Chinese vehicle brands set to rise in five years,
expected to take 40 percent of domestic market

Chinese car brands are expected to take about 40 percent of the domestic Chinese market by 2012, according to a new report from the automotive consulting firm Global Insight Inc.
John Zeng, senior market analyst for Global Insight, believes there are a lot of opportunities for Chinese locals in the future. “There are low penetration rates in the vehicle market and a trend to shift to the mid-class car segment,” he explained. “Favorable policies by national and local government also help promote domestic car brands, as supply structures improve and there is easy access to advanced technology from suppliers.”
In 2006, more than 982,800 Chinese-branded models were sold, accounting for 25.6 percent of the total passenger car market, according to China’s Association of Automobile Manufacturers. The auto industry has experienced average growth of 25 percent over the past five years in China, where only 20 out of 1,000 Chinese people own a car. Total vehicle sales hit 7.9 million units with a 25 percent growth last year, while passenger car sales topped five million units.
China is transforming from a bicycle kingdom into a car-driven society as people’s incomes rise.

Chinese automakers have relied heavily on cooperation with overseas partners to gain quick profits over the past 20 years. Global players such as Toyota, General Motors, Volkswagen and Hyundai have set up joint ventures in China and built up their brands. But smaller and private players have seen the potential. They include Chery, Geely, Zhongxing, Chongqing Lifan and BYD. They can be more flexible in restructuring production and focus on cheaper, smaller models.
China’s central government seeks to have at least one-half of the nation’s car market supplied by Chinese brands by 2012, offering some financial support and indirect tax incentives.
Chery Automobile won its most market share, with 8.2 percent for the first quarter of 2007. The 48 percent sales increase helped it rank among the top three, up from last year’s fifth position. Volkswagen has a 16.2 percent share and is the market leader, while Toyota has a 7.5 percent market share.
Mid-class models will account for 42 percent market share of the total in 2012, bigger than compact and subcompact models, according to Global Insight. Production of Chinese-made mid-class sedans, which are priced between 100,000 yuan (US$13,157) to 200,000 yuan, is expected to more than triple – from 500,000 units last year to 1.5 million units by 2012.
Chinese carmakers also are finding a way to quickly narrow their technology gap with overseas players and gain timing advantage by acquiring assets from overseas players. In addition, the Chinese government is encouraging the consolidation of Chinese automakers to increase competition. (China Daily)