Foreign Auto Players Rule In China For Now, Local Firms Lag Behind

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Shanghai, March 16: In the race for China’s turbo-charged auto market, foreign auto makers have the winning brands, but local rivals are in for a long haul and may have a few tricks up their sleeves.

Unlike once high-flying foreign mobile phone and electronics makers that had their dreams of big China sales dashed by intellectual property infringement and rules requiring foreign manufacturers to find local partners, auto industry watchers say that the foreign car makers are protected by their brands.

“Chinese consumers still very much lean towards foreign brands,” said Josh Li, managing director of advertising firm Grey Worldwide in Beijing. “I don’t think China will ever develop into a Chinese-only market.”

Chinese consumers are more likely to happily own a Haier Tvor, a Bird phone than be seen cruising around in a Chery or Geely car, which are perceived to have lower status than their foreign counterparts. Only the richest one per cent of China’s 1.3 billion population can afford a car, reinforcing the sense of status that support established foreign brands, industry watchers say.

General Motors Corp, China’s second-biggest player, tested this theory with an experiment. It launched the same Buick sedan under a Chinese name to see how it would go down with the local consumers.

“It turned out that nine out of 10 customers opted for the original version, because of the foreign cachet,” said GM spokeswoman Daphne Zheng.

Local brands make up less than 20 percent of China’s passenger car market and mainly compete in the low-end segments. While most foreign marques enjoyed stronger- than-expected sales last year as the car market doubled to about two million units, Geely’s sales fell about 20 per cent short of its initial target of 100,000 units.

The government is believed to be tinkering with its ambitious targets for local market share after impassioned complaints from foreign players.

Insiders say that under the latest draft of its evolving auto policy outline, it has deleted a reference to having pure Chinese brands control half of the car market by 2010. Foreign car makers aren’t taking any chances, filing piracy and intellectual property (IP) infringement cases in a legal environment some fear favours local firms.

Last year Japan’s Toyota Motor Corp lost a suit against Geely for copyright infringement on its logo, while SAIC-Chery’s QQ minicar is at the centre of an investigation by GM, which is worried since the model is a copy of its Spark.