Foreign companies remain well ahead in China's auto market
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China's auto market has taken over the United States as the largest, but doesn't mean domestic automotive companies will catch up with foreign companies anytime soon.
"Chinese auto companies have a long way to go before they can compete with large foreign car makers on traditional vehicles and new energy technologies," said Fu Yuwu, executive vice director-general of the Society of Automotive Engineers of China.
Moreover, how companies accumulate profit differs.
"Foreign auto companies make profits on design, new materials and technologies, while Chinese car makers usually engage in manufacturing," Xiang Songzuo, an economist from a private financial research institute, told China Business News.
China's auto market has become very profitable for large foreign car producers. In 2009, sales of major multinational auto companies increased more than 20 percent in China. Volkswagen gained pre-tax profits of 703 million euro in the first quarter of this year, and 286 million came from the Chinese market, which accounts for nearly 40 percent of total profits. Toyota's two joint ventures in China have reported profits of $1 billion in 2008, although Toyota had lost $4.4 billion overall during the year. Honda took in $3.18 billion in 2009, with $2.86 billion from sales in China.
Volkswagen has invested 1.6 billion euros in China. Its total investment in the country will hit 6 billion euros (about $8.1 billion) in the next three years. In addition, more foreign automakers have placed their headquarters in China.
"Foreign companies have 50 percent of the Chinese auto market and gain 70 percent of profits," said Wang Xiaoguang, a researcher with the Chinese Academy of Governance.
Industry insiders have predicted that China's auto market will continue to grow rapidly this year, with sales more than 17 million, which means multinational automakers will earn even greater profits in China. For the time being, Chinese auto companies are not as competitive in terms of technology and of course, brand recognition.
