There is no doubt that Geely Automobile has come a long way in a short time.
Twenty years ago the company was making parts for refrigerators before moving into motorcycle production in the 1990s. It only started building cars in 1998 but has turned itself into the largest privately-owned automaker in the country.
Production came to 208,000 vehicles in 2006, enough for a 4.2% market share, and auto consultancy CSM Worldwide expects output to more than double to reach 446,000 by 2013.
Given the strong political interest in China’s auto industry, with local governments willing to place significant financial backing behind their own regional manufacturers, Geely’s progress is impressive.
"We do not have the financial strength of the state owned enterprises (SOEs)," said Lawrence Ang, executive director of Hong Kong-listed Geely Automobile Holdings. "We can only lobby the government and say things are unfair. But we always see administrative influence."
He cites the various city taxi fleets as evidence of this. Beijing’s tie up with Hyundai of Korea only started in 2003 but the past two years have seen vehicles produced by the joint venture become the dominant taxi brand in the capital.
Similarly, Volkswagen’s longstanding partnership with Shanghai Automotive Industry Corp (SAIC) means most cab rides in the city take place in a German brand car.
While, five or six years ago, institutional buyers ruled the domestic market, now the balance has shifted 60-40 in favour of private ownership. The government has taken steps to encourage individual car purchases and, in an industry becoming ever more open to market forces, the pressure is on state owned enterprises to adapt to a better off and better informed customer base.
"The small sedan is very much a consumer product so a policy-driven environment may not be optimal in the long term," said Charles Cheung, head of regional autos at investment bank Citigroup. "It may be easy to get a government-controlled taxi fleet to buy cars but consumers have free choice."
He believes that the overseas markets, which offer no protection to Chinese SOEs, will prove the biggest challenge. "When you go out there it’s a real war and they won’t be prepared for that."
If any company is prepared it is Anhui-based Chery Automobile, which turned out 308,000 cars last year and is expected to have trebled it by 2013.
"Chery is the most progressive of the Chinese carmakers," said Michael Dunne, vice president for Asia-Pacific, JD Power & Associates. "While it is an SOE, it plans like a private enterprise – there may be injections of political and financial backing from the state but the management is all about business."
You must log in to post a comment.
Yes, I would like to receive emails from China Economic Review. (You can unsubscribe anytime)
Copyright © 2018 SinoMedia Group Limited All rights reserved