Polk: Chinese carmakers have chances and challenges in '09

The outbreak of the global financial crisis dragged the growth of the Chinese auto market down in 2008 and with the crisis still unfolding, the picture for year 2009 is also mixed. Chinese independent automakers are facing tough times and challenges. What's the prospect of independent Chinese automakers in 2009? Gasgoo.com has an exclusive interview with Molly Tang (Tang Jing), analyst of Beijing Polk-CATARC Vehicle Information Consulting to elaborate on this question.

Gasgoo.com: What do you think of the development of China's independent automakers in 2008?

Molly Tang: According to Polk statistics, the passenger vehicle market in China started to slow down in 2008. The total PV registrations in the mainland only grew by 6.5% to 6,222,646 units, making 2008 the first year of single-digit growth since China entered the new century. Independent Chinese automakers, mostly manufacturing passenger vehicles, just kept a stable market share with 2007, with the market perfomance weaker than Japanese and Korean automakers but better than European and American automakers.

Gasgoo.com: What opportunities do China's independent automakers have this year?

Molly Tang: As China has launched its 4 trillion yuan economy stimulus plan, the country's economy will begin to recover.  Thus, independent Chinese automakers will embrace opportunities this year:

1) Potential in the tier-2 and tier-3 markets

The financial crisis mainly affects China's export-oriented areas such as Guangdong, Zhejiang, and Jiangsu, but the tier-2 and tier-3 cities are not badly influenced. Chinese independent automakers, which focus on these markets, have much potential by keeping growth in the second- and third-tier cities.

2) Policies favoring low-emission cars

Energy-saving and emission reduction have become the common recognition of the world. China makes policy to encourage low-emission economical cars, reducing purchase tax on vehicles with engines under 1.6-liter to 5% from the previous 10% from Jan. 20 to Dec. 31. About 50% vehicles of independent carmakers have engines below 1.6L, which means independent brands will benefit from the policy.

Statistics showed that in January Chery Automobile Co Ltd sold more than 35,000 cars, a record high since 1997. BYD Co Ltd sold 20,000 units of its two low-emission car models. And Geely sold 28,502 low-emission cars in Jan., representing a year-on-year growth of 14.5%.

3) Industry policy support

The Chinese government is promoting clean-energy technology in its auto industry. Independent automakers should seize this opportunity to develop new energy for future growth as they have far lagged behind global auto giants in traditional vehicle technologies.

Gasgoo.com: What challenges will independent brands face in 2009?

Molly Tang: China's automakers, though generally in better shape than their U.S. counterparts, are facing their own relatively tough times. With the global economic crisis deepening, independent brands will face three main challenges:

1) Global auto giants targeting tier-2 and tier-3 markets

Global automakers will expand to China's second- and third-tier cities, which challenges Chinese independent automakers.

2) Great pressure faced by medium-sized car development

The medium-sized cars, accounting for nearly half of the passenger car market, haven't been affected badly like other segments amid the financial crisis. However, independent Chinese automakers still couldn't keep a relatively satisfying growth in this segment.

3) SUV failure

China's SUV market has been growing fast in these two years, but independent brands only take a small share in this market. Except Chery Auto and Great Wall Motor, no other automakers have SUV products. Though faced with the uncertainty of oil prices and energy-saving trend, SUV still has a great potential market in China, especially in second and third-tier cities.