Warc Blog

Chinese auto industry faces shake-up

22 April 2014
BEIJING: The share of the Chinese auto market taken by local marques is shrinking as they fail to compete with foreign brands, prompting one consultant to describe them as "zombies" and the Chinese government to seek industry consolidation.

Data from the China Association of Automobile Manufacturers (CAAM) show that in March 2014 local manufacturers accounted for 39.3% of sales, down from 50% four years earlier.

Announcing the figures, Dong Yang, secretary-general of CAAM, said the figures demonstrated that domestic brands were failing to compete. "The time for hand-to-hand combat to the death between local and foreign brands has really started," he added.

Speaking ahead of the Beijing Motor Show, Jochen Siebert, managing director of Shanghai-based JSC Automotive Consulting, was also blunt in his assessment.

"A lot of what the local automakers make is rubbish," he told the South China Morning Post. "They are more or less zombies and there's no way for them to compete with the big boys."

Quality has been a major issue for local brands, which have struggled to match the standards set by foreign marques. Although even they have faced problems – for example, BMW became the most recent foreign manufacturer to issue a vehicle recall, in their case, to deal with a defective bolt on 230,000 cars.

In the fight to the death predicted by Yang, one local brand, Qoros, has tackled the quality issue head on by putting it first.

Andy Edwards, BBH China's head of planning, told Warc earlier this year that the brand was challenging the market and the consumer by being better: "A better car; better connectivity; better value; a better ownership experience. We don't think any other car company is delivering this".

Jaguar Land Rover, meanwhile, has said that its new Chinese production line can produce vehicles of better quality than those made in the UK. And Bob Grace, head of its China operations, told the Financial Times that the company would also be adding a new Chinese brand to its portfolio.

The government has stepped in to promote consolidation in a sector that features around 70 manufacturers, perhaps half of which make few vehicles but retain their licence to do so. It had previously indicated a desire to see the creation of a handful of carmakers capable of shifting more than 2m units a year.

Data sourced from South China Morning Post, Bloomberg, Financial Times; additional content by Warc staff

 
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