Local brands face adverse market, hard competition

• Source: Global Times
• [14:26 January 20 2011]
• Comments

By Cheng Yuan

The present market conditions are adverse to the development of local brands. It will be too late to develop local brands if the authorities don't take exceptional measures to mend fences once a sheep is lost.

These days, particularly after the financial crisis, many people are saying that China's auto industry has gone from "small to big" and from "weak to strong."

Yes - it is big considering the number of sales and products on the market, as well as the grand occasion of the 2010 Beijing Auto Show. But I doubt that it is strong.

China's auto market has witnessed enormous changes over the last 20 years. In 1990, only 500,000 vehicles were sold. Yet last year unit sales topped 13.6 million. The market is expected to grow 18 percent this year. China took the lead worldwide in auto sales last year and will keep its place for some time.

But China's local brands have been struggling to survive in the present domestic auto market. The cost advantage of local brands is weakening as joint ventures are rolling out low-end vehicles. Local auto companies' medium- and high-end products are confronted by those made by joint ventures, which have gained a strong and loyal clientele thanks to years of brand building.

In finalizing its deal with Ford to buy Volvo, Geely has completed a step in producing cars that could be cleared for government purchasing. It will have to convince officials Volvo's quality remains undiminished.

In this market, it is unfair to let Chinese local brands compete with multinational brands, which are more than a half-century older. When the Chinese market is saturated in several years, local brands will find there is even less space for them.

The author is auto director of www.ce.cn. He has covered automotive news for 26 years.