China domestic automakers start at first gear

The 10th Beijing International Automotive Exhibition ended yesterday in Beijing. Chinese homegrown carmakers, both traditional leaders like Chery, Geely and Changan and new comers like Dongfeng Motor Corp, Guangzhou Automobile Industry Group and Beijing Automotive Industry Holding Co Ltd, all showcased their independent lineups of everything from low-end to high-end models. Some of them even released environment-friendly concept models representing their latest green technologies.

Guangzhou Auto was not the only group ambitiously pouring 6.8 billion yuan into an independent research base hoping to get into the medium- and high-end sedan market in 2010. Beijing Auto rejuvenated its own "Beijing" brand and also hopes to push it into the medium- and high-end sedan market within next two years.

But Wang Xiaoguang, senior economist at the National Development and Reform Commission's Economy Research Institute, suggested that Chinese carmakers should stay at medium- and low-end niches and away from high-end niches.

Statistics showed that a total of 4.73 million sedans were sold in China last year, up 23.46 percent from 2006, but small cars sales volumes grew only 3.9 percent to 1.27 million in the domestic market. Meanwhile, homemade Chinese brands, which produce mainly small models, only accounted for 26 percent of the entire sedan market.

"A number of Chinese carmakers, such as Dongfeng and Shanghai Automotive Industry (Group) Corporation, hope to produce medium- and high-end models under their independent brands first, and I don't look good on them," said Wang. He insisted that Chinese independent brands should start at the beginning.

Senior auto marketing expert Zhang Zhiyong says the same thing. Zhang believes that production of high-end models demands higher technologies and tremendous investment, two conditions not favorable for Chinese automakers. At the same time, more foreign-funded automakers have started to introduce their small models to China as eco-friendly topics are heating up worldwide, suggesting this market section is still profitable.

Zhang upholds that enterprise managents, including marketing management, technology management, production management, as well as personnel management, are all crucial to success.

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