Local auto brands struggle in China

25 April 2012

BEIJING: Domestic automakers in China are struggling to match the sales of their overseas rivals, in a market where shoppers now have more than 90 brands to choose from.

JP Power & Associations, the information services firm, and LMC Automotive, the intelligence provider, reported that 3.4m passenger vehicles were sold in China during the first quarter of 2012.

This marked a 2% increase year on year, a "sluggish" performance compared with the recent past. Among the factors contributing to this below-trend growth is a general slowdown in the Chinese economy and rising petrol prices.

Despite this, China's luxury sales climbed by over 20% in Q1, benefitting manufacturers like Audi and BMW, while sports cars saw a 40% expansion and SUVs enjoyed a 20% lift.

But entry-level alternatives struggled, with mini-cars down by 29%, sub-compacts off by 10% and compact cars largely flat year on year. This is partly due to government subsidies, which incentivised small car purchases, have come to an end.

These three sectors deliver between 55% and 60% of total car sales per year, and such a trend thus hit indigenous firms especially hard, as they are particularly active in the same categories.

More specifically, Chery, FAW Chang'an, JAC, Zhonghua, Haima and Roewe all witnessed drop offs in the 20% to 25% range. BYD also logged a 4% slide, while Great Wall and Geely were essentially unchanged.

Elsewhere, Dongfeng Liuzhou and Dongfeng Passenger Vehicle both posted gains of around 60%, but these figures came from a low sales base.

As Chinese drivers have 94 brands and 476 models to pick from, 40 more marques and 100 more models than in the US, the study suggested that quality and service were becoming differentiators.

Drivers in China experienced an average of 8.34 problems with a new car made by a local firm and 4.38 for international brands in 2000. By 2011, these totals stood at a much closer 2.32 and 1.31 in turn.

By contrast, after-sales service was still a sticking point, Tim Dunne, director for global automotive coordination at JD Power, argued.

"With the exception of a few domestic brands, such as Roewe and Chery, which compete favorably with some international brands, this is an area that is improving at a slower pace," he said.

Data sourced from China Daily; additional content by Warc staff