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China: How local brands may finally find their mojo at home

Chery E5 China June 2012The Chery E5 could be just what the Chinese needed after all…

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It’s no secret that apart from in the LCV segment, Chinese brands have been struggling at home for a while (see China February 2012: When will Chinese cars rule at home?). Granted, last November in the midst of China-Japan tensions, the penetration rate of Chinese passenger cars shot up to 35%, its highest in 20 years. But it’s still incredibly low compared to Japan and South Korea, two Asian car manufacturing powerhouses that have built their success overseas on a quasi-monopoly at home. A very interesting article on French website autoactu.com claims however that the Chinese woes at home may be about to ease a little.

ChangAn Eado 2012The ChangAn Eado’s potential lies in export markets and the Chinese Far West

But first let’s backtrack a few years. The bulk of the explosive Chinese car market growth – from a mere 1.5 million annual units in 2002 (including LCVs) to a whopping 19.6 million 10 years later – has been for the most part absorbed by well-off urbanites from the East coast. Their culture and buying power have biased their car choices towards more expensive and non-Chinese models. When the government put in place limitations on the obtention of licence plates to curb congestion and pollution in very large cities like Shanghai and Beijing in 2011, this trend accelerated.

Lifan 720 China January 2013. Picture courtesy of auto.ifeng.comLifan 720. Arguably, Lifan is currently more successful in Russia than in China…

Nowadays Shanghai licence plates alone can set you back as much as $15,000. For this price, only the (very) well-off can afford a new car, and their choice is not Chinese, which represent only 9% of new car sales in Shanghai and 10% in Beijing, down from 20% before the licence plate restrictions. If these measures are extended to Tier 2-3 cities, you would assume the situation could become truly dramatic for Chinese manufacturers. Not so, according to Autoactu. Most local brands have recognised that their opportunity now lies in secondary markets deeper inside the ‘Chinese Far-West’…

BYD F3 Surui China February 2013. Picture courtesy of auto.ifeng.comThe BYD F3 could get back to pole position at home when the country’s West develops.

These areas are currently considerably under-motorised and given the evolution of the market in the last decade, no foreign manufacturer has spent too much time thinking about a truly affordable, no frills offering. This is where local models come in…

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