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UPDATED: September 1, 2014 NO. 36 SEPTEMBER 4, 2014
Stuck in First Gear?
Chinese automakers have a long way to go before catching up with their foreign rivals
By Deng Yaqing
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Stumbling blocks

Liu Shidong, Deputy Manager of the Manufacturing Department of Hawtai, told Beijing Review that most domestic automakers have not yet realized independent technological research and development, relying instead on the introduction of technologies developed by their foreign counterparts.

"Problems may emerge when domestic automakers directly install engines and gearboxes developed by foreign automakers onto their cars," said Zhang Xinke from the Bureau of Industry and Information Technology of Baoding, north China's Hebei Province.

Aside from that, consumers who have bought domestic- made cars frequently complain about glitches such as the occurrence of oil leaks in cars that have only recently come into use.

"More attention should be paid to the efficacy and composition of auto parts as well as the manufacturing process," Zhang said, noting that some domestic brands boast beautiful design and high performance costs, and still encounter poor sales because of high repair rates.

"In fact, most of these breakdowns are caused by very tiny auto parts, and have nothing to do with core parts like the engine or the gearbox. But nonetheless, they may cause consumers to lose faith in domestic brands," Liu said.

On this front, what really matters is the quality of auto parts provided by suppliers. "German cars appeal to consumers because they are durable, while Japanese and South Korean cars attract consumers because they are more affordable. But the prerequisite is, no quality problems," said Zhang, stressing that the success of foreign automakers owes 80 percent to their ancillary part suppliers.

The recent anti-trust probes initiated by Chinese authorities have caused the foreign automakers involved to launch price cuts, which is far from good news for domestic automakers, for some consumers who may have originally planned to buy a Chinese-branded car might now turn to foreign brands instead, said Jia.

A way out

"While foreign automakers have developed a technological edge on traditional gasoline cars, Hawtai has been focusing on the research and application of diesel engines, which are cleaner and more economical," said Zhang.

Since the ignition point of diesel is lower than that of gasoline, it is a good fit for a compression-ignition engine, as the fuel only generates carbon dioxide after being combusted. However, when fuel is combusted in a gasoline engine, noxious gases such as nitric oxide and carbon monoxide are emitted. Now, Hawtai's self-developed diesel engine will be fitted onto its new Santa Fe model.

Shenzhen-based automaker BYD has been trying to maintain its foothold in the new-energy automobile market. As its semi-annual report showed, in the first half of the year, its sales of new-energy cars registered a year-on-year growth of 600 percent, with a revenue of 2.7 billion yuan ($440 million).

"This year, our revenue from new-energy car sales is expected to hit 10 billion yuan ($1.63 billion), 10 times as much as last year's figure. BYD's new-energy cars will experience a period of explosive growth," said BYD Chairman and President Wang Chuanfu.

In July alone, BYD Qin, a plug-in hybrid compact sedan, sold 1,100 units. "The market demand for the model has exceeded the supply. At present, orders of numbering up to 8,000 units have yet to be delivered," Li Yunfei, Vice General Manager of BYD Auto Sales Co. Ltd., told The Economic Observer, a business weekly published in Beijing.

To anticipate and better cater to consumers' inclinations, it is becoming increasingly common for some automakers to team up with suppliers in the research and development of new technologies and models. "Expert teams have been formed to analyze the sales of existing models and offer the results to suppliers in order to make our products more competitive in the market," Zhang said.

"Excellent products form the essence of a brand. Manufacturers should not put the focus on churning out products, but on creating brand recognition," said Zheng Xin'an, a professor at the Capital University of Economics and Business in Beijing.

Email us at: dengyaqing@bjreview.com

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