Comment by Yang Jian, Automotive News China
CHENGDU -- What a difference a year makes.
When car sales were booming in 2010, many Chinese auto executives viewed their competition with foreign rivals with a confidence that bordered on arrogance.
As they raced to introduce EVs and new lines of upscale cars, many thought they would quickly catch up to the international brands.
Not anymore. Faced with stagnant sales and weak demand for EVs, several Chinese ceos are admitting that it will be tough to close the technology gap.
At an industry forum this week in Chengdu, Xu Liuping, president of China Changan Automobile Group, said domestic automakers are struggling with "unprecedented" challenges in technology, product quality and brand recognition.
Xu's views were echoed by other Chinese auto company executives who spoke at the event.
Xu Heyi, president of Beijing Automotive Industry Holding Co., predicted in his speech that some domestic brands will be weeded out by competition before 2020.
This is in sharp contrast to what those two executives said during the 2010 Beijing auto show.
When he was asked last year how Chinese automakers could catch up with global competitors, Changan's Xu Liuping said the only thing they needed to do was to make full use of global suppliers.
Meanwhile, Xu Heyi outlined Beijing Automotive's ambitious plan to launch electric vehicles plus a new line of gasoline models based on Saab platforms the company had purchased in 2009.
In retrospect, it appears that Xu Liuping, Xu Heyi and their peers underestimated the complexity of product development.
To date, no Chinese companies have developed electric vehicles with world-class technology.
And BAIC, which had planned to introduce its Saab derivatives, lacked the supply base to do so. This year, the company has repeatedly postponed the launch of its first sedan.
Why were these executives so over-optimistic? Perhaps it stems from China's booming market for cars and trucks. When car sales are soaring, every CEO looks like a genius.
But China's sales boom was fuelled by generous government tax breaks for vehicles with engine sizes of 1.6 litres or less. Since Chinese automakers mostly produced small vehicles, they benefited the most from these subsidies.
And when those subsidies expired last December, sales of Chinese brand vehicles steadily lost momentum.
In the first eight months of 2011, industry light-vehicle sales rose 6 percent to 9.2 million units. However, domestic brand sales fell 1 percent to 3.9 million units, according to the China Association of Automobile Manufacturers.
By contrast, luxury brands including Audi, BMW and Mercedes as well as global auto giants such as GM and Volkswagen are holding up pretty well.
Ebbing sales have laid bare the chronic shortcomings of Chinese brands: weak brand image and poor product quality. It has been a sobering experience for the leadership of Chinese automakers.
Judging by their executives' comments at this week's forum, Changan and Beijing Automotive have abandoned their blind optimism about the competitiveness of their products. They have started looking for ways to improve their companies' technology.
At the conference, Changan's Xu Liuping said his company will patiently improve technology. Without strong technology, there is nothing else to speak of, he cautioned.
Meanwhile, Beijing Automotive has built an r&d staff of more than 1,000 people. Now it is establishing a global supply network, said company President Xu Heyi.
It will be interesting to see how other Chinese automakers tackle these problems.