China's homegrown carmakers are unlikely to see a further significant decline in their mainland market share after seeing it shrink for 12 consecutive months, but they are being urged to capture growth in the SUV segment and boost product quality to counter a weakening price advantage. "This year, the market share decline is pretty severe, but I don't expect that level of decline to happen further," said Sangyun Han, a credit analyst at Standard & Poor's Ratings Services. The market share of domestic brands in passenger car sales recovered by 2.35 percentage points from July to hit 37.1 per cent in August, but that was still 1 per cent lower from the same month last year and marked a 12th straight month of year-on-year decline, according to the China Association of Automobile Manufacturers (CAAM). Sales of domestic cars accounted for about 19.5 per cent of total car sales in August, down 5.5 percentage points year on year. Domestic players were losing market share in the car segment as global carmakers were now penetrating the lower end of the market, where local brands had enjoyed a price advantage, he said. Han said local carmakers could ride strong growth in the SUV market amid growing competition in the car segment. "The growth is coming from small-sized SUVs, which is a cheaper car market, and I think Chinese carmakers can do better," he said. SUV sales increased by 29.6 per cent year on year in August to 311,300 units, outpacing the 1.31 per cent growth in car sales, which totalled 910,800 units, CAAM said. "Local carmakers cannot compete with global carmakers in all segments because of the limited resources," Han said, adding that some domestic carmakers like Great Wall Motor and Geely were already focusing more on the SUV sector, which was more profitable. Andreas Graef, a principal at consultancy AT Kearney who advises the automotive sector, said he expected the market share of domestic carmakers to drop for one or two more months, but was likely to stabilise as the number would reach a low level. Chinese carmakers were losing their price advantage as joint-venture competitors were able to lower prices through localised production and benefited from economies of scale, he said. "Some domestic carmakers are producing many models but with small volume and lower quality," he said. "So they have the difficulties in keeping cost advantage." Graef agreed that some domestic carmakers, such as Great Wall, were shifting their focus to SUVs, which offered higher profit margin, but he said it could not solve the core problem. "By doing more SUVs, it can make your company more profitable, but at the same time you are limited to one segment," he said. "Although the SUV segment is growing, the fundamental problem is quality. None of the big carmakers can just focus on one area." Chinese carmakers should boost product quality and technology by acquisitions in the long run to survive an industry consolidation which was likely to accelerate amid a slowdown in economic growth. Yale Zhang, head of consulting firm Automotive Foresight, said the lack of good products was one reason domestic carmakers were losing market share. Focusing more on SUVs could help boost sales, but it would do little to help restore market share as the SUV segment was small when compared with cars, Zhang said.