Foreign Automakers Gain Market Share in China
A recent report revealed that domestic automakers in China are losing market share to foreign automakers at a steady rate that appears set to continue as multinational corporations set up manufacturing plants in China. With an increasing number of China’s citizens gaining wealth, new car sales are soaring, and more affluent consumers are choosing global brands which are seen as being safer, more reliable and more luxurious than locally produced vehicles. Moreover, restrictions on the number of license plates issued each year in Shanghai, Beijing and Guangzhou has made choosing a car an important decision, and buyers appear to be prepared to spend more on a car when they receive their much sought-after, and often long-awaited, license plates.
Ford Motor set up a joint venture in Chongqing more than two years ago, and through expanding output and introducing new models, the company exceeded sales of 100,000 cars and light trucks in March, and revealed plans to double production in the coming year. China’s automakers are mostly state-owned and are reportedly pressuring the country’s Ministry of Commerce to extend the requirement that foreign automakers must have 50-50 joint ventures with domestic partners to assemble cars in China. Of its own volition, the Commerce Ministry had reportedly considered dropping this requirement in anticipation of China exporting large numbers of cars to industrialized nations, thereby circumventing protectionism issues. But, the state-owned automakers are more focused on capturing local market share, than exporting at this stage.
For decades the prices for automotive replacement parts have been an issue in the United States, as many brand name parts have no generic equivalents. The same problems apply to China. Moreover, car prices in China are generally higher than elsewhere, even before adding the 17% value-added tax and 25% import tax, as well as consumption tax which is based on engine displacement and can be as high as 40% of the sales price. Despite these price variances foreign cars continue to garner increased market share in China.