Chinese Car Buyers Don’t Want ‘Made in China’

As GM (NYSE:GM) continues battling Toyota (NYSE:TM) and Volkswagen for global dominance, the Chinese market remains the most hotly contested front. That’s because Chinese car buyers remain unimpressed with their domestic options and overwhelmingly choose foreign-made brands over those with the ‘Made in China’ label.

The reason behind this trend is simple: Chinese brands are inferior to the world’s best cars on nearly every level. A recently released Sanford Bernstein study revealed that Chinese automakers have a steadily declining market share, which slumped to 26 percent in 2012. The top 10-selling automobiles include one Ford (NYSE:F), three GM cars, four Volkswagens, two Hyundais. The Ford Focus remains China’s most popular model.

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The Bernstein study combined hard sales data, field research matching Chinese cars versus foreign-made models and observations taken on the streets of the country’s biggest cities. The tests on a Geely sedan and a Great Wall SUV revealed the most damning evidence of all: Chinese cars were unpleasant to drive. Government officials in Beijing have subsidized  Chinese automakers for years in hope they would produce a viable brand for the global market. The partnerships made with foreign car makers, intended as an opportunity to acquire technology, have instead led to dependence on companies like GM and Toyota. Unless China’s auto industry makes its move soon, its window might close.

“The next five years really will be the last window of opportunity for local car makers,” analyst Yale Zhang told the AP. Zhang, the managing director of Automotive Foresight, sees the majority of Chinese automakers doomed to failure by the close of the decade. As Bernstein’s tests indicated, Chinese consumers are unwilling to buy ‘Made in China’ cars when imports deliver superior performance and, sometimes, lower prices to boot. (GM had a slam dunk when it rolled out its Sail sedan priced at $9,100 in 2012).

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The partnerships with foreign automakers are riling a Chinese leadership that has invested considerable capital in its country’s car industry. However, rather than shut out companies like Toyota, GM and Volkswagen, Beijing may have to accept its inferior place in the industry in order to keep some profits rolling in (all three companies are ramping up their Chinese offerings following the Shanghai Auto Show). Clearly, if Chinese consumers are forced to buy domestic, they could end up buying nothing at all.

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