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Consolidation period expected for China's auto industry

  • Staff Reporter
  • 2014-05-04
  • 09:03 (GMT+8)
A Chery Tiggo 5 SUV at the 2013 Guangzhou auto show, Nov. 23, 2013. (File photo/Xinhua)

A Chery Tiggo 5 SUV at the 2013 Guangzhou auto show, Nov. 23, 2013. (File photo/Xinhua)

China has more than 200 car manufacturers, many of which have annual production volume of less than 10,000 vehicles, demonstrating overlapping and intensive competition as well as falling market share, Tencent's finance portal reports.

In the first quarter, 1.885 million own-brand passenger cars were sold in China, down 1.5% from a year earlier and accounting for 38.7% of the total market share, down 4.5 percentage points from a year before. Of this total, 715,000 vehicles own-brand sedans, down 17.7% from a year earlier and representing 23% of the total sedans sold in the country, down 6.2 percentage points from a year ago, the report said, citing statistics from the China Association of Automobile Manufacturers (CAAM).

Jiang Jun, deputy general manager of Shanghai-based SAIC Motor Corp, said that since last year China's domestic-brand carmakers have been facing rising pressure for their survival as foreign joint-venture brands have strengthened their sales channels and their product lines are exploring downward ranges. SAIC sold 51,430 sedans in the first quarter, showing slight growth from a year earlier but lower than expected.

China's own-brand car makers have seen seven straight months of market share decline since September last year, said CAAM secretary general Dong Yang. China's own-brand cars enjoyed a 30% market share at their peak, but this has dropped to 23% in the first quarter, showing the weakening competitiveness of domestic brands.

Most domestic-brand cars focus on the lower end of the market with cars priced below 100,000 yuan (US$16,000), which see intense competion over prices.

China's car sales have reached 22 million a year, making the country the first in the world to see car sales break 20 million. In recent years, many local governments have offered preferential tax treatment, land and financing polices to upgrade their economic structure and support their car industries, thus boosting the number of carmakers.

This stage was formerly seen in the early development of the American car industry, with several hundreds of producers in the first half of the 20th century which eventually amalgamated or went out of business until there were only three major players left.

Every domestic enterprise has been trying to develop its own brand, but the excess competition has brought lethal damage, Dong said.

A reorganization of the industry via mergers and acquisitions is the way out of the crisis, experts said, with such development expected to accelerate after 2020 when the market is half-saturated.

In 2009, the State Council had already set the tone, aiming to develop two to three large-sized carmakers each with annual production capacity of more than 2 million cars, and to reduce the number of major car groups, which together accounted for more than 90% of the market share, from 14 to 10 or fewer.

Most executives at Chinese carmakers hope that 10 years from now the country's car exports can account for about 20% of total production and sales, and that one or two of the country's marques will rank among the world's top 10.

Who's Who

  • Wei Liang (魏亮)

    Wei Liang (魏亮)

    Wei Liang is the political commissar of the Guangzhou military region. He is also a member of the 18th CPC Central Committee.Born: 1953Birthplace: ...