China’s car sales go from peak to a valley

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What China’s auto industry has experienced in 2011 is quite similar to what happened seven years ago, when the industry cooled down in 2004 after soaring growth in the previous year.

This year’s auto market has three major issues: Changing policies, disputes over joint brands, and challenges faced by Chinese local brands.

With regards to policy changes firstly, the two-year-old vehicle purchase tax reduction policy for passenger vehicles with 1.6L engines or below was canceled in the beginning of the year; secondly, Beijing and even sleepy Guiyang issued policies to restrict vehicle registration. These policies exerted negative impacts on the auto industry this year.

 

Almost all of the JV automakers in China have joined the trend of developing and launching joint sub brands this year, either due to policy requirement or the need of expanding to the lower-end market. However, opponents believe that the joint brands are not really self-developed or self-owned brands, because the core technologies are still controlled by the foreign parties, and some are even the phased-out technologies from the foreign partners. The industry insiders are also worried about the deadly shock from the joint brands’ in-rush on the local homegrown brands such as Chery and Geely.

Judging from the data for the first half of this year, Great Wall became one of the few Chinese homegrown automakers with growing sales and profits. In contrast, BYD, a star company chosen by Warren Buffet, was lacking in terms of sales and profit.