Government officials who used to luxuriate in the back seats of fancy Audi sedans may soon be chauffeured around in China-brand autos.
A recent preliminary list for 2012 government fleet purchases from the Ministry of Industry and Information Technology showed only Chinese models are eligible for procurement.
The new guidelines, which have been circulated for public comment, cover 265 sedan models, 78 sport-utility vehicles, 46 multi-purpose vehicles and five green vehicles from domestic automakers such as SAIC, FAW, Geely and BYD.
Government fleets were previously dominated by foreign brands as a statement of status, with their larger space and higher-profile reputations.
The central government hasn't disclosed its reasons for the policy change. Dong Yang, secretary-general of the China Association of Automobile Manufacturers, said the new policy follows a common international practice of favoring domestic brands and that government purchases are excluded from World Trade Organization rules on competition.
However, industry analysts surmise that it may be part of a plan to control costs by resorting to cheaper Chinese brands and also to show the government wants to bolster the domestic industry as the quality of its cars improves.
"Domestic carmakers in China are under pressure from international brands," said Klaus Paur, director of automotive research group Ipsos in Shanghai. "A ban on foreign cars for official vehicle fleets would ensure additional sales for domestic brands and a more enhanced public exposure."
The government's policy switch came as no surprise to many foreign automakers. New procurement standards, released last November, require models with engine capacities of less than 1.8-liters and costing no more than 180,000 yuan (US$28,571). The new criteria eliminates major luxury carmakers.
The stringent guidelines also require domestic carmakers to invest at least 3 percent of their core revenue into research and development, and bar any major new Sino-foreign joint ventures that only assemble cars in China.
John Zeng, head of LMC Automotive, estimates that government purchases account for about 10 percent of the nation's auto sales, a relatively small proportion of China's overall market. But given the fact that more than 18 million vehicles were sold last year in China, it's still a very lucrative segment.
Small impact
Foreign carmakers, not anxious to get on the wrong side of the government, have said little about the new policy. Shanghai General Motors, whose Buick models have been a favorite of local government officials in Shanghai for years, merely said that government purchases account for a small proportion of its sales.
BMW and Audi said they would respect government regulations, and their businesses wouldn't be affected that much.
Audi, perhaps, has the most to lose among the top three premium carmakers in China. The German-based company has been supplying A6 and A4 sedans to officials for a long time, securing an inside track with government procurement. About 20 percent of its business has come from the government.
At the same time, the automaker has been expanding its line of models to include sportier and more compact models as it seeks to reshape its brand image and make inroads into private car ownership - a diversification that may lessen the impact of less government business.
"The actual impact of this ruling will depend on how strictly the regulation is enforced," said Klaus. "We may anticipate significant resistance from local governments. Brand reputation and status are still important purchase reasons for officials, which makes foreign luxury cars desirable, particularly for 'higher ranks'."
New rule may raise profile
Source:shanghaidaily