Chinese auto brands limp into Beijing show

Associated Press
In this photo taken Wednesday April 16, 2014, vehicles are parked outside a factory of SGMW, a joint venture between Chinese carmakers and General Motors in Qingdao in east China's Shandong province. China’s automakers are the underdogs heading into next week’s Beijing auto show, where foreign and domestic brands will jostle for attention in a crowded market. Facing intense competition from General Motors, Volkswagen and other global rivals, local brands such as Chery, Geely and SUV maker Great Wall have seen sales and market share shrink this year while China’s overall market grew. (AP Photo) CHINA OUT

View gallery

BEIJING (AP) — China's automakers are the underdogs heading into next week's Beijing auto show, where foreign and domestic brands will jostle for attention in a market that is increasingly difficult for homegrown models.

Facing intense competition from General Motors, Volkswagen and other global rivals, local brands such as Chery, Geely and SUV maker Great Wall have suffered shrinking sales and market share this year while China's overall auto market has grown. That is a blow to Chinese leaders who have made it a national priority to catch up with neighboring Japan and South Korea by creating globally competitive automakers.

"I am pretty pessimistic about the domestic brands," said Wang Chao, auto editor for the newspaper China Youth Daily. "They have to work even harder to win customers."

China is the world's biggest auto market, with last year's sales rising 15.7 percent from 2012 to 17.9 million vehicles. That has supported the rapid growth of Chinese brands. But it also has attracted U.S., European, Japanese and Korean automakers that have more advanced technology and are spending heavily to appeal to local tastes in a market they see as a key to their future growth.

In the first quarter, sales by Chinese brands shrank 2.6 percent from a year earlier while the overall market grew 7.9 percent, according to the China Association of Automobile Manufacturers. Their market share shrank by 4.5 percentage points to 38.7 percent while German, American, Japanese and Korean rivals gained.

"The dramatic decline in domestic sales has exceeded even our bearish expectations," said Bernstein Research analyst Max Warburton in a report.

China's fledgling independent brands face an array of problems from weak research and development to lack of marketing experience.

Adding to competition in a crowded market, Ford Motor Co. is using the auto show to launch its luxury Lincoln brand in China.

General Motors Co. plans to unveil a new Chevrolet Cruze compact and to display an updated Cadillac CTS and Chevrolet Trax SUV. Nissan Motor Co., looking to China to help drive its global turnaround, will debut a concept sedan.

Chinese brands are using the show to showcase their latest sedans and sport utility vehicles. Geely Holding Group, owner of Sweden's Volvo Cars, is launching a new branding campaign. BYD Ltd., the country's leading maker of electric cars, is to unveil a compact sedan and a plug-in hybrid SUV.

Foreign brands have long dominated the premium end of China's market. Some see China as so important that they have broken with the industry trend of selling the same models everywhere and are designing vehicles for this country.

Now, they are making inroads with unexpected speed into Chinese brands' former stronghold in lower-income markets outside major cities.

GM's joint venture with state-owned Shanghai Automotive Industries Corp. and Liuzhou Wuling Motors Ltd. sells its Hongguang minivan for as little as 45,000 yuan ($7,500).

Wuling sold 81,200 of its new Hongguang S in January. That exceeded combined sales for Chinese automakers Geely, BYD and Great Wall Motors Co.

Without the Hongguang in the market, "these customers would have chosen a domestic branded car instead," said Bernstein's Warburton.

The crush of competition is partly self-inflicted following repeated strategy changes by Chinese leaders who are trying to create global competitors by decree.

In the 1990s, foreign automakers that wanted to manufacture in China were required to do so through state-owned partners. Planners hoped local manufacturers would learn from them and strike out on their own.

That fueled the growth of cash-rich but unambitious companies such as Shanghai Automotive Industries, which assembles vehicles for GM and VW, and Dongfeng Motor Corp., the partner of Japan's Honda Motor Co. and Korea's Kia Motor Co. Both have launched their own brands but make most of their money providing support to global partners.

After 2000, Chinese leaders changed course and threw support to ambitious independent brands such as Geely, Chery Inc. and Great Wall. Governments of cities and provinces were ordered to favor them in buying official vehicles.

Planners have taken yet another tack in the past five years, requiring global automakers to set up indigenous brands with Chinese partners as the price of being allowed to expand their own production.

