China’s Indigenous-Brand Policy Stumbles

China's demand that foreign carmakers develop and market special "indigenous" brands is hurting more than helping the country's domestic carmakers, the Financial Times reports.

The idea was to help China's carmakers become more competitive. But local producers say the plan has merely enabled foreign companies to compete directly with domestic manufacturers on price. They also point out that the new indigenous models benefit from global R&D resources that local manufacturers can't match.

The FT notes that demand for General Motors Co.'s local Baojun brand climbed nearly 20% to more than 100,000 units last year. Prices for Baojun cars begin at 50,000 yuan ($8,000).

In the meantime, the market share held by domestic producers currently at a record-low 23% continues to shrink.

Foreign carmakers, which prefer to develop vehicles they can sell in multiple markets, are not enthusiastic about China's local-brand requirement. The FT says the Chinese government doesn't appear to be pressuring foreign carmakers to step up their efforts to introduce more indigenous brands, perhaps because it recognizes the policy is not effective.