CAR makers are increasingly looking at the taxi market to highlight the reliability and quality of their products.
With thousands of taxis plying streets across China, it may be one of the best promotions for car makers seeking a good public impression.
Those concerned with their brand image as upper-level products, however, have feared that using their models as taxis might compromise their brands.
But it's a strategy that has paid off for manufacturers such as Hyundai, which has seen sales of its Elantra model soar in China since it sold 20,000 models to Beijing taxi companies in 2005.
Now FAW Toyota Motors Co Ltd is about to do the same. Two weeks ago, it announced it would not stop producing its older generation of Corolla sedans when it unveils its new model built in Tianjin, northern China.
Instead, the joint venture of Japan's Toyota Motor Corp and China's First Automotive Works Group plans to equip the old Corolla with a new engine and relaunch it on the taxi market nationwide.
"We are not worried about the brand's reputation because we would target the Corolla as the premier taxi on the market," according to Wang Fachang, vice general manager of FAW Toyota Sales Co Ltd. "It is the best market to prove safety, durability and running costs."
A taxi usually drives several hundred kilometers a day compared with the average private use of 10 kilometers a day. Each year a taxi can cover 100,000 kilometers.
FAW Toyota has sold around 160 Corollas as taxis in Shenzhen, Hangzhou and Fuzhou in a trial operation.
It plans to launch more models across 11 cities this year and is working on different market entry policies before targeting more cities.
Chery Automobile Co Ltd's Cowin and Easter Son sedans have also been used as taxis in big cities like Shanghai and Beijing.
Zhejiang Geely Holdings Group will also make the world-renowned British black cab at its Shanghai factory to service the taxi market both domestically and overseas.
Car makers realize that taxi companies provide a huge market potential that can help boost their overall sales and raise their brand image.
There are estimated to be about one million taxis across China.
Beijing Hyundai sold 20,000 Elantra and Sonata models to taxi companies, mostly in Beijing, in 2005. At that time, total sales were 233,668 in China.
Domestic sales of Elantra have now topped 500,000 units.
"We have seen a positive market response and won consumer recognition because it helped us to ease people's concern over the quality of South Korean vehicles at the beginning of our business," Zhu Linjie, spokesman of Beijing Hyundai, told Shanghai Daily.
China's taxi market is now dominated by Volkswagen's Santana and Jetta models, along with PSA Peugeot Citroen's Fukang compact. These makers entered the taxi market early. Santana and Jetta were among the top 10 best-selling models in China over the past five years.
But despite car makers' optimism, automobile analysts are still cautious about the taxi market, not only because of what it says about a car's brand image, but also for the very limited profits.
"Individual purchases could be dampened because Chinese auto buyers like to buy cars that show off their wealth and personality," said Frank Y. Chou, associate partner of Value Partners Management Consulting (Shanghai) Co Ltd.
Developed countries already have premier models running as taxis, such as Cadillac in North America and in Europe, BMW, Audi and Mercedes-Benz.
"Car makers need to make sure they have a suitable model to serve the taxi market, otherwise it will ruin the brand image and pose negative impact on personal purchase," said Chou.
Most car makers disagree. "We will continue to run the taxi business, especially when many cities like Shanghai, Hangzhou and Shenzhen are upgrading their taxis, demanding more fuel-efficient and low-emission models," Hyundai's Zhu said.
Zeng Jialing, marketing official from Shanghai Volkswagen, said: "Our individual sales are getting stronger and stronger because some people have changed their mind as the (Santana) model has a good quality and price."
Shanghai Volkswagen, Volkswagen AG's venture with Shanghai Automotive Industry Corp, had a 35 percent share of the nationwide taxi market with its Santana sedan in 2005.
Among the replaced taxis in Beijing in 2005, 30 percent of new taxis were Santana while the proportion was 80 percent in Dongguan in Guangzhou during the same period.
But the competition has hotted up since 2004, when Hyundai and Brilliance's Zhonghua entered the taxi market.
However, most taxi companies prefer using cars made by local suppliers for lowered maintenance costs, logistic cost and good spare-parts supply, according to Value Partners' Chou.
In Shanghai, nearly 90 percent of the city's 50,000 taxis are made by Shanghai Volkswagen.
The car maker began to offer Passats as taxis in 2005, while there are also 50 Mercedes-Benz E-class taxis in the city.