China to issue new rules on vehicle procurement in favor of homegrown brands

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China’s latest policy on the government procurement of vehicles will be implemented soon according to media reports. According to the policy, the upper levels of the general government vehicles will be lowered from vehicles with engine size at 2.0L or below and prices below 250,000 yuan to those with engine size at 1.8L or below and prices below 180,000 yuan. It means almost all of the foreign branded midsize vehicles will be excluded out of the procurement objects. But it’s good news for China’s homegrown automakers. Many homegrown automakers are taking corresponding measures to gain more shares from the government procurement market.

SAIC Motor launched new the Roewe 750 hybrid  in September, which has served as government official vehicles in Shanghai, Brilliance, Guangzhou Auto, Chery, Geely and First Automobile Works are all eying this potential money pot with these manufacturers rushing to produce compact to midsize vehicles.

In the first nine months of this year, the sales of passenger vehicles of the homegrown brands reduced 0.80% from a year earlier to 4,452,900 units, accounting for 42.26% of the total sales of passenger vehicles in the period, down 3.09 percentage points from a year earlier. It means the Chinese homegrown automakers also need the government procurement to boost their sales.

However, the industry analysts point out that the foreign brands won’t just see their market shares taken by the homegrown brands and do nothing about it, we can expect government favorites such as Audi and VW to make a fight back at some point.