China's auto market stood out in 2009 thanks to government policy incentives. However, as the world's auto industry has shifted its market focus to China, domestic carmakers expect increasingly fierce competition in the evolving market structure.
Since the beginning of 2009, China’s independent domestic auto manufacturers have announced their expansion plans, showing a pressing demand to extend independent brands. Brilliance Auto set a goal of 450,000 cars sold in 2010, an increase of 36.4 percent compared with 2009, while Great Wall Motors issued production and sales target over three years, with 300,000 vehicles sold in 2010, 400,000 in 2011 and 600,000 in 2012 and 2013, respectively.
Meanwhile, BYD, who posted soaring sales results in the past year, pushed ahead plans to increase production capacity, with 800,000 vehicles rolling off the productions lines this year. In addition, Tianjin FAW and Geely both took steps to accelerate their expansion. Geely plans to build a new plant in Beijing in 2010, following the acquisition of Volvo in recent days, and intends to sell 2,000 Volvos in China.
Taking a different tack from the independently-owned brands who are eager to increase output capacity by expanding production base and equipment, joint ventures in the automotive sector are inclined to introduce the most popular models and continuously update their productivity and product lines. KIA's new goal for 2010 is to boost sales 40 percent over the previous year to 330,000 vehicles, while Beijing Hyundai plans to establish its third plant this year and achieve a production capacity of 900,000 units in 2012.
Sources have indicated that, some joint ventures including Shanghai Volkswagen and Dongfeng Citroen have launched plans to set up new plants, while others including Dongfeng Nissan and Dongfeng Honda have drawn up strategic plans for expansion.
Industry insiders believe that due to relative low sales targets set by automotive joint ventures in the past year as well as gratifying production and marketing conditions, carmakers in China remain confident about their brand performance in 2010 and expect an even faster growth in sales. Well-informed sources revealed that China Association of Automobile Manufacturers has not yet announced next year's sales forecast, but word has it that a year-on-year growth of 15 percent, with an expected sales for the year of 15 million units is being called for. Policy put in place by the Chinese government of levying a 7.5 percent purchase tax on high-emission cars in 2010 signals that the government are trying to maintain the stability of the auto market.
However, the principal aim of the policies for auto industry in China has moved from stimulating consumption to promoting a sea change in the overall structure of the sector. As the Ministry of Industry and Information Technology of China has asked the sector to take on the dual responsibilities of improving industry structure while saving energy and reducing emissions, it behooves carmakers to be cautious in their future expansion plans and to attach increasing importance to vehicles that are powered by new and alternative energy sources.
