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Kandy Wong

If taxi drivers are the pulse of a city, mainland carmakers face a hard slog convincing Shanghai people to buy a planned new crop of mainland-branded vehicles.

'We prefer to buy second-hand cars from Volkswagen or General Motors rather than new cars from local brands such as Geely or Chery even though they cost about the same,' one taxi driver said while weaving through a street filled with VW taxis.

'Consumers are still not confident about domestically made cars.'

After years of churning out vehicles under foreign marques such as the Buick and Polo, carmakers in the world's second-biggest vehicle market are starting to make serious efforts to build their own brands.

Guangzhou Automotive Industry, First Auto Works, Beijing Automotive Industry and Hong Kong-listed Dongfeng Motor Group are among the leading carmakers to announce programmes to build self-branded cars.

The ultimate aim is to create home-grown brands that can compete on the global stage with the likes of GM  or Toyota Motor.

The China Association of Automobile Manufacturers said sales of self-branded passenger cars account for 28.85 per cent of overall car sales. Still, they are considered inferior by many consumers.

'Local brand cars don't appeal to consumers in big cities because well-known global branded cars are indications of higher social status.' said Yale Zhang, director of CSM Worldwide, a consultancy specialising in the  car market.

Mr Zhang said local branded models were still looked on as cheap, economy cars better suited to poorer rural populations.

The top 10 home-grown brands include Chery's QQ, First Auto Works' Xiali, Brilliance China's Junjie and Free Cruiser and King Kong from Geely. They sold 480,000 units in the first half, accounting for 72.87 per cent of local self-branded sales.

Building self-branded vehicles is not particularly new in the mainland.

Almost  50 years ago, First Auto Works made Dongfeng CA71 passenger cars and Red Flags for state officials.

However,  carmakers are now gearing up to launch a new family of  vehicles  to an expanding and increasingly wealthy, middle class as a way to boost sales in a  crowded domestic market.

Guangzhou Honda, a venture between Hong Kong-listed Denway Motors and Honda Motor of Japan, this month said it would launch its own model by the end of the decade.

The company will invest  two billion yuan in researching and developing the as-yet unnamed car. Denway is hoping the expertise of engineers from Honda as well as the Japanese company's marketing expertise will give it the edge.

Another strategy being used by some carmakers is to buy assets from foreign carmakers as a springboard  for launching their own vehicles. Shanghai Automotive Industry Corp's Roewe 750 series uses designs bought from defunct British carmaker MG Rover in 2004.

Shanghai Automotive, the largest domestic carmaker in the mainland, last week said it would sell eight billion yuan worth of bonds to help fund the development of self-branded cars.

And Dongfeng Motor,  which makes cars in tie-ups with Nissan Motor, Honda and  Peugeot Citroen, is planning to invest 7.6 billion yuan in self-branded cars, according to sources.

Dongfeng unveiled its first self-developed sports-utility vehicle  late last year and is still awaiting government approval to begin mass production.

Meanwhile, Chery  is working with Chrysler to open up the United States market while Brilliance China has signed a contract with HSO Motors Europe to export 158,000 vehicles to Germany by next year.

These carmakers are banking on gaining brand recognition at home by selling their cars in important overseas markets such as the US and western Europe. But it  will not be easy. Eiji Okawara, president of Guangzhou Honda's research and development department, said the mainland is expected to need 10 to 30 years to master self-branded models.

Mr Zhang said home-grown carmakers needed to broaden their product range, making more mid- and high-range cars, in order to target increasingly wealthier consumers.

'Other things like the comprehensiveness of after sale service and a dealership network are also critical,' Mr Zhang said.

Guangzhou Honda executive vice-president Fu Shoujie said domestic carmakers that can take the lead in developing self-branded cars will be in a good position.

Analysts say it is too early to assess how successful local carmakers will be, considering the extensive engineering and marketing development needed before self branded cars can make a dent in the market.

Still, the government is not holding back  its ambitions.

'I hope the new self-branded model from Guangzhou Honda will be seen at the Beijing car show next year,' said Chen Jianguo, an official from the National Development and Reform Commission's manufacturing division earlier this month.

Catching up

Mainland carmakers   are now willing to   invest in research   and development

The percentage of sales accounted  for by self-branded passenger cars  28.85%



Brand recognition the future for mainland carmakers