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Analysis: Despite slowing global economy, Chinese manufacturers continue to expand

Carmen Lee From| August 17 , 2011 (Shanghai) - Following Standard and Poor's revising the US's credit rating, Western economy has hit yet another slump, which in turn has been reflected in the falling stock prices of GM, Ford and other American automobile enterprises. Meanwhile, the European debt crisis has caused similar effects among European car manufacturers.

In the light of said news, automobile markets in China and other developing nations, while still continuing to expand, are doing so at a slowed down pace. According to statistics released by the China Association of Automobile Manufacturers, over 6.33 million passenger vehicles were sold in the country in the first seven months of 2011, more than 9 percent higher than the amount sold in 2010. The market looks likely to stay cool in the near future.

Market fluctuations have been especially apparent among Chinese manufacturers. 3.15 million domestic passenger vehicles were sold in the first half of this year, a decrease from the latter half of 2010. Domestic brands made up 44.39 percent of all passanger vehicles sold. Domestic manufacturers, including Chery, BYD, Brilliance, Changan and SAIC have all seen their sales decrease by varying degrees.

Chinese manufacturers are currently divided by large state-owned companies carrying representative own brands, such as SAIC (Roewe), FAW (Benten) and Dongfeng (Aeolus), and fully independent companies such as BYD, Chery and Geely. Alongside joint ventures, the country's automobile industry is actually quite varied. (Chinese) conducted a survey earlier this month to better understand what views experts have on the future of this diversified industry.

Large Chinese manufacturers made quite a splash among Fortune Magazine's list of top 500 companies, with Dongfeng placing at 145 ($55.75b returns, $2.48b net profit), SAIC placing at 151 ($54.26b returns, $1.91b net profit), FAW at 197 ($43.43b returns, $2.13b net profit) and Changan at 226 ($37.99b returns, $225m net profit). GAC and BAIC also found their way into the list. These manufacturers have also expressed their desire to continue large-scale investment to develop own brands.

However, according to the survey, 40 percent of respondents believe that Chery, BYD, Geely and other independent manufacturers will represent the Chinese automobile industry in the future. 31 percent of respondents believe that this is due to the lack of competition among large corporations that in turn stifles creativity. They fear that lack of clear planning for own brands by joint ventures may end up giving independent manufacturers the edge they need in this new segment.

The decision of manufacturers such as JAC, Chery and Geely to open factories overseas has also caught worldwide attention. Both JAC and Chery have begun investing in establishing Brazilian production sites, while Geely will be opening one in Indonesia. Other moves, such as BAIC's purchasing of intellectual rights from Saab in 2009, are also being taken as evidence of China flexing its muscle in the industry.

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