Analysis: New policy on government cars draws mixed opinions

The relationship between government vehicle purchasers and own brand manufacturers has once again caught the attention of the Chinese press. The new list of approved vehicles for government purchase, released by the Ministry of Industry and Information Technology on February 24, contains only domestic models, with no imported or joint venture models present. However, domestic manufacturers have approached the new policy with a cautious, almost skeptical, attitude.

Gasgoo.com (Chinese), in association with the 21st Century News Group, conducted a week long survey on the topic earlier this month, collecting opinions from 3,865 industry experts and insiders.

When asked about their feelings on the policy, a majority of respondents answered that they supported the government's decision to purchase own brand vehicles, with only 12 percent opposing and six percent undecided. Most proponents of the policy agree that it will help aid in the development of Chinese own brands. However, there is still disagreement in certain circles on whether or not the government will actually take this step to protect domestic manufacturers.

With once rapid growth in the automobile industry beginning to slow last year, Chinese manufacturers have faced an increasingly uphill battle in regaining market share lost to foreign competitors. The government has apparently taken heed of their plight, with the new government car policy seen as a relatively proactive step in protecting local industry.

The government has previously voiced its concerns on the state of Chinese automobile manufacturers, with the central government having passed policies addressing the matter in the past. However, due to lack of clear monitoring, unclear phrasing, and other factors, the policies failed to achieve their desired effect, with foreign owned joint ventures controlling around 80 percent of the market for government vehicles. The fact that black Audi sedans have become synonymous with the government is clear proof that domestic manufacturers have unable to make inroads in the market for official use vehicles.

That said, the new MIIT list is unprecedented in its scope, with some in the industry going as far as describing it as a new beginning for Chinese own brands. However, several manufacturers are far less optimistic, with the general consensus being that the new policy will fail to live up to its lofty expectations. On this matter, 51 percent of survey participants said that they believe the list was mainly the government showing its support for domestic manufacturers. 28 percent answered that it was a real step to prevent further decline among domestic manufacturers, while 16 percent said it was merely an internal reform unrelated to the industry.

Regardless of whether the policy is merely symbolic or a true reform, it is impossible to deny that it will be difficult to force foreign JV brands out of a market they have dominated for several years. 53 percent of respondents answered that the new policy's success depends on the government's implementation. 15 percent, meanwhile, worried that it will not be of any practical use to domestic manufacturers.

Summarizing opinions on the policy as a whole, 40 percent of respondents were fairly negative, saying that any progress it would generate in the short-term would be very brief, with it being forgotten over time. Another 32 percent was even more cynical, arguing that local officials would find ways to ignore the policy, diminishing its effectiveness. Only nine percent were optimistic that government bodies would strictly adhere to the policy. The remaining 19 percent were undecided.

Those doubting the policy aren't entirely unjustified, with previous legislation failing to be effective due to poor implementation. For example, the Government Procurement Law, effective on January 1, 2003, similarly pushed for official bodies to purchase domestic goods and services. However, due to ambiguous wording, it was left undecided whether or not government vehicles were covered by the policy or not. Later on, the central government revised pieces of legislation to ensure that domestic brands constitute at least 50 percent of all newly purchased government vehicles. The revised legislation has essentially not been implemented.

Despite these setbacks, a minority of survey participants are optimistic in the new policy's prospects. 17 percent believe that it will help improve the brand image of domestic enterprises, while seven percent maintain that foreign JVs will actually lose their hold in the government car market. Nine percent answered that the policy will help increase domestic manufacturers' overall performance in the Chinese automobile market.