Chinese government to buy more Chinese cars in 14.7billion USD splurge in 2010

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We all need to become civil servants!

From Xinhua:

BEIJING, Dec. 31 — Chinese authorities are mulling new regulations to increase the ratio of domestic brands cars to more than 50 percent in government procurement of official cars. The annual car-purchasing bill of the Chinese government is expected to top 100 billion yuan (14.7 billion U.S. dollars) in 2010, a huge cake for Chinese and foreign car brands to compete for.

The Financial Ministry, Government Offices Administration and the CPC Central Commission for Discipline Inspection have been jointly drafting a regulation to specify standards and prices of domestic cars, China Business News (CBN) reported Wednesday.

Based on the State Council’s plan earlier this year to push for the preferential policy for domestic car brands, a meeting of China’s top legislature, the NPC, which concluded last Saturday, reiterated the government’s resolve to increase the ratio of China-made cars to more than half.

Under the new regulation, ordinary vehicles of all government departments nationwide should have an engine displacement of up to 1.8 litters and a price below 160,000 yuan, compared with current regulations effected in 1994 for an engine displacement up to 2.0 litters and a price of up to 250,000 yuan.

This policy is deemed as preferential to domestic brands, that enjoy a competitive edge in producing economic cars.

Ministers and provincial heads should have cars with an engine displacement of up to 3.0 liters and a price below 450,000 yuan. For a vice minister-level official, the car should be priced below 350,000 yuan, according to the 1994 regulations.

Statistics indicate that official-vehicle expenses at all levels last year reached 80 billion yuan (11.7 billion dollars), 14 percent of the total amount of expenses of government purchase. And the figures could jump to 100 billion yuan (14.6 billion dollars) next year.

The total value of official-car purchase is 8 percent of the total value of car sales in China, and governments at all levels have shown an increase of more than 20 percent in car purchases, according to CBN.

Domestic car manufactures welcomed the new regulations, saying they will be given a boost by the change.

“It will bring us an enormous opportunity in the near future, since the government’s initiative will definitely build consumers’ confidence and promote the expansion of the market,” hailed Yang Bo, general manager of the department of Rich, Cherry’s recent mini, multi-purpose vehicle.

Supporting domestic brands is the government’s long-term policy. The decision came on the heels of an announcement by the Government Office Administration in June that central and local government departments would increase the purchase of China-made cars further to cut the official vehicle expenses of government organs.

The announcement pointed out that these organs have taken a lead in using energy-saving and environmentally friendly domestic cars over the years and the number has topped more than 1,000 involving brands such as Cherry, Brilliance and Besturn.

Of the 38 manufacturers on the government purchase list made public in June, 21 are domestic, such as Roewe, MG and BYD.

However, an increase in the number of purchases of domestic brands could be bad news for a number of joint ventures such as FAW Toyota Motor and Changan FORD Automobile Corporation, whose higher-end car prices will be, on average, above the bar.

“We will have to bear the loss at some degree, since the nation decided to foster the development of China’s own brands,” Ma Chunping, a media relations officer at FAW Toyota Motor Sales, told the Global Times.

But she was confident about the company’s Toyota Crown, a brand that ranks second in the official-car market after Audi.

For companies with a focus on private car sales, the impact appeared not to be serious.

Zhang Xiaojun, the executive vice president of Audi, told the Global Times there will not be much impact on Audi, as it cares about both governmental purchasing and the individual sector.

“Commercial and private vehicles have taken 80 percent of the whole market, which means the governmental purchasing will suffer less loss,” Zhao said.

A resource close to Peugeot, which is also on the list, told the Global Times that his company will not suffer as a result of the new regulations, since most of its cars are sold to individual consumers.

Since 2004, the central government has readjusted the official vehicle quotas of 95 central government organs, the Xinhua News Agency reported, citing the Procurement Center of the Central People’s Government (PCCG).

During that process, 721 vehicles were deemed excessive or extravagant and the total number of central government official vehicles fell by 30 percent, the center’s figures showed.

Spending on central government vehicles fell 22.5 percent year on year in 2008, according to the PCCG.

It said in June that the central government departments have no current plans to buy BMW or Mercedes-Benz vehicles for official fleets to cut this year’s official vehicle expenses of government organs and the Communist Party of China (CPC) by 15 percent from the previous three years’ average as part of its austerity drive, according to Xinhua.