China: The most thriving automotive market in the world has no place for foreign brands – Part 2
March 6th, 2012 by Usman Khalid | 4 Comments |
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.