A Research Report on the Change in Global Auto Industry (XV)

4.  Chinese brands will have good opportunities for development, but blind optimism will lead to failure

Local automakers profit by adversity as the Chinese government has released a slew of stimulus policies for the auto market. This is a chance for Chinese automakers to get closer to global carmakers in the China market competition. But this may also make some Chinese companies blindly optimistic, which will cause their strategic blunders in future.

① Positive policies will increase sales of Chinese-brand vehicles

The global financial crisis would adversely affect the Chinese auto market, and in the second half of 2008, the domestic auto market was very bad. To stimulate the auto consumption as an important means of boosting economic growth, the Chinese government issued a series of favorable policies for the auto industry, resulting in sustained rapid growth in the Chinese auto market. China's domestic carmakers also benefited, with the small-emission, low-end own-brand vehicles as the largest group of beneficiaries of these positive policies, as reflected in their sales.

January-May cumulative sales of all Chinese-brand carmakers achieved the year-on-year growth, and BYD had the most prominent market performance, as its sales nearly doubled from the same period of last year; Chery and Geely had relatively small-sale growth as they had higher sales before. Other brands have a higher year-on-year growth, which is a blessing in disguise.

② It should be an opportunity to narrow the competitive gap with global automakers in China

The rise of local brands has made more and more people see the hope of China's auto industry, and the own brands in China have always been regarded as the main reason for auto prices to drop. Chinese brands, however, have a tough time, mainly because they are positioned as the low-end model, and their profit margins are thin. As local brands in China's mobile phone industry have been defeated across the board, the future of the auto industry is hard to predict. Still, Chinese auto brands are enjoying a relatively favorable period in the domestic market competition with international brands.

The consumption structure, propelled by the preferential policies, is moving in a direction more favorable to the Chinese brands, which will have the opportunity to sell more cars, increase their revenues and profits. During this period of opportunity, local brands can improve the quality management, enhance the supply chain advantages, boost the brand image, and gradually penetrate into the sector of mid-size models now dominated by global brands.

For a long time, Chinese brands and foreign brands have been making efforts to penetrate into each other's territories, with global brands trying to enter the segment of low-end models and the markets of tier-2 and tier-3 cities while Chinese brands committed to enhance the brand image and improving the quality and technical level for success in the field of mid-sized cars. This round of crisis has brought better opportunities for Chinese brands to narrow their gap with global brands in the brand competitiveness in the Chinese market.

(To be continued)

A Research Report on the Change in Global Auto Industry (I)

A Research Report on the Change in Global Auto Industry (II)

A Research Report on the Change in Global Auto Industry (III)

A Research Report on the Change in Global Auto Industry (IV)

A Research Report on the Change in Global Auto Industry (V)

A Research Report on the Change in Global Auto Industry (VI)

A Research Report on the Change in Global Auto Industry (VII)

A Research Report on the Change in Global Auto Industry (VIII)

A Research Report on the Change in Global Auto Industry (IX)

A Research Report on the Change in Global Auto Industry (X)

A Research Report on the Change in Global Auto Industry (XI)

A Research Report on the Change in Global Auto Industry (XII)

A Research Report on the Change in Global Auto Industry (XIII)

A Research Report on the Change in Global Auto Industry (XIV)

A Research Report on the Change in Global Auto Industry (XVI)

A Research Report on the Change in Global Auto Industry (XVII)