GM and Nissan have made their indigenous brands a low-priced extension to their product range. They are penetrating lower-income cities and the countryside where Chinese brands once dominated. Sales of GM's Baojun brand, which is another joint venture with SAIC and Wuling, rose 19 percent last year to 100,498 vehicles.

Some Chinese automakers have responded by expanding abroad.

In February, Dongfeng injected 800 million euro ($1.1 billion) into struggling PSA Peugeot Citroen, France's biggest automaker, in exchange for a 14 percent stake. Peugeot executives say they will use the tie-up to expand faster in China.

China's auto market has cooled since its growth peaked above 40 percent in 2009 but still is the world's fastest-growing. Sales should reach a record 23.3 million vehicles this year, according to LMC Automotive.

GM and its Chinese partners sold nearly 3.2 million GM-brand vehicles last year. China's biggest independent brand, Chery, sold a total of 375,000 vehicles.

Still, Chinese automakers are making progress in design and some might catch up within five years, said LMC Automotive analyst John Zeng.

Chinese brands including Chery and Geely also are suffering from lack of new models over the past two years but several are preparing to release new vehicles that should help to fix that.

"We probably will see their performance improve once their new products make it to the market," said Zeng.


AP researcher Fu Ting in Shanghai contributed.


View Comments (116)

Recommended for You

  • Tycoon buys 30 Rolls-Royces for Macau hotel

    A Hong Kong tycoon has placed the biggest ever order for Rolls-Royce cars, agreeing to buy 30 Phantoms to chauffeur guests at a luxury resort he's building in the global gambling capital of Macau. Stephen Hung's $20 million purchase surpasses the 14 Phantoms bought by Hong Kong's Peninsula Hotel in…

    Associated Press
  • 1 Tip To Lose Belly Fat

    It's Hollywood's Hottest Diet And Gets Rid Of Stubborn Fat Areas Like Nothing Else.

  • Before You Buy Alibaba, Check Out 4 Top China Stocks

    Before You Buy Alibaba, Check Out 4 Top China Stocks While investors gear up for Alibaba Group 's (BABA) hotly anticipated initial public offering, don't forget about other Chinese stocks that are worth keeping an eye on. Today's Young Guns Screen of

    Investor's Business Daily
  • Tycoon's arrest sends shock wave through Russia

    Tycoon's arrest sends shock wave through Russia MOSCOW (AP) — The arrest of a Russian telecoms and oil tycoon has sent shock waves through the country's business community, with some fearing a return to the dark days of a decade ago, when the Kremlin asserted its power by imprisoning the country's…

    Associated Press
  • "The Retiree Next Door": How successful retirees stretch their savings

    "The Retiree Next Door": How successful retirees stretch their savingsBy the time she hit her late 40s, Toni Eugenia wasn’t sure she would ever be able to retire. Eugenia, 56, a pharmacy technician who lived in Houston, was nearly $200,000 in debt and

    Yahoo Finance
  • Costco Stores in Canada to Stop Taking American Express

    “The credit card relationship between American Express and Costco Wholesale Canada will not be renewed when it expires” on Dec. 31, the company said today in an e-mail to Canadian customers. The message was attributed to Lorelle Gilpin, vice president of marketing and membership for Costco…

  • CNBC Anchor Calls Out Fed-Hater Bill Fleckenstein In Startling Shouting Match

    CNBC Bill Fleckenstein of Fleckenstein Capital appeared on CNBC's Futures Now program on Tuesday. Futures Now host Jackie DeAngelis came out swinging, asking Fleckenstein right at the top if he was willing to admit that he had misunderstood monetary policy. Sounding taken aback, Fleckenstein…

    Business Insider
  • Beanie Babies creator's sentence debated in court

    Beanie Babies creator's sentence debated in court CHICAGO (AP) — Federal prosecutors seeking to put the billionaire creator of Beanie Babies in prison for hiding millions in Swiss bank accounts told appellate court judges Wednesday that the toymaker's sentence of probation threatens to erode the…

    Associated Press
  • Wondering How You Could Save on Home Insurance?

    Get a quote from Farmers Insurance and discover how you could save. Speak with an agent to get the knowledge you need to make an informed decision.

