Domestic brand cars end 20 consecutive months of growth; market outlook for 2017 cautiously optimistic

According to the latest statistics from the China Association of Automobile Manufacturers, in January 2017, passenger car sales in the Chinese market fell by 1.1% year-on-year. Among them, sales of domestic brand passenger cars fell by 4.4% year-on-year, and the market share fell by 1.5 percentage points. Prior to this, sales of domestic brand passenger cars had been growing for 20 consecutive months.

Domestic brands grew rapidly in 2016, but the performance at the beginning of 2017 was not satisfactory. Apart from the Spring Festival holiday, the industry is cautiously optimistic about the market prospects of domestic brands in 2017 due to factors such as the adjustment of the purchase tax preferential policy and the advance prediction of sales.

Sales of self-owned brands ended their continuous growth

In 2016, China's auto market ushered in a wave of high growth. Among them, domestic brand passenger cars sold a total of 10.529 million units, a year-on-year increase of 20.5%, accounting for 43.2% of the total passenger car sales, an increase of 2 percentage points over the same period last year.

In 2017, this high growth trend began to change. In January 2017, domestic brand passenger cars sold 977,000 units, down 4.4% year-on-year, accounting for 44% of total passenger car sales, down 1.5 percentage points from the same period last year. Among them, according to data from the China Association of Automobile Manufacturers, domestic brand sedans sold 201,000 units, down 13.9% year-on-year, accounting for 18.6% of total sedan sales, down 2.4 percentage points from the same period last year.

As the main driving force for the growth of domestic brand passenger cars in 2016, the sales of domestic brand SUVs have continued to increase year-on-year, but the growth rate has begun to slow down. According to the latest data from the Passenger Car Association, in January 2017, the sales of domestic brand SUVs increased by 10.51% year-on-year, but fell by 18.59% month-on-month.

Among the top ten models in terms of sales volume in the domestic sedan market in January 2017 as calculated by the China Passenger Car Association, only Geely Automobile is still on the list, and the other nine are joint venture brand models.

Analyzing the reasons, some experts said that on the one hand, the Spring Festival holiday this year was brought forward to January, which affected the car sales of that month; on the other hand, the reduction in the purchase tax preferential rate also affected the market growth to a certain extent. According to statistics, in January this year, due to the reduction in the purchase tax preferential rate, the sales growth rate of passenger cars with a displacement of 1.6 liters and below dropped significantly.

The domestic brand market is cautiously optimistic

The industry believes that the preferential policy of halving the purchase tax for vehicles with a displacement of 1.6 liters and below played a great role in promoting the automobile market in 2016, but at the same time, it also overdrew part of the sales volume in the automobile market in 2017, which is also an important reason for the slowdown in the growth rate of the automobile market in January this year.

In addition, the sales growth rate of new energy vehicles, mainly domestic brands, declined in January, which also increased the impact on the entire domestic brand automobile market to a certain extent.

According to data from the China Association of Automobile Manufacturers, in January this year, the production and sales of new energy vehicles decreased by 69.1% and 74.4% respectively compared with the same period last year. Among them, the production and sales of pure electric vehicles decreased by 63.8% and 67.8% respectively compared with the same period last year, and the production and sales of plug-in hybrid vehicles decreased by 83.2% and 89.5% respectively compared with the same period last year.

However, industry insiders remain cautiously optimistic about the market prospects of domestic brands in 2017. This is because the overall trend of domestic brand automobile products and enterprises' enhanced market competitiveness has not changed. Although the overall growth rate has declined, major domestic auto companies have still achieved high growth. Among them, Geely Automobile's sales in January increased by more than 70% year-on-year, GAC's domestic brand automobile product sales increased by nearly 60% year-on-year, and SAIC's domestic brand automobile product sales also increased by more than 70%.

Moreover, the policy still has the driving force to boost the market. Although the policy of halving the purchase tax last year has overdrawn part of this year's sales in advance, and the reduction in the preferential rate of the purchase tax policy will also affect this year's sales, overall, this preferential policy will still promote the increase of overall sales in the automobile market.

In addition, rural areas have become an important new market. With the advancement of policies such as small town construction and rural land transfer reform, rural consumer demand for automobile products is also increasing. Domestic brands have traditional advantages in this market. With the continuous improvement of domestic brand cars in product quality and performance, they are still expected to occupy a dominant position in the rural market.

Domestic brand cars still need to make up for their shortcomings

Compared with joint venture brands, domestic brands respond to the market faster and are more willing to cater to consumer demand in terms of styling, configuration and price, which has attracted a large number of entry-level consumers. However, faced with the continuous downward expansion of imported and joint venture brand product lines and the rapid upgrading of rural consumption, domestic brands have also felt the pressure of competition and need to make up for their shortcomings.

Some experts suggest that domestic brands must accelerate product upgrades and completely change their competitive mode of competing on price. When domestic brands first entered the market, low prices became the only way to compete, and at the same time, they also left people with a brand image of low quality and low price. In the future, they must make up for the shortcomings in product quality, brand and service, and shift from low quality and low price to a stage that focuses on cost performance, brand loyalty, product quality and service.

Secondly, domestic brands cannot rely solely on SUV models. Since 2015, the market share of domestic brands has continued to grow, especially in the SUV market segment, which has maintained a high double-digit growth for a long time, becoming the main force of sales growth and driving the growth of the entire automotive industry.

However, while SUV sales are booming, the development of domestic brands of sedans is mediocre. In the current fierce competition, any domestic brand that wants to achieve long-term development must take into account all market segments. Facts have proved that sedan business is the foundation for an automobile company to gain a long-term foothold. If domestic brands want to achieve long-term development, they must pay attention to the development of sedan business and achieve balanced development while ensuring the growth of SUV sales.

Industry insiders believe that, on the one hand, as the country's energy-saving and emission-reduction system becomes increasingly perfect, small-displacement sedans will inevitably gradually become a highlight of the market driven by policies; on the other hand, although the sedan market share has been seriously diverted by SUVs, as the largest segment in the current automobile market, sedans are still the mainstream, even accounting for more than half of passenger car sales.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.