A production line of Chang'an auto. The company forecasts sales volume to hit 3.4 million, which would rank it 10th globally.[Photo/China Daily]

Chinese automakers well-positioned as they bid to continue driving forward over next five years, Hao Yan reports

Having strengthened dramatically over the last decade, the Chinese automotive industry is expected to accelerate its development over the next five years.

Dong Yang, secretary-general of the China Association of Automobile Manufacturers, said at the Chinese Automobile Brands Development Forum in Wuhu, Anhui province on Friday that "Chinese automakers are far beyond where they were 10 years ago, and the next five years will be a great time for the Chinese car industry as Chinese customers are no longer simply relying on international brands."

Shi Jianhua, deputy secretary-general of CAAM, said, "The government's encouraging policies and its 'Made-in-China 2025' strategy have improved the environment and made it more favorable for the Chinese carmakers."

Chang'an Automobile celebrated reaching annual production of 1 million vehicles on Wednesday, days after it was named the top Chinese automobile brand.

The State-owned carmaker, headquartered in Chongqing, became the fifth Chinese carmaker to produce 1 million vehicles a year, following SAIC General Motors, SAIC Volkswagen, FAW Volkswagen and Beijing Hyundai.

Chang'an Automobile expects its sales volume of Chinese brands to reach 2.33 million units by 2020, which would rank it 12th among all automotive brands worldwide; by 2025, it forecasts its sales volume will be 3.4 million, which would rank it 10th globally.

Although no Chinese automotive brand ranks among the Forbes World's Most Valuable Brands, the China Council for Brand Development last week valued Chang'an at 24.3 billion yuan ($3.7 billion).

"Chinese automakers have experienced some pains in establishing their brands. They have confused branding and marketing. The most important factor is to understand that it is not just selling the cars, and they need to define what the brand is," said Marco Hecker, managing partner of Deloitte China Automotive Consulting. "A strong auto brand requires three basic elements: reliable products, sound quality and the ability to deliver excellent customer experience."

He said branding is the key for Chinese carmakers as they look to tap into larger markets. Without a strong brand, he explained, customers will not accept a product.

Toyota, valued at $37.8 billion by Forbes, has topped the list of most valuable auto brands for several years, despite news about brake and airbag problems in its vehicles. In recent years, the Japanese carmaker has continued to invest intensively in quality control.

Chang'an insisted that it will elevate the quality of its vehicles, said Xu Liuping, chairman of the board of Chongqing Changan Automobile Co, in a recent speech.

"Our senior management team has participated deeply in the process of research and development and quality control to make sure our products meet the strictest requirements."

Yin Tongyao, chairman of the board of Chery Automobile Co, echoed Xu's sentiment, saying in his speech that quality leads to trust, and that builds a brand.

"We have built a sophisticated quality system in the past five years. We are transforming, despite the tough process," Yin said.

Chery Automobile announced on Friday in Anhui province that it hopes to develop into a leading Chinese brand by 2020 and develop into global brand after that.

Chang'an annually invests 5 percent of its revenue into research and development; Chery annually invests 5 to 10 percent.

Chang'an passenger car sales this year as of November surged 30.3 percent from last year's figure to 869,567 units; sales of Chery passenger cars jumped 12.5 percent to more than 475,000, while the overall passenger car market growth rate slowed to 5.89 percent.

Yin said: "The central government's 'Made-in-China 2025' strategy has the car manufacturing industry in its sights. China has the world's largest car market, the most Internet users, and the most open-minded customers. These factors give us a great opportunity."

Hecker said Chinese automotive winners will stand out in the next five-year period, and there will be one to two Chinese brands that will have a strong presence on international stage.

"They are very likely to be brands that have developed smart mobility. No big players have a dominant solution at present, though Chinese carmakers may combine their strengths in China," he said.