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China to probe car market competition
The Financial Times, June 11, 2014
China is conducting a review of potentially anti-competitive behaviour in the world’s largest car market, the commerce ministry said on Tuesday, as new sales data showed that foreign brands were continuing to acquire market share at the expense of their struggling domestic rivals.
Qiu Zhongyi, a ministry official, confirmed that Beijing had asked industry associations in a range of sectors to share information on problems ranging from monopoly practices to local protectionism. “We want to understand the challenges they are facing,” he said, adding that the review covered dozens of industries including cars, pharmaceuticals and alcohol.
The survey document, circulated late last month, said the reviews were being conducted in accordance with the Chinese Communist party’s pledge in November to ensure that market forces would play a “decisive” role in the economy.
May vehicle sales increased 8.5 per cent year on year to 1.9m units, according to the China Association of Automobile Manufacturers, a domestic lobby group. “If the economy is slowing down, there’s no evidence of that in the auto industry,” said Bill Russo at automotive consultancy Synergistics.
But sales of Chinese brand vehicles again trailed the wider market, growing just 5.4 per cent. “Competition between Chinese brands and foreign brands, and among foreign brands themselves, is intensifying,” Yao Jie, CAAM deputy secretary-general, said at the association’s monthly briefing.
Cars produced by foreign-invested joint ventures dominate the market. While the JVs have proven lucrative for both multinational car companies and their state-owned partners, the latter have failed to develop their own brand products.
The three most popular cars in China are Ford’s Focus and Volkswagen’s Santana and Lavida sedans. Sales of these three models alone exceeded 500,000 units in the first five months of this year. For all of 2013, by contrast, China’s most popular domestic brands, BYD and Chang’an, each sold 500,000 units.
“Continued expansion of the middle-class population is raising the number of potential buyers and foreign brands are building out their distribution networks in lower tier cities,” Mr Russo said. “From a market share perspective there’s no good news for the local brands.”
Even Hebei-based Great Wall Motor, which manufactures China’s best-selling SUV, has recently suffered heavy sales declines in part because of quality issues that have delayed the launch of its latest Haval model.
In an attempt to halt the decline of local brands, CAAM has opposed moves to lift the 50 per cent foreign-ownership cap in China’s auto sector and is urging multinational carmakers to transfer more technology and R&D capabilities to their local joint ventures.
Some foreign car companies have also been criticised for the high prices of their vehicles in China relative to other markets, although they insist this is because of strong demand and import tariffs rather than any anti-competitive practices.