China's domestic vehicle brands are starting to pose serious competition to foreign brand market share.
A report produced by research firm, Stanford C. Bernstein, suggests Chinese carmakers have significantly improved their technology and competitiveness, but still have at least a decade before they are on a par with their foreign counterparts.
The 200-page report looks combines interviews with over 40 top automotive executives in China, as well as a detailed breakdown of two Chinese sedans.
The firm’s automotive engineers were especially impressed by SAIC and Great Wall models, whose joint ventures with General Motors and Volkswagen, have contributed significantly to improvements in technology.
Toyota and VW spend roughly $10bn on R&D annually, while Chinese companies spend on average just one percent of this figure. Domestic firms, claims Max Warburton who spearheaded the report, are able to advance so quickly yet spend so little thanks to reverse engineering and technology gleaned from their government-mandated joint ventures.
Warburton claims many of China’s domestic sedans are reverse-engineered copies of the Toyota Corolla, with other key features being borrowed from VWs and believes the Chinese auto industry is not yet capable of building its own car from scratch.
The government’s hopes for domestic brands to occupy a 40% share of the passenger car market by 2015, up from around 33% today, may be optimistic as sales growth of foreign brands continues to outpace that of domestic manufacturers. John Zeng, a director at LMC Automotive, said that despite this imbalance, Chinese consumers will be slowly shifting their preferences as domestic brands continue to improve important features, such as safety and fuel efficiency. This, says Zeng, could take up to a decade to happen.