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Chinese brands face cloudy future with market stuck in downturn
2019-07-01 08:46:56
Saddled with generally weaker balance sheets and brands, underutilized factories, and facing strong headwinds from the weakening economy and tougher emissions rules, their prospects are coming under enormous pressure. The prolonged downturn in the light-vehicle market and fierce competition from foreign rivals has sent Chinese brands retreating on multiple fronts. While the overall new-vehicle market shrank 15 percent in the first five months, aggregate sales of domestic brands dropped 23 percent. As a result, domestic automakers’ share of the China market has dropped to 39.7 percent, down 4.2 percentage points from the same period last year. The last time their share fell short of 40 percent was 2015. The near-term future doesn’t look good for them, either. In May, Great Wall Motor Co. and BYD Co., the only two domestic carmakers that maintained growth in the first four months, posted lower deliveries, pushing the combined market share of China’s domestic automakers down to 36.2 percent for the month. The persistent market downturn has also clipped the ambitions of Great Wall and another major private Chinese car manufacturer, Geely Automobile Holdings, to move upscale. The duo, tired of competing with global automakers on price, each launched a premium subbrand two years ago. Great Wall has introduced three crossovers and an SUV under the Wey brand while Geely has rolled out two crossovers and a sedan with the Lynk & CO marque. Even with new models in their lineups, the two brands’ sales have been declining month by month. In May, Wey delivered just 6,217 vehicles while Lynk & CO sold 9,190. Because U.S. President Donald Trump’s tariffs have dashed any hopes of selling in America, Chinese brands have sought to shore up sales by boosting exports to emerging markets. But that has proved to be a tall order. Chinese brand exports fell 15 percent to below 260,000 in the first five months, in part because of slower growth elsewhere in the world. To engineer a turnaround, China brands have to double efforts to revive domestic sales. It is easier said than done because multiple forces seem to be working against them. Domestic brands have traditionally targeted low-income customers who typically live in China’s rural and inland areas. These customers are more likely to cut discretionary spending than are households in big cities and coastal regions amid a weakening economy. Housing prices in rural and inland China have kept rising this year while prices in big cities have been tightly controlled by the government. Fearing property prices will continue to rise, households in rural and interior regions tend to spend savings and wages on housing rather than other items such as cars. In addition, Beijing is pressing provinces to adopt new vehicle emissions standards ahead of schedule. Chinese brands, saddled with older technology and anti-pollution controls, generally need more time than global peers to upgrade products to comply with the new rules. That has left dealerships with much higher inventories of vehicles that can only meet older State 5 emissions standards, which are equivalent to the Euro 5 rules.
Miss.Dong Lu

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