According to the leader of the Chinese state-backed automotive industry group, the local brands are now in danger of once more losing market share as foreign carmakers have initiated a pricing competition to lift lagging sales.
Dong Yang, secretary general of the Chinese Association of Automobile Manufacturers, has shared his beliefs through a website posting, forecasting that increased incentive and subsidy spending from outside brands will impact domestic peers during the next few months. He added – in a position that reflects on a local scale the views expressed by FCA chief executive officer Sergio Marchionne in terms of industry consolidation – that local car brands are too numerous and instead of increasing production output they should focus on partnership deals and mergers. “Most of the local automakers have been facing rising difficulties with a few of them expanding against the tide,” commented Dong. “The price war started by joint ventures will quickly proliferate to local Chinese brands.”
China, the world’s largest auto market, has seen delivery growth slowing alongside with the economy increase contraction – coupled with new purchase restriction in certain cities – and the rapidly expanding stock market has further drawn away funds from the auto industry. While local brands have gathered momentum thanks to a booming sector of affordable sport utility vehicles and crossovers, the overall passenger vehicle sales in May soared at the slowest pace for that month, according to the CAAM. Still, the executive sees China’s auto demand only peaking when overall ownership reaches around 400 million – still rising fast from the current level of around 150 million.