observe the competition close-up.

By staff reporter Ouyang Changzheng

While in Beijing for a company meeting, a group of Volkswagen mid-level managers toured the city’s auto show. Their objective was clear: observe the competition close-up.

What they saw were several independent manufacturers that the German auto giant apparently had previously overlooked.

One manager later told Caijing he was stunned by the plans and level of development among some independent brands. In his opinion, one sedan shown by Chinese automaker Geely meets all industry criteria and, if the company can guarantee production quality, sales volumes should be strong.

The manager paused and then admitted, “The next step for competition will be extraordinarily brutal.”

The numbers suggest it won’t be long before Chinese independent automakers realize their dream of catching up to major international brands. Last year, according to a Chinese industry report, independent automakers sold 1,242,christian louboutin pas cher,200 vehicles, capturing 26 percent of the national market.

The scene at the Beijing car exhibit in April underscored the trend. Geely alone showed 23 vehicles including the Shanghai Maple and Shanghai LTI. The company says most of these new cars will be on the market within two years.

After buying MG Rover, Shanghai’s SAIC group is making the new product line a focus of its marketing campaign. Although neither domestic independent manufacturer Chery Automotive nor Great Wall Motor (HKSE: 2333) offered anything especially attractive,franklin and marshall, their displays indicated they’re making efforts to overcome an excessively narrow product line.

Fitch International automotive analyst Kong Shi said that, judging from the Beijing auto show, independent brands have made major breakthroughs in terms of research, development and manufacturing technology. “This will certainly further inspire the confidence of independent brand enthusiasts,” he said.

Industry insiders think the show marked the beginning of a golden decade for China’s independent brands.

It’s also worth noting that almost all major,louboutin, independent automakers are interested in selling newly developed, alternative energy vehicles overseas. One manager for a state-owned auto company said the Chinese started researching alternative energy at about the same time as their foreign counterparts,louboutin pas cher, which means they’re not far apart.

Automaker BYD, for example,franklin et marshall, introduced a dual-mode hybrid sedan that lets a driver switch between full-electric and hybrid modes. The series includes the F3DM,polo ralph lauren shirts, F6DM and e6 electric sedan,christian louboutin, which can travel 300 kilometers on a single battery charge. Each vehicle is slated for the market before 2009.

An incentive for Chinese manufacturers is their access to an enormous market. One expert at the auto show estimated China’s annual sales volume could reach 12 million vehicles in 2010 and 18 million by 2015, surpassing the U.S. market to become the world’s largest.

The potential market for independent manufacturers is big, and Chinese government policy is expected to help pave the way for growth. According to information at the auto show, China is currently discussing plans for a series of policies that progressively support high-speed development of independent auto brands.

No Across-the-Board Gains

Even so, not everyone will benefit from industry growth. Decisions made by independent companies over the past decade differ, and rates of development reflect these variations. Divergence is expected to continue as competition increases down the road.

An analyst report indicated that, as a result of changing market demands, an addition of new vehicles that divided the market led to a slide in revenues for Brilliance China Auto in the fourth quarter 2007. Afterward, Citibank suggested to “sell” Brilliance’s stock on Hong Kong’s exchange.

Brilliance reportedly spent more than 1 billion yuan to introduce a new product line – FRV, that features Italian design, support from Porsche on production and control, and help from several British auto labs.

Domestic auto producers spent ＄10 million to import a European design scheme. Yet, based on Toyota’s standards, it takes 800,000 hours to develop a new car model. Even if new design and manufacturing processes are separated,franklin marshall, a company still needs 400,000 hours per model – a high investment for Chinese auto makers.

“Many (Chinese) factories complain that (foreign) technologies and designs cannot achieve production goals. In reality, it’s because not enough money is spent and people only do one-third of the engineering,” said Lei Yucheng, chairman of the biggest auto design company.

“And if we spend US＄ 500 million like this on design costs, our brand also has no way to sustain this type of cost,” he said.

But the growth of independents could provide alternative options.

FAW Group, for example, relies on technology platform development and technology transfer from its joint-venture partners. For example, the company’s new Red Flag model uses Audi’s platform and technology, the Red Flag HQ3 borrows a platform from Toyota’s Crown Royal, and the Benteng relies on a platform and technology from Mazda.

The idea is “market for technology.” But there is a hidden risk that once the Chinese automakers developed their own brands to compete with the joint-product, their international partner might take back the key technology and cut off the supply of parts.

There is no universal solution for China’s automakers. Lei said that Chery, Geely and BYD have relied on their own R&D teams. They’ve sought cost control and marketing methods, even scoping out international markets. Great Wall, on the other hand, has a plan to shares its work with a domestic design company.

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China’s independent car manufacturers are releasing new models and dashing for a dream to beat the major brands.
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