European firms see share of car market halved
Trade and distribution inefficiencies reduce hold on sales to just 21pc
European passenger car makers, led by Volkswagen, have seen their hold on the mainland market cut by half in two years as Japanese, American, South Korean and Chinese rivals increasingly eat into market share.
Citing data from China Auto Monthly, Thomas Stanley, the director of KPMG's financial advisory services, said the combined share of European firms fell to 21.4 per cent this year from 40 per cent in 2003.
Meanwhile, the market share of Japanese companies rose from 21.9 per cent to 27.8 per cent, US firms 10.4 per cent to 13.3 per cent, Korean groups 4.9 per cent to 11.6 per cent and domestic players 22.8 per cent to 26 per cent.
Toyota, Hyundai and Peugeot Citroen gained market share among the foreign brands, while domestic players Dongfeng Motor and Chery, increased their hold on the market.
'The economy segment has been the fastest growing as consumers have been looking for cheaper options,' Mr Stanley said.
Volkswagen's share tumbled from 31 per cent last year to 15 per cent in the first nine months of this year.
The German car giant, the first foreign firm to set up joint venture car factories in the mainland two decades ago, suffered from marketing and distribution inefficiencies typical of state-owned enterprises, said Jia Xinguang, the consulting and development chief analyst at China National Automotive Industry.
Mr Jia said this was caused largely through having the sales of its joint ventures in Shanghai and Changchun handled by separate companies controlled by its partners Shanghai Automotive Industry Corp and First Auto Works.
'Volkswagen had poor control over the planned economy-style operation of its partners as a result of their market dominance,' he said. 'Now that it has taken control back, it has to do a lot of work to improve its effectiveness.'
Last month, Volkswagen announced it would bring its Skoda brand to the country in 2007, and introduce 10 to 12 new models before 2009, to boost flagging sales.
Co-operation on sales and production between its two joint ventures - seen to be rivals on certain products - was also strained.
Mr Jia said Volkswagen's Shanghai joint venture posted a 5.57 per cent year-on-year sales rise last month while its venture with First Auto Works in Changchun reported a drop of more than 20 per cent.
The figures represented an improvement on the 35.2 per cent sales drop in the Shanghai joint venture and a 22.27 per cent decline in Changchun for the first 10 months of the year.
Mr Jia expected passenger car sales to grow 20 per cent this year, up from 14 per cent last year.
