Stuck in First Gear？

　　Chinese automakers have a long way to go before catching up with their foreign rivals

　　Tianjin， a major industrial city along the western coast of Bohai Bay in north China， has become a new foothold for domestic automaker Hawtai Motor Group’s business expansion. Before its production facilities in Tianjin went into operation on May 28， the company had already established manufacturing bases in Shandong Province， Jilin Province and Inner Mongolia Autonomous Region.

　　“Hawtai will make full use of the international shipping and logistics resources in Tianjin to export our cars to overseas markets，” Sinmo Zhang， Human Resource and Administration Manager of Hawtai’s Tianjin unit， told Beijing Review.

　　As a late starter in the auto market， Hawtai places more stock in overseas markets like Russia and Southeast Asian and Middle Eastern countries than the Chinese market. According to statistics from Hawtai， its sales in China in the first half of the year totaled a mere 16，000 units in stark contrast to the 50，000 units sold overseas， though it aims to sell 85，000 units in 2014 in the Chinese market.

　　Hawtai is not the only domestic automaker that has suffered a weak demand on the home front. According to statistics from Zhejiang Geely Holding Group， the private automaker sold 187，000 units in the first half of this year， down 29 percent year on year.

　　In addition， the China Association of Automobile Manufacturers (CAAM) reported， in the first half of the year， domestic brands’ share of the Chinese auto market fell 3.1 percent and the share for sedans 5.4 percent.

　　“Despite the geographical and cost advantages held by domestic automakers， they cannot compete with their foreign rivals for a slice of the Chinese market. In effect， domestic automakers are in the position of ’playing catch up’ and thus have to deal with pressures and overcome an array of challenges，” Zhang claimed.

　　Left behind

　　Since Chinese automakers started much later in the game than their overseas counterparts， they have been lagging behind in terms of technology， brand promotion and after-sales services， said Qiao Liang， an executive director of the Society of Automotive Engineers of China.

　　Jia Xinguang， managing director of the China Automobile Dealers Association， noted that since entering the World Trade Organization， foreign automakers and their joint ventures in China have wasted no time in grabbing the lion’s share of the Chinese auto market. It’s almost impossible for domestic brands to turn around the situation given their respective weaknesses in technology， capital and popularity.

　　As Chinese consumers become increasingly wealthy， they tend to care about not just price， but also comfort and the brand. Now， the limited selection of models produced by domestic automakers will not suffice for Chinese consumers， which has caused them to lose consumers to foreign brands， Jia said.

　　In addition， the prices of cars manufactured by foreign automakers’ joint ventures in China have been on the decline in recent years， and some models even fell by 40，000 ($6，511) to 50，000 yuan ($8，139)， dealing a crippling blow to their domestic rivals who mainly subsist on delivering higher cost performance.

　　According to statistics from the CAAM， in the first seven months of this year， Shanghai-Volkswagen， FAW-Volkswagen and Shanghai-General Motors—all Sino-foreign auto joint ventures—ranked in the top three among sedan makers by sales volume， selling 940，000 units， 895，500 units and 806，900 units， respectively， far exceeding the sales of domestic brands.

　　Stumbling blocks

　　Liu Shidong， Deputy Manager of the Manufacturing Department of Hawtai， told Beijing Review that most domestic automakers have not yet realized independent technological research and development， relying instead on the introduction of technologies developed by their foreign counterparts.

　　“Problems may emerge when domestic automakers directly install engines and gearboxes developed by foreign automakers onto their cars，” said Zhang Xinke from the Bureau of Industry and Information Technology of Baoding， north China’s Hebei Province.

　　Aside from that， consumers who have bought domestic- made cars frequently complain about glitches such as the occurrence of oil leaks in cars that have only recently come into use.

　　“More attention should be paid to the efficacy and composition of auto parts as well as the manufacturing process，” Zhang said， noting that some domestic brands boast beautiful design and high performance costs， and still encounter poor sales because of high repair rates.

　　“In fact， most of these breakdowns are caused by very tiny auto parts， and have nothing to do with core parts like the engine or the gearbox. But nonetheless， they may cause consumers to lose faith in domestic brands，” Liu said.

　　On this front， what really matters is the quality of auto parts provided by suppliers. “German cars appeal to consumers because they are durable， while Japanese and South Korean cars attract consumers because they are more affordable. But the prerequisite is， no quality problems，” said Zhang， stressing that the success of foreign automakers owes 80 percent to their ancillary part suppliers.

　　The recent anti-trust probes initiated by Chinese authorities have caused the foreign automakers involved to launch price cuts， which is far from good news for domestic automakers， for some consumers who may have originally planned to buy a Chinese-branded car might now turn to foreign brands instead， said Jia.

　　A way out

　　“While foreign automakers have developed a technological edge on traditional gasoline cars， Hawtai has been focusing on the research and application of diesel engines， which are cleaner and more economical，” said Zhang.

　　Since the ignition point of diesel is lower than that of gasoline， it is a good fit for a compression-ignition engine， as the fuel only generates carbon dioxide after being combusted. However， when fuel is combusted in a gasoline engine， noxious gases such as nitric oxide and carbon monoxide are emitted. Now， Hawtai’s self-developed diesel engine will be fitted onto its new Santa Fe model.

　　Shenzhen-based automaker BYD has been trying to maintain its foothold in the new-energy automobile market. As its semi-annual report showed， in the first half of the year， its sales of new-energy cars registered a year-on-year growth of 600 percent， with a revenue of 2.7 billion yuan ($440 million).

　　“This year， our revenue from new-energy car sales is expected to hit 10 billion yuan ($1.63 billion)， 10 times as much as last year’s figure. BYD’s new-energy cars will experience a period of explosive growth，” said BYD Chairman and President Wang Chuanfu.

　　In July alone， BYD Qin， a plug-in hybrid compact sedan， sold 1，100 units. “The market demand for the model has exceeded the supply. At present， orders of numbering up to 8，000 units have yet to be delivered，” Li Yunfei， Vice General Manager of BYD Auto Sales Co. Ltd.， told The Economic Observer， a business weekly published in Beijing.

　　To anticipate and better cater to consumers’ inclinations， it is becoming increasingly common for some automakers to team up with suppliers in the research and development of new technologies and models. “Expert teams have been formed to analyze the sales of existing models and offer the results to suppliers in order to make our products more competitive in the market，” Zhang said.

　　“Excellent products form the essence of a brand. Manufacturers should not put the focus on churning out products， but on creating brand recognition，” said Zheng Xin’an， a professor at the Capital University of Economics and Business in Beijing.

　　By Deng Yaqing