26 September 2018

Homegrown car brands stuck in low gear

After years of breakneck expansion, the Chinese car market may be slowing but it has some way to go before it stops growing.

Car ownership in the mainland is 58 per 1,000 people against 797 in the United States and 591 in Japan, World Bank data shows.

China had about 120 million cars in 2012 and the number is projected to increase to 827 million in the next 20 years, suggesting a double-digit clip.

How much of that growth will come from the domestic car market remains to be seen.

Passenger vehicle sales grew nearly 15 percent year on year during the first 10 months, according to the China Association of Automobile Manufacturers, but the market share of homegrown brands fell 3 percentage points to 40 percent during the period.

Some domestic brands are going strong but not as much as expected. The road is littered with cautionary tales.

For instance, after its success with entry-level models, Chery Automobile is still struggling to come up with any significant upgrades, lagging the fast-changing tastes of Chinese consumers.

BYD (01211.HK) is on the cutting edge of new energy technology but its green cars are not resonating with domestic consumers.

And years after Geely Automobile (00175.HK) acquired Swedish brand Volvo, efforts to create new models have yielded little results. A new model is not expected to hit the market until 2016 at earliest.

The road ahead will only get bumpier for domestic carmakers as China presses on with draconian measures to curb air pollution and traffic congestion.

This will highlight their shortcomings in technology and fuel efficiency alongside foreign brands which are perceived to be of higher quality in every respect.

Chinese carmakers can take little comfort from the rosy growth outlook for the car sector as a whole.  

– Contact then writer at [email protected]



EJI Weekly Newsletter

Please click here to unsubscribe