The automotive industry in China has already beaten U.S. and E.U. car markets and has become the largest in the world. This means that domination of the market by Chinese has become an extremely important issue among the car manufacturers. As you can see below, during March 2013, VW dominated the market. Out of top 10 models of best seller, 6 were VW’s.
Do you see any Chinese brand in this top 10?
As you can see on the right side, VW really dominated the top 10 in March 2013 and the cumulative sales from January to March, followed by Ford, Buick, Chevrolet, and NISSAN.
However, have you noticed something odd in this table? There is no Chinese brand in this top 10! Chinese market is being dominated by foreign car manufacturers, and it seems Chinese cars are not preferable. There is also only one Chinese brand in the 11~20 chart, named 帝豪 (20th). This table brings up a question about the Chinese car companies. Obviously, even Chinese are not buying their country’s car. What would be the reason?
This doesn’t answer your question, but doesn’t this sort of thing happen with all sorts of other industries? Take watches, for instance: Americans love buying Timex and Seiko watches, but I can’t think of any top selling brands from the U.S. (maybe Nike?).
A difference could be that a car is a huge part of a person’s expenses, whereas a watch isn’t. One could argue that it is therefore a much more important purchase and thus more likely to involve national pride. But then again, we don’t care where the companies are from that built our houses, and that is an even more important purchase.
I’ve spoken with a Chinese journalist, whom I am familiar with in Qingdao. In addition to his normal duties, he is part of a team responsible for writing the local Mercedes-Benz dealer’s newsletter to buyers. He is also a car nut; he took me to a Cadillac stunt show at an expo center in the country. He told me that the Chinese recognize that their country’s cars are vastly inferior to those of foreign makes and they are willing to pay a lot more money to cover VAT’s on the foreign cars simply to have a good product. He paid about twice what Americans would pay for his 3-series. There is also a great deal of prestige associated with many of the foreign brands. For instance, the government drives Audi’s, BMW and Mercedes have immense brand equity, and back in the day the last emperor had a Buick.
I think that as Chinese car quality gets on par with the foreign brands, domestic brands will have more of a chance. Also, once the domestic manufacturers can prove they can do luxury their prospects at capturing more of the market should improve.
I’m doubtful the a chinese company will be able to emerge without government intervention the amount of capital required to compete with already in place manufacturers needs to be insanely high. Secondly because the car market has not been in existence for a long while the proportion of used car sales in China is probably much lower than in the U.S. Chinese cars are already struggling in terms of quality and i imagine used chinese cars are probably pretty terrible which will hurt their image even more.
First, there are currently about 71 Chinese motor vehicle manufacturers, though half of them made under 10,000 vehicles in 2012. This is a legacy of policy under Mao Zedong, when local governments (provinces and large cities) faced incentives to build their own firms. A couple in the heavy truck segment do well, but as G notes all of the successful passenger cars are made (under 50-50 joint ventures) by one or another global car firm. The joint venture partners (SAIC, Shangai Automobile Industry Co. and FAW, First Automotive Works) now know how to run assembly plants. There are now a wider array of local parts suppliers (all the firms we’ll visit have operations there, Metalsa, Brose, Federal Mogul, probably Tower). Lots of engineering is being done locally, particularly by GM and its suppliers. So purely local firms will become better, while joint ventures will become increasingly local.
Oh, and see the web sites of the Chinese Assoc of Automobile Mfgs
FYI gasoline runs about $4.90 / gallon in China (ca. RMB 8.0 / liter at an exchange rate of RMB 6.16 = US$1.00)