    AdChoicesFarmers InsuranceSponsored
  • Apple to unveil new iPads, operating system on Oct. 21 : report

    The company plans to unveil the sixth generation of its iPad and the third edition of the iPad mini, as well as its operating system OS X Yosemite, which has undergone a complete visual overhaul, the Internet news website said. Trudy Muller, a spokeswoman for Apple, declined to comment. The iPad is…

  • Gilead Stock Is Falling On These Drug Setbacks

    Gilead Stock Is Falling On These Drug Setbacks Gilead Sciences (GILD) shares are backsliding Wednesday on news that the patient drop-out rate for hepatitis C drug Sovaldi is quadruple that of clinical trials. In addition, the biotech's Phase 2 study results

    Investor's Business Daily
  • Play

    Citi, Bank of America Offer Discounted Mortgages

    Citigroup and Bank of America will offer mortgages at discounted interest rates to help borrowers with low incomes or subprime credit. AnnaMaria Andriotis joins MoneyBeat. Photo: Getty.

    WSJ Live
  • Margaritaville casino owners seek bankruptcy

    The owner of Biloxi's Margaritaville casino has filed for Chapter 11 bankruptcy protection Tuesday, only hours before a hearing where the landlord aimed to seize the property. The filing by MVB Holding LLC in U.S. Don Dornan, a lawyer for landlord Clay Point LLC, said the company had planned to ask…

    Associated Press
  • Venture Capitalist Makes Case Against 'Shark Tank'

    If you watch the TV show "Shark Tank" as entertainment and not to obtain a startup education, you will be benignly inspired by fellow entrepreneurs. "Shark Tank" is a reality competition show that features entrepreneurs pitching business ideas to a panel of potential investors, referred to as…

    The Wall Street Journal
  • Don't care about Alibaba? Here's why it may matter

    When the Alibaba Group Holding prices its initial public offering Thursday, small businesses in particular will be watching. Founder Jack Ma -the former English-teacher-turned-dot-com billionaire-has touted his e-commerce platform as a way for smaller merchants to expand their international…

  • Take Your Career in Law to the Next Level!

    Earn an accredited Master of Laws in only 1 year. 100% online, No LSAT required, and 5 concentrations offered, including Taxation Law. Apply today!

    AdChoicesThomas Jefferson Law Sponsored
  • Play

    Hilsenrath: Fed Still Sees 2015 for Rate Increase

    WSJ's Jon Hilsenrath discusses the Federal Reserve's decision to hold steady on interest rates, but the central bank foresees a rate increase by early 2015. Photo: Getty.

    WSJ Live
  • Here's What Mark Cuban Wishes He Knew About Money In His 20s

    Cuban is the owner of the Dallas Mavericks basketball team. Billionaire investor and entrepreneur Mark Cuban is generous with his advice. When we asked him what he wishes he'd known about money in his 20s, he said:

    Business Insider
  • Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More

    Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More Stocks were firm on Wednesday morning ahead of the FOMC meeting outcome. Tuesday’s rally may have sparked higher interest again, and investors are looking for bargains

    24/7 Wall St.
  • SHOE COMPANY: Our CEO Just Disappeared And Most Of The Money Is Gone

    "and like that: he's gone." This is an actual headline from a company press release: "CEO and COO disappeared, most of the company's cash missing." (Via FastFT) In a statement, German-based shoe company Ultrasonic said its CFO,  Chi Kwong Clifford Chan, has been unable to reach the company's CEO,…

    Business Insider
  • Boeing may have outfoxed Musk, but it could have bigger problems

    Elon Musk is arguably one of the greatest entrepreneurial minds of the 21st Century, but he was outsized an old school aerospace giant. Boeing won the bulk of NASA’s contract for a space taxi.  One of the other companies vying for the deal is SpaceX, the company headed by Tesla’s Musk, will get a…

    Talking Numbers
  • Billionaire Investor Says Chinese People Work Harder And Western Companies Could Face Deep Trouble After Alibaba IPO

    Michael Moritz, the chairman of VC firm Sequoia Capital, is a huge fan of Chinese internet companies and reiterated his enthusiasm for the Chinese market in an interview with The Wall Street Journal Wednesday. The billionaire investor described the Alibaba IPO as a “major landmark event” that is as…

    Business Insider
  • Best Womens Wrinkle Creams 2014

    Mom reveals simple wrinkle solution that has researchers very excited. Try this free solution today to look and feel years younger.

  • As Fed takes baby steps, Cramer's trick for profit

    In turn, Cramer says making money in the market, involves looking at the environment through the lens of the Fed. "The trick is to remember that they speak for the common person," Cramer said. "The Fed wants the common person to make money." With that backdrop always in mind, Cramer says it becomes…