Eight Issues for China Auto Market in 2010

Less than a decade ago, the promotion of vehicles into families was included in the national economic plan. At present China has become the largest automotive vehicle market in the world. Less than a decade ago, auto price got rid of strict regulations. We cannot evaluate the gap between China's auto market and the system of competitiveness in Europe, the United States and Japan based on time. However, that cannot stop China to prove her place in the world with strong production and sales. Long time ago the position was once out of reach. Now China's auto market has suppressed the U.S. market.

The year of 2009 is a particular year for the development of China' auto market. Prior to this, China's auto market potentials have been underestimated. After this, it is difficult to estimate the future. China's automotive industry has and will change the pattern of world auto industry. However, China's auto market still needs a longer time to become the world's key role. Japan and South Korea have already given proof.

However, in the upcoming year of 2010, China's automobile market will basically continue the trend in 2009. There will no fundamental transformation. Research Department of the 21st Century Business Herald revealed that China will have eight major problems to be solved.

　　1. The Government's hand.

With the changes in Europe, the United States, Japan and other world's major automotive markets, China's auto market conducted a large-scale reconstruction work in 2009. There are several examples such as Guangzhou Auto’s acquisition of Changfeng, Chang'an "marriage" to CNAC and the reconstruction process between BAIC and Fujian Auto. On the surface, those events belong to market. However, in essence, they are propelled by the government .In the world's auto market, successful mergers and reorganizations are mostly pure corporate behaviors. The deal between Renault and Nissan is a good representative. In 2010 China's auto market will continue in this state. If the auto industry wants to be stronger, every participant should understand their respective roles.

　　2. New energy: from plan to practice.

At the end of 2009, the Copenhagen meeting ended in quarrel, a summit which failed to offer an answer for auto industry. However, that will not stop the expansion of new energy vehicle market. Compared with Toyota, Honda, Nissan, General Motors, Ford and other major forces in new energy vehicles, China is planning the future actively with the hope to "catch up and exceed " the transnational auto giants. China's mainstream vehicle manufacturers and large-scale state-owned enterprises have worked out various versions of the new energy vehicle programs. With the multinational auto manufacturers continuing to conduct the competition and test the product, Chinese new-energy vehicles are still stuck in the planning stage. There will not be major changes in the current situation.

　　3. The public relations from independence to joint venture.

When the independent innovation was set as China's state goal, the automotive industry attracted a lot of concerns. Thereafter, China's auto industry embraced an upsurge of independent innovation. China's domestic vehicle manufacturers behaved very actively. In addition to Geely, Chery, Great Wall and other manufacturers, the Big Three groups also have launched a variety of models. Just at this time, the joint venture also began to introduce the so-called independent vehicles, which are joint-independent ones. Guangzhou Honda has first proposed the concept among venture companies. Thereafter, the definition of the independent vehicle embraced a subtle change. Subsequently, a variety of joint-independent models began to appear in the market. No matter what the interpretation of those products are, the use of trade mark failed to explain the cause for their emergence. Even if there is the replacement product identification, it is only outer changes. As the major power in auto market, joint ventures are trying to get policy support by promoting their own products. That's the fundamental aim. In 2010, the situation will only get more severe.

　　4. Unsymmetrical internationalization

As China's auto industry has become the world's largest market, the share of imported vehicles is becoming larger. However, the share of China’s domestic cars does not have a great change. In addition to the influence of global economy, the joint-venture companies in China have faced tougher situation in exporting vehicles. The co-operation between SAIC and GM is a new trend. But in China we need more technical means such a method. Chinese domestic vehicle manufacturers can only enter the market in developing countries with limited quantities. Compared with the worldwide globalization, China' auto market has not enjoyed a balanced treatment. In 2010, the joint venture is still the main character in China's auto market. How to enhance the strength of China's domestic manufacturers will be the key to change the unequal status.

　　5. Dislocation of independence and brand.

According to the statistics about the growth rate of market, independent vehicles sales enjoyed a substantial surge. Those cars accounted for about 30% of the low-end market. However, in the high-end market, China's automakers rarely succeeded. How to upgrade the value of brand is still a chronic problem, which will exist at least in the area of passenger cars. China's auto market can continue to expand its volume. But the development of brand value does not necessarily bring in the equal increase of sales. In terms of market development, only Shanghai Auto maintains a certain competitive edge. It is a brand new topic for China to develop a brand.

　　6. The half step for going out.

China's auto industry has tried various forms to participate in the international automobile market. But most attempts failed. China's domestic manufacturers have tried to cooperate with foreign agents. However, most deals did not end in success. China's automaker began to penetrate into international market with acquisitions. Due to the lack of understanding and knowledge about local matters, China's automakers suffered from several failures. In contrast, Indian enterprises did not face those problems. Compared with Japan and South Korea's car manufacturers which have entered the North American market, China has just achieved half step.

　　7. To explore a second market.

China has a typical dual economic structure, which makes the car market have such features as well. After the popularity of automobile consumption in first and second tier cities, the emerging market in towns and countryside will become a focus. The development of automobile consumption in those areas will greatly enhance China's automobile production and sales. The mainstream consumer groups of that market lies in the bottom of an economic pyramid. Their demands will differ from higher markets accordingly. Economical vehicles will be the focus in the market in 2010. In the international market, these products are referred to as City Car.

The emergence of this market will change the market structure of China's automobile industry. Vehicle manufacturers and sellers belong to different interest groups and they will maximize their own interests into account. In this process, dealers have to depend on vehicle manufacturers. While automakers compete with each other in first and second tier cities, dealers also face a competition. In addition, with the existence of other competitors, the living conditions of the entire dealer group are mixed. At present, China’s auto sales market has been moving toward grouping. In 2010, this will show more clearly.

　　8. The silent group of consumers

China's auto consumer groups are becoming larger but their interests do not extend, or even become narrowed. Consumer-related policy measures are either missing or have been commercialized, which may harm the protection of the interests of consumers. Vehicle manufacturers and policy makers not only become a community of interests, but also influence the media and other related groups. Consumers frequently suffered from all kinds of damages. At another level, since the automobile consumer groups are quite large, the abnormal policy related to automotive consumer and automotive market will continue existing. For instance, vehicle toll is the much-criticized policy. As consumers in a weak side, they can hardly change the situation. These will continue in 2010. (Translator: Qinghua/ Hanxin)

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