Self-owned brand cars should seize the three major development opportunities


The Chinese independent brands that are surrounded by multinational car companies are currently faced with many difficulties in competition. However, they must be aware of the difficulties and firmly grasp that the domestic market still has a period of rapid growth of more than a decade, the westward shift and sinking of regional markets, and the potential of the international market. Huge opportunities are favorable for the development of independent brands in China.

From August 2nd to 5th, the 4th China Independent Brand Auto Expo was held in Beijing. During the period, the "China Auto Auto Forum for the 60th Anniversary of China's Auto Forum" was held. At the forum, Xu Changming, Director of the Information Resources Development Department of the National Information Center, elaborated on the difficulties and opportunities faced by China's own branded car companies.

Xu Changming believes that after undergoing a period of steady and rapid development from 2000 to 2008 and a period of high-speed improvement from 2009 to 2010, since 2011, with the withdrawal of government stimulus policies, the development of China's auto brand has entered a correction period. During the pullback period, the three major long-term factors significantly restricted the development of self-owned brands: First, foreign brands are currently using their own platform advantages to produce multiple models and share parts on one platform. The relative cost advantage is declining. Second, the increase in comprehensive use fees, such as purchase restrictions, licensing, oil price rises, and rising parking fees, has led to a drop in the sales of self-owned brands, which have a low price. Third, consumer demand in the first and second tier cities is escalating. Consumers generally believe that joint venture vehicles can better reflect their own identities and status. Such consumption concepts also exert great pressure on independent brands.

Xu Changming said that despite this, there are at least three good development opportunities for independent brands:

First, the domestic market still has a period of rapid growth of more than a decade. From the perspective of the development of the automotive market, the growth of the auto market in each country has two rapid development periods. In the first period of rapid growth, the number of vehicles owned by thousands of people will increase from five thousand to five thousand, which will maintain an average annual growth rate of around 30% for five years. The first stage of Japan appeared in 1960-1964, the first stage of Korea appeared in 1981-1985, and the first rapid growth stage of our country appeared in 2001-2008. The average annual growth rate is very fast. The second period of rapid growth will last for about 10 years. At this stage, the number of vehicles for thousands of people will increase from 20 to 1,000. The second stage of development in Japan was from 1965 to 1973, the Republic of Korea was from 1986 to 1997, and the second stage of our country was roughly from 2009 to 2023. Therefore, the ownership of thousands of cars in our country in the next ten years or so. The average annual growth rate will remain at around 10%, which provides a good market opportunity for the development of independent brands.

Second, the regional market for automobile consumption is showing a trend of shifting westwards and sinking, and the market is moving towards the middle and western regions and moving to the second and third tier cities. In recent years, the market share in the central region has increased from 14.9% to 18.3%, the market share in the western region has increased from 18% to 29%, while the market share in the eastern region has dropped from 60% to 52%. At the same time as moving westwards, the proportion of first-tier cities dropped from 46.3% in 2007 to 37.6% in 2011, and those in third-tier cities rose from 22.7% to 27.7%. Relative to the eastern regions and first-tier cities, the purchasing power of consumers in the central and western regions and second- and third-tier cities is not enough, and low-priced vehicles are required, and the self-owned brands have a price advantage.

Third, there is great potential for independent brands to enter the international market. In the ten years before the financial crisis, the export of our own brand has doubled every year. The financial crisis of previous years caused exports to be affected but it was recovering in the past two years. The current high-growth markets are mainly South America, Asian countries, East Asian transition countries and African countries. The market growth of these countries is relatively fast, and they have a preference for self-owned brands. Therefore, exports to independent brands are very favorable. Algeria, Iraq, Russia, and Iran are all major exporters, and they are also growing rapidly. China’s exports to these emerging markets last year reached approximately 150,000 units, 90,000 units, 90,000 units, and 80,000 units respectively, and it is expected that it will continue to grow in the future.

Xu Changming believes that as long as these three opportunities are seized, independent brands will usher in better prospects for development.

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