China’s indigenous brand policy backfires

Even the most ardent car lovers would struggle to identify some of the vehicles built by major multinational auto companies in China.

A BMW Brilliance Zinoro, an SGMW Baojun and a Dongfeng Nissan Venucia are among the “indigenous” brands that the Chinese government requires foreign-invested joint ventures to develop in return for approvals to expand production capacity in the world’s largest auto market.

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SGMW – GM’s joint venture with SAIC Motor and Liuzhou Wuling Motors – embraced the dictat by developing popular Baojun sedans and mini-cars. SGMW sold more than 100,000 Baojuns in 2013, up almost 20 per cent.

Priced at just Rmb50,000 ($8,000) to Rmb70,000, Baojun’s success has come primarily at the expense of China’s struggling domestic automakers, suggesting that the policy has had at least one unintended consequence.

“After several decades in China, the earliest models introduced by the foreign joint ventures are now priced as cheaply as Chinese brands,” Liu Bo, vice-president of Chang’an Auto, said at a seminar held in conjunction with April’s Beijing car show. “Their ability to focus global R&D resources on the China market is putting a lot of pressure on us.”

March sales of Chinese brand sedans fell 12 per cent year-on-year, as local automakers lost their market lead in the segment to their German rivals led by VW.

“The indigenous brand policy is really dumb because all it does is cannibalise the local Chinese brands,” said Janet Lewis, head of Macquarie Securities industrials research team in Hong Kong.

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Source: FT


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