China: The most thriving automotive market in the world has no place for foreign brands – Part 2

March 6th, 2012 by | 4 Comments |

The Chinese auto-market, as compared to other parts of the world, has more potential of growth, thanks to the European debt crisis that has affected its automotive market among other issues.

The China Association of Automobile Manufacturers forecasts sales in the country to increase 9.5% in 2012, but that’s optimistic.  “The best scenario is for annual car sales to remain flat, even if automakers try harder in the latter half,” says Zhang Xin of Guotai Junan Securities.  “The current official forecast for about 10 percent growth doesn’t look realistic.”

The calendar year’s start was not even supportive of claims by the Chinese government. Car sales plummeted 23.8% in January, which cannot be taken as a promising start. However, there seems to be no stopping the success of the foreign brands.

In addition to opening dealerships in mainland China, many automakers have opened production plants in that region for immediate availability of their vehicles at low costs. However, the new rule promulgated in Beijing is worrisome to these companies.

Of the government market, the Audi accounts for a third of the total.  Audis have been the first choice of top officials since the 1980s, and that has helped make China Audi’s largest market. However, now that these officials are forbidden to purchase Audi, or any other foreign brand for that matter, the sales are going to take a deep plunge in the coming days.

The biggest blow would be to Ford, who started operations in China a little while back and has even opened a new $480 Million plant in Chongqing. Its hatchback, Ford Focus, which competes with a slew of inexpensive domestic models such as those from Geely, is going to see the end before it even opens the sales.  Geely’s chairman, not surprisingly, “enthusiastically” supports Beijing’s plan to prohibit the purchase of foreign vehicles.   He should: there are 19 Geely models on the proposed list of approved vehicles.

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  • Comment by Usman Khalid: ( March 10th, 2012 at 10:46 am )

    Mr. McKee,
    There is certainly no need to apologize for anything. You always are welcome to express your opinion and critique. I will be looking forward to remain in contact with you. Attached is my email, where I can be reached 24/7.
    Wish you the best.
    Regards,
    Usman.
    khalidusman@hotmail.com


  • Comment by David T McKee: ( March 7th, 2012 at 8:10 pm )

    Unman
    Thank you for your kind response. I will continue to follow your fine writing. All the best from Punta Gorda, Florida. Forgive my first posting as my Apple IPad has a spelling overide feature that has a mind of it’s own :0)
    Sincerely
    David McKee


  • Comment by Usman Khalid: ( March 7th, 2012 at 10:49 am )

    Dear Mr. McKee,
    I surely do not have any doubts in your credentials and I am aware of Ford’s presence in China. However, the point that I made was completely different and had been inferred from various sources, some of them are attached below. Ford presence, in my knowledge, was joint ventures but this year they opened an entirely new production plant in Chongqing, dedicated to Ford vehicles.
    Dearly appreciate your response and will be looking forward to connect with you again.
    Regards,
    Usman.

    http://media.ford.com/article_display.cfm?article_id=36062
    http://www.forbes.com/sites/gordonchang/2012/03/04/fordgetaboutit-china-to-buy-only-domestic-branded-cars/ (Second paragraph)


  • Comment by David T McKee: ( March 7th, 2012 at 12:23 am )

    I opened the Ford Motor Company office in Beijing in 1992 and Ford started it’s first operations with the First Auto Works and SAIC in 1994. the automotive joint venture in Chongqing started soon after that. I enjoyed your fine article, but it is not accurate to say that Ford started operations “a little while back”. President Hu and other China automotive government officials presented me with a gold medal in 2008 and named me a ” China Automotive Pioneer”.
    David McKee
    Executive VP, Ford IBD China
    (retired)