China: The most thriving automotive market in the world has no place for foreign brands – Part 1

Tuesday, March 6th, 2012 5:48:06 by

China is slowly becoming the attraction for industrial conglomerates in terms of consumption. Although the per capita consumption is still low as compared to Europe and the US but out of 1.6 Billion people, a fraction counts for millions.

The latest of the news is related to the automotive industry in mainland China, where the domestic purchase of automobiles surged to billions of dollars in revenues last year and the main actors were foreign brands like BMW and Audi.

However, the Chinese government, being a communist one at that, has taken the matter in another sense. Due to the huge success of foreign brands in China, the government has imposed new laws for the purchase of vehicles for government sector organizations and their employees. These laws implicitly prohibit the purchase of foreign brands. The authorities issued a list of cars these organizations can purchase.

There were 412 brands, none of them foreign.  The list is open for public comment until March 9. This poses a threat to companies like Volkswagen, General Motors and Ford although the latter one does not have substantial share in the market.

Last year’s sales reports showed that companies like Mercedes-Benz and Audi surged past 35 percent growth rate in an otherwise slow Chinese market. The success of European brands, especially Germans, are more likely to grow in China than in any other part of the world. Moreover, they are also considered successful as compared to local Chinese brands.

Foreign-branded cars account for about 70% of the overall Chinese car market and around 80% of government purchases. Chinese government sees this as a potential threat to its domestic automotive industry that is figuring out a way to infiltrate into the international market. However, that is another issue that needs to be addressed separately.

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