Chinese brands seen making it globally in 10 years

PUBLISHED : Saturday, 20 April, 2013, 12:00am
UPDATED : Saturday, 20 April, 2013, 5:45am

Four leading state-owned carmakers said yesterday at least one or two Chinese brands of cars would make it to the international stage in the next decade.

However, a lack of scale and a shortage of local talent remained major hurdles for their development.

Speaking at a conference on the eve of the Shanghai Auto Fair, the heads of Changan Automobile, Beijing Automotive, Dongfeng Motor and Guangzhou Automobile agreed increasing exports and their own brands' production capacity were two of their main tasks in the next seven years.

While exports still make up just a fraction of total sales for Chinese carmakers, Beijing Auto chairman Xu Heyi said he expected car exports from the mainland to exceed imports this year.

"The growth in sales of domestic brands is still below the average sales growth of the industry, and it probably will remain this way too this year. But starting from next year, it should catch up or even exceed that of the overall industry," Xu said.

China Automobile Manufacturers Association figures show 6.48 million Chinese-brand cars were sold last year - a year-on-year rise of 6.1 per cent, which was below the 7.17 per cent for the overall passenger car market.

Domestic brands' market share edged down 0.38 percentage point to 41.85 per cent.

However, excluding domestic brands co-developed by Chinese carmakers and their foreign partners, the market share of brands developed by mainland manufacturers was much lower, at 28 per cent, Changan Auto said.

But the group's chairman, Xu Liuping, said he believed it would rise to 35 per cent or 40 per cent in the next 10 years.

"We can surely do that," Xu said. "Half of the United States' car market is made up by its home brands; we are only looking to take up two-fifths of the market."

Changan and Dongfeng said they would strive to triple the capacity for their domestic brands to between four million and five million units by 2020.

But Albert Lam, the chairman of US-based electric carmaker Detroit Electric, said that to build true global brands, Chinese carmakers should work harder on innovation and care less about sales.

"They push out a lot of new models every year, but there is very little innovation," Lam said. "They should invest more on [research and development]."

Equity research firm Sanford C. Bernstein released a report earlier saying Chinese carmakers spent less than half the time of their Western and Japanese counterparts building a new model, and the money they spent on research and development was just 10 per cent of that spent by their foreign rivals.

Patrick Steinemann, a managing director at Bank of America Merrill Lynch, said Chinese carmakers were not global enough in their fundraising channels.

"Listing in New York and seeking investments elsewhere are also good ways to make your name global," Steinemann said.

But Wu Congjian, a director of Deloitte China's automotive practice, said people should give Chinese carmakers more time.

"When Korea and Japan first developed their car industry, their vehicles' quality was also poor," Wu said. "See how much China has progressed in the past 10 years. They will make it there."