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.