Chinese Car Brands Losing Out to Foreign Rivals

Chinese auto brands have surrendered one-quarter of their local market share since January 2010, sinking to 37% as consumers snap up foreign-brand vehicles, Bloomberg News reports.

As many as half the country's 177 domestic carmakers may fail in the next three years, according to the China Assn. of Automobile Manufacturers. The government said last month it would revoke the production permit of any company that builds fewer than 1,000 passenger vehicles annually for two consecutive years.

BAIC Group sales executive Liu Yu tells Bloomberg, "China's indigenous cars are the lowest in the food chain." He says many consumers are biased against domestic brands.

Last year local marques boosted their quality 30% from 2010 to 309 problems per 100 vehicles, according to J.D. Power and Associates. But they still trail international makes, which average 177 problems.

For decades China has required overseas automakers wishing to build cars there to form joint ventures with local companies. The goal was to boost the latter's expertise and technology. But executives at several Chinese carmakers complain to Bloomberg that they have gained little from the tie-ups.

Analysts say many Chinese companies have neglected their own brands because they are satisfied with the profits from producing vehicles with their foreign partners. The news service says the country's biggest automakers Dongfeng, FAW and SAIC generated less than 10% of their profits last year from their own car marques.