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Why Chinese Car Brands Are Stuck in First Gear

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7/11/12

Why Chinese Car Brands are Stuck in First Gear

Publication: The Economic Times Mumbai;Date: Jul 7, 2012;Section: Global Business;Page: 6

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Why Chinese Car Brands are Stuck in First Gear Local brands make up only about 30% of their home market, the lowest proportion of any major economy ike many Chinese, Zong Zhaoxiang wishes nothing but the best for the Chinese car industry – yet he won’t be buying a Chinese car anytime soon. The 52-year-old chairman of a Shanghai chemical company, Zong said he expects Chinesebranded cars to have bright prospects. However, he loves the comfort, quality and image projected by his black Mercedes-Benz S-class, and he said he may buy another Mercedes-Benz model or a BMW in the future. “If Chinese-made cars were better designed and could demonstrate your status, more people might buy them,” Zong said. Not all of Zong’s compatriots can afford a Mercedes-Benz, of course. But most of them still prefer foreign brands to domestic ones. Volkswagen and General Motors sold the greatest number of vehicles in China in 2011, the world’s largest car market, followed by Nissan, Hyundai and Kia. All domestic car makers combined captured only about 30% of their home market, the lowest proportion of any major economy. This is not what Beijing intended. In contrast to other “strategic” industries like telecom and banking, the auto industry has been gradually opened to foreign investment over the past two decades, as Beijing allowed foreign car makers to form joint ventures with domestic partners. But the goal was always to help Chinese manufacturers acquire the technologies and expertise necessary to build their own strong brands, an outcome that eludes the industry. Race to the Bottom State-owned car makers – such as Shanghai Automotive Industry (Group) Corporation (SAIC), First Auto Works (FAW) and Chang’an Automobile Group

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