the time of stable development. Foreign brands and joint-invested brands launch more products into the low- and medium-end markets， which used to be the fortress of Chinese self-owned brands. The direct “confrontation with foreign brands” killed Chinese auto brands’ advantages built up by the low prices.

A director of a Chinese auto manufacturer says： “We were once in a different sector with foreign and joint-invested brands. Now， they are trying to get into the low-end market， our own fortress. We are in great trouble.”

The situation is more worrying because foreign brands or joint-invested brands are still more costly yet more attractive than local brands in the low-end market. “The foreign brands are 45% more expensive than local brands. Such a price gap could not affect the popularity of them. If they are completely distributing in the low-end market， the price gap would be shrunken and the situation for us would be worse，” says Zhu Huarong， vice president of Chang’an Auto.

No Integration of Products

Why are the Chinese local auto brands less favored in China？ Someone attributed the unpopularity to their low technological level， their unreliability and the consumers’ concerns for safety. This is true. The Chinese automakers need to think of themselves， especially when they are compared to South Korea， whose automotive industry started later than China but has already owned international competitiveness and fostered world-class brands like Hyundai and Kia.

Experts in the automotive sector think that the lack of complete top-level design of policies for the entire automo- tive industry is the one to blame. No one has ever thought of the overall situation of the self-owned brands. As a result， the Chinese local automakers are in a state of disunity and compete with each other. They are not focused on the improvement of technologies and upgrade of products； instead， they join in the competition with increasingly lower prices， expanding the low production capacity repeatedly. “They cannot work together to develop key technologies and would not like to share the new technologies with each other.”

“There are about 20 Chinese automotive enterprises and over 100 types of vehicles. None of them could be massively produced and sold. Most of the Chinese automakers are running with low profits or even losses. This is an important reason for the weak competitive power of self-owned brands，”Dong Yang says.

This situation also disrupts the system of setting up joint ventures with foreign markets whose original purpose was to“exchange the technologies with the market”. “A foreign automaker brought about a new model. Every one in China wants to the partner for the new car. They contend with each other， trying to get the attention of foreign automakers with the best conditions. Of course， no clause about technological transfer is one of the best conditions，” Zhu Huarong says.

The Chinese government and automakers only pay atten-tion to the short-term profits when it comes to the joint ventures with foreign automakers. The idea of introducing new technologies through the cooperation has never popped out in their minds.

The short-sighted action has rendered Chinese local automotive brands unable to compete with foreign brands in the technological level despite their progress in recent years. Dong Yang admits that the Chinese automakers need at least 10 years to catch up with the current technological level of foreign companies. “The world’s best automakers are now studying into the technologies in the next 20 years and the new technologies that can be directly used have been in tryout for 5-10 years.”

How to Make Breakthroughs

Then， what can the Chinese local automakers do to change the situation. It is widely believed that developing self-owned auto brands is the core for China to become a powerful state of automotives. Therefore， the industrial polices need to comprehensively provide strong and solid support for local brands in technologies， production and market.

“Most of the local auto brands are still far away from the massive production and sale. Local automakers need time and policy-driven environment to realize this point，” says Dong Yang. The Chinese auto industry that depends on imported technologies need to be changed. Innovations and inspirations should be added to boost the development of self-owned technologies. Above all， the enterprises need to improve the proportion of investment in their total revenue.

The automakers are recommended to spend more on the R&D to solve the problem of lacking core technologies. They need to take the consumers’ advices too to take care of every detailed problem. They should not rush for the good financial performance since the hurriedness might lead to quality problems and complete ruin the brand fame.

In recent years， the Chinese automakers have spent a lot on the technological improvement and new products. However， without a solid foundation and the proper cooperation with each other， they are slow in making impressive progress. Zhu Ronghua admits that it is impossible for a single Chinese automaker to shoulder the tough task of research and development.

Therefore， Xu Yanhua， deputy secretary-general of the CAAM calls for the governmental guidance to build up a system of basic technologies and generic technological research. Meanwhile， a long-term cooperative system should be built for the local enterprises to improve their relations as both competitors and partners. They need to work together to develop technologies， solve common problems and deal with the challenges.