12 May 2010

Too Many Chinese Brands

China is the biggest car market in the world by volume. Virtually all cars sold there are made locally due to import duties on imported cars and cheap labour costs. Yet, the dominant brands within China are foreign despite local brands selling well. Chinese brands are now exporting, mainly to developing nations and selling on price. However, even in these markets, the top brands are not Chinese.

You would think that even by now, they would be reaching the top of sales charts with stylish, low priced cars. But they are not. So why can't Chinese brands get to the top of any market. Average quality, poor crash protection and low brand image all play a part but there is another reason though. There are too many Chinese brands who take sales off each other. In Uruguay for example, it seems about half of all brands sold there are Chinese, yet none are in the top ten.

Of course, in Europe and America, when the automotive industry was in its infancy, hundreds of car companies started up, only to fall by the wayside. The few that survived have become the names we see on the cars around us. Won't this happen in China? Well maybe. The reason why it hasn't even shown signs of happening yet is that China's economy is regional and the car makers are too. Most of their sales are achieved in the area they are made. If that is to change, some regions may have to give up car making, allowing the fewer brands left to grow in size and use the extra profits garnered to really get competitive and take on the world.

So the current setup is holding back the Chinese auto makers. Who can say how it will pan out? For the time being, it buys time for other nation's car makers to prepare for the attack of Chinese brands when they do come in earnest.

The bottom line: Chinese car makers are impatient to go global, but the current situation is proving counter productive.

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