Car sales curb in top cities hit Chinese manufacturers

BEIJING: Hit hard by curbs on the purchase of new cars in large cities, Chinese automakers are experiencing an extended slump in market share compared to foreign rivals, despite continuous expansion of the world's largest automarket during the first half of the year.


Auto production and sales reached new highs during the January-June period, hitting 10.75 million and 10.78 million units, respectively, according to the new data from the China Association of Automobile Manufacturers.

The domestic brands have seen their market share shrink due to rising competition from foreign brands and tightened vehicle ownership regulations that are designed to reduce gridlock, state-run Xinhua news agency reported.

With some 3.57 million cars sold during the first half, Chinese passenger vehicles accounted for 41.2 per cent of total passenger vehicle sales in the same period, it reported.

Chinese auto brands experienced a sales boom in 2009 after the government rolled out incentives and subsidies to help domestic companies weather the global financial crisis. The policies ended in 2010, leaving the companies to fend for themselves. Sales of passenger cars have slipped ever since.

The purchase limits imposed by a growing number of cities to ease traffic congestion have also weighed on sales. Large cities such as Beijing, Shanghai and Guangdong have all adopted license plate auctions or lotteries to limit the growth of automobile ownership and combat gridlock and pollution. More cities are mulling similar measures.

Since securing a license plate has become more difficult, domestic brands have fallen out of favour, as Chinese buyers are more inclined to put their hard-earned plates on foreign cars, which they perceive to be of higher quality due to their cost, the Xinhua said.

For Feng Hui, a prospective car buyer in Shanghai, Chinese brands are not an option. "It will cost me between 80,000 to 90,000 to obtain a license plate. I don't want a car that costs even less than that," Feng said. "It's not worth it."

The sales decline has led some companies to reinvent themselves in an attempt to win back customers.

Chery Auto, one of China's biggest automakers, is streamlining its lineup by reducing its number of auto models from more than 20 to a dozen. Domestic brands like Great Wall Motor, Chery and Geely are also making efforts to step up investment in automobile safety research.

Chinese automakers have largely focused on low-end vehicles to fuel their expansion, as the high-end demographic is dominated by foreign vehicles manufactured and sold through joint ventures with Chinese auto firms.

Domestic automakers have focused too much on expanding their market share while ignoring growth-related problems, said Hu Wenzhou, an auto industry analyst at Bank of China International (China) Limited.