The Chinese government put forth a list of cars that government departments will be limited to buying in 2012 over the weekend, it was good news for Chinese car makers but bad news for staples for companies such as Audi who have long seen their cars as being government staples.
According to the list issued by the Ministry of Information and Technology the government has authorized 412 different models for Chinese party cadres to buy with government money, every year the government spends some 80 billion RMB on bringing new cars into the government fleet, for the longest periods of time these cars were of course foreign and Chinese cars but going forward they will all be Chinese cars from Chinese brands.
Four pure electric cars have made it into the final list of 412 vehicles, 78 SUV’s have entered as well as 64 ‘multi purpose vehicles’ (likely pick up trucks), 265 gasoline and diesel sedans have been entered as well. On the branding front it, Hong Qi, Xia Li, Dongfeng’s Fengshen sedan range as well as Feng Xing MPV range, Chang-an’s mini van range, Guangzhou Auto’s Trumpchi, and SAIC’s MG and Roewe vehicles have all become official government vehicles for this year. Lifan, BYD, Chery, Geely, Great Wall, Brilliance and Zotye have all won places in the list. However it should be pointed out that the vast majority of cars are 1.5L or 1.6L with the larger sedans coming in at 1.8L and as mentioned, MPV’s and SUV’s are able to become 2.0L and 2.4L models.
For example, a mid level cadre for example is limited to a car of 1.8L or less and spend around 180,000rmb on that vehicle. One point that the government has made very clear is that manufacturers that do take part should invest around 3% of their earnings back into R&D.
Foreign manufacturers have been closed out of the system for now with Chinese manufacturers planning to reap the most of the rewards in the short term. Government staples such as Audi, VW Santana, Passats and various Buick’s are likely to receive a short term shock when the government tap turns off but these companies are big and smart enough to turn to other markets and segments to offset losses. The biggest long term worry from China Car Times is that Chinese manufacturers will fail to innovate as they will always have a strong customer base in the government fleet, thus offsetting the need to challenge foreign manufacturers with Chinese consumers and also in overseas markets.
Apparently Beijing’s recent obfuscated new rules won’t allow Geely to get Volvo on the list. But I can’t help thinking that if BAIC or SAIC had purchased Volvo instead, then it would be included.
“The biggest long term worry from China Car Times is that Chinese manufacturers will fail to innovate…”, your worry has no bases in reality, since, most countries with mature car industries do the very same thing. For example, NYPD uses exclusively Chevys and so on. Besides, those chosen chinese firms are not delivering 100% of thier production to the chinese gov., so the chinese companies would have to continue thier successfull murch.
Jia you.
Zap Jonway Not on the list. It is Not an registered Chinese auto manufacturer.
Manny, with the greatest respect I think you are wrong in every sense.
Of course GM provides cars to the local law enforcement organs in the USA, but they also have a world wide arm that takes care of business in Europe, Asia and South America. Chinese manufacturers now have a key client that is never going to turn away, and will unlikely make huge demands of it, the real test for Chinse manufacturers is pushing into overseas markets, setting up foreign subsidiaries, carrying out research in foreign countries using local talent and boosting their product lines. Some manufacturers have done this (i.e. Chang’an, SAIC) but others are quite content in sitting in the Chinese market and racing towards internal demand rather than facing challenges that are essential to their long term development.
And Chevy is even a good example for failing to innovate. What you see today globally sold as “Chevrolet” has been developed in Korea. The only remaining “real Chevys” sold outside the USA are Camaro and Corvette.
Regardless, GM is number one again, and making money.
Well, what you said it true, but the Chinese car market is 18.5 million cars, the world’s biggest, so staying in China for now is not such a bad idea. Of course, some consolidation has to take place.
I still don’t think you have proven him wrong. But I agree with you in a different way. FAW for instance is moving really slow, but that’s mainly because they can live from joint-ventures, which yield a lot more money than government contracts.
Manny, clear the commercial vehicles out of that 18.5 million and the real no passenger car sales are evident.
I dont think Chevy is a bad example of failing to innovate, I think its a fantastic example of reorganizing your house so that you can make the most of what is being developed. Chevrolet is on the verge of capturing the 80s/90s/00′s generation in the same way it captured the 40s/50s/60s generations before it went into its great malaise.
GM’s choice of using EU products from Opel for Buick and Daewoo products for world markets is brilliant, it shows that GM are back on top.
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You seem to deem it good that GM is making money. How about all the displaced workers in the US that are now unemployed due to globalization.
I also realize it’s not a simple situation, but something has to be done about ALL OF OUR GOODS being manufactured by cheap, inferior labor! Meanwhile, we are suffering from massive unemployment and runaway inflation!