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Auto expansion unwise

(China Daily)
Updated: 2009-02-09 08:00

Homegrown automakers should be cautious launching new models in the current market, says an article in Beijing News. The following is an excerpt:

Related readings:  Auto sales 'surpassed US in Jan'  China auto export slows down as demand falls  Brilliance Auto to expand despite overall slowdown  Chinese auto giant FAW reports record sales in '08

Automakers like Chery, Geely, and BYD are optimistic about the coming year, despite predictions that Chinese automakers will suffer in 2009. All three are aiming for sales increases of 25 percent and some are angling for new markets.

Anhui-based Chery, China's biggest domestic automaker, plans to start producing minicars and business cars and Zhejiang-based Geely is determined to develop sports utility vehicles and multi-purpose vehicles.

Experts say that it is not smart for these carmakers to expand amid the credit crunch, unless they are awash in cash.

Chinese automakers trail international auto companies in technology and brand recognition and are less experienced in dealing with economic slowdowns.

But homegrown automakers do have some advantages. They are better positioned in second- and third-tier markets than foreign companies and are more familiar with government policies and local consumption patterns.

Domestic automakers should spend more time enhancing product and service quality and cementing relations with their dealers and suppliers instead of expanding. This is the best way to long-term development.