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Homegrown auto brands gain more market share
Last Updated(Beijing Time):2008-11-05 10:24

By Jiang Fan

Such vehicles with independent brands have always been a vital part of China's auto market. As far as sales volume is concerned, independent brands have accounted for over 40 percent of the overall auto market, and what's more, they are taking the lead in commercial vehicle market. We can say that nowadays, independent brands have become one of the decisive powers that affect the structural adjustment and trend of China's auto market.

In a whole, although the production and sales volume this year confronted with month-to-month decline and the year-on-year increase rate slowed down, considerable growth was still achieved in comparison with the same period of last year. From January to July, the production and sales volume was 5.9321 million and 5.8490 million respectively, up by 16 percent and 16.66 percent year on year. In which the production and sales volume of passenger car was 4.1969 million and 4.0993 million, increased by 15.71 percent and 15.79 percent year on year respectively; the production and sales volume of commercial vehicle was 1.7352 million and 1.7497 million, up 16.69 percent and 18.76 percent respectively. In the first seven months, seven of the top ten best-seller manufacturers kept growing. In commercial vehicle market, the top ten biggest sales volume holders maintained continuous increase, in which eight enterprises have demonstrated a relatively rapid growth.

As the primary economic indexes showed, such vehicles with independent brands have realized a favorable development in the first half year. In the first half year, the market share of most key enterprises was increased to some extent, and only five enterprises suffered market share decrease in comparison with the same period of last year. In the first half year, both the profits and total pretax profits of key enterprises went up quickly; the monthly increase rate, although slightly lower than the same period of previous year, is still in the relatively fast interval. The growth rate of profit was between 25.42 percent and 43.75 percent, and the growth rate of pretax profits was between 17.78 percent and 37.75 percent. It is noteworthy that the total profits of some enterprises grew rapidly even if the sales volume was a little bit smaller year on year, demonstrating the achievement of strategic adjustment and the reinforcement of profit-making ability. 

Experts said that the cost of auto enterprises kept increasing due to natural disasters and the continuous increase of raw material and energy price, and profit margin was squeezed to a certain degree. Auto enterprises could react actively in the face of these adverse conditions. They successively adopted measures such as strict cost control, price-comparison purchasing, expenditure cut-down, product structure adjustment and marketing strategy change, and therefore the auto production and sales in the first half year kept a relatively steady increase trend, and the overall development of auto market was favorable.

In auto market, independent brands are the mostly-concerned ones. Since 2001, the sales volume and market share of China's independent vehicle brands had begun to increase year by year. In 2007, the total sales volume of independent brand cars was 1.2422 million, accounting for 26 percent of the total car sales. Compared with 2006, sales volume of independent brand car went up by 259.4 thousand, and the market share was increased by 0.23 percent. But since the second half year of 2007, the fast growth of independent brands had slowed down; some enterprises even suffered sales volume decrease.

In the first eight moths, the market performance of independent brand cars was not positive as far as sales volume was concerned. Statistics from China Association of Automobile Manufacturers indicates that from January to August, the total sales volume of independent brand cars was 835.5 thousand, taking up 24.77 percent of the total car sales and the market share was more than 1 percent lower than 2007. In the car sales ranking list of the first eight months, only Chery and Geely entered top ten. In recent years, all of China's independent car manufacturers have been thinking highly of and dedicating to the perfection of product series and the fast growth of production and sales scale so as to consolidate the development base and improve the capacity of risk resistance. The present speed-down of sales volume growth brings a realistic challenge to the enterprises.

Except for pressure from well-known energy and raw material cost increase, independent brand cars are still confronting with unique market "micro-climate". Before 2007, the main products of independent brands and introduced brands had rare face-to-face competition in the market, and a layout where independent brands develop low and medium grade market and introduced brands hold high-grade market was formed. As the market competition gets increasingly intensified, introduced brands began to focus on low and medium grade market and independent brands started to strive for breakthrough in medium grade market, they have more and more face-to-face competition. In the past, joint-ventures seldom came into auto market priced below RMB100, 000 yuan, but now such mainstream enterprises as FAW-Volkswagen, Shanghai Volkswagen, Beijing Hyundai and Guangzhou Honda, all launched fairly competitive low emission vehicles of the price range. Because of the long-term leading position of joint ventures in China's car market, their structure adjustment to lower grade market has caused direct pressure to independent brands.

How will independent brands react to the heavy market pressure? Our reporter learned from the interview that independent-brand enterprises have had clear forecast and relatively complete understanding of the slowing down growth. Lots of enterprises adjusted developing strategy from the second half of last year. They began to pursue quality instead of quantity, and laid emphasis on the improvement of technology, quality and service level by force of independent innovation.

Diving into quality improvement becomes the common choice of independent enterprises. At present, they are making technology upgrading in succession and are developing more competitive products with higher quality, and they are striving for transformation from "price advantage" to "technology leading" and "quality leading", from "cost leading" to "brand innovation". Only the improvement of quality, brand value and influence power could produce stronger core competency for auto enterprises. The engine innovation and breakthrough is one of the highlights of independent brands this year.

In addition, independent brands still has a bright prospect in overseas market. In the first half year, car export maintained a high speed development. From January to June, China exported 133 thousand cars, increasing by 98.6 percent year on year; the export value was US$953 million, up 84.2 percent year on year and accounting for 19 percent of China's total vehicle export value. The export value of car has climbed to and ranked No. 3 in terms of China's total vehicle export value. Independent brand enterprises are leaders in car export; they all reinforced the developing of foreign market this year.

Some experts pointed out that independent cars had wide market coverage and had relatively big advantage in rural and urban suburb areas, which possessed a huge potential for development. Independent brands should consolidate and strengthen their influence on these markets and seek for bigger development space. What merits our attention is the modulation of vehicle consumption tax and the society's concern on energy saving and emission reduction, which will bring a favorable opportunity for the development of independent brands. 
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