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Chinese Auto Brands--A Topic That Cannot Be Said
After years of rapid and continuous growth, China's automotive industry has entered a critical phase of strategic transformation. The rise of "Chinese auto brands" has become a central topic in the industry. But what lies ahead for China’s automotive sector? And what should Chinese auto brands focus on in the future? There may not be a single, clear answer to these questions.
For many years, companies like Chery, Geely, and Great Wall Motor were seen as symbols of China's growing independent automotive power. Indeed, over time, the number of self-owned brand vehicles has increased significantly. In 2005, the total production of self-owned brand cars reached 850,000 units—up 5.6 times from 150,000 units in 1997, with an average annual growth rate of 23%. It was a positive sign that independent brands like Chery and Geely had managed to enter the top five of the country's major automotive groups.
However, despite this progress, the market share of self-owned brands actually declined in 2005 compared to 1997, even though the overall market grew by an average of 25.3% annually. By 2006, Japanese and South Korean brands had captured 36.6% of the market, showing that it was these foreign brands that had truly gained traction. Most Chinese independent brands remained confined to the low-end segment, struggling to make a mark in more competitive markets.
In China, only a few long-established companies, such as FAW and SAIC, have historically had the potential to develop high-end models. While some media have highlighted FAW's challenges in the post-joint-venture era, it is hard to deny that the "Hongqi" (Red Flag) brand remains a symbol of China's own automotive identity.
As the largest passenger car company in China, SAIC Motors—resulting from joint ventures between Shanghai General Motors and Shanghai Volkswagen—has played a key role in shaping the industry's new direction. Its approach to developing its own brand has drawn considerable attention. Through collaboration and joint ventures, SAIC has accumulated advanced technology, market experience, and customer service expertise. Although it has consistently led in market share, it has faced criticism for lacking bold moves in its own brand development. In response, SAIC chose to remain silent.
Recently, the core leadership of SAIC Motor made their debut in Shanghai, sparking discussions across the industry and media. Following Shanghai Volkswagen and Shanghai GM, SAIC Motor became the third major unit under SAIC, forming a "troika" structure. This move is seen as a strong response to past criticisms.
According to Chen Hong, President of SAIC Group, the goal for independent brands is to become global brands. He emphasized that they must expand internationally, integrate global resources, and develop independently before going global. SAIC's strategy reflects a long-term vision, aiming to build a brand that can compete on the world stage.
On the path of self-owned brands, there are multiple development approaches. After over two decades of joint ventures, SAIC has chosen a differentiated path—leveraging both domestic and international markets and resources. Rather than simply imitating, it has focused on secondary and integrated innovation. Different strategies work for different companies, and the key is to align them with each firm's unique resources and environment.
In the context of globalization and regional integration, the lines between "domestic" and "global" are increasingly blurred. Based on its strong domestic presence, SAIC has begun exploring international partnerships. In December 2004, it acquired all intellectual property rights related to the Rover brand, marking a milestone in Chinese companies' overseas M&A activities. Industry experts praised this as a "smart move." Additionally, SAIC partnered with Ricardo, a British design firm, to enhance its R&D capabilities.
SAIC's model—building on the domestic market while seeking global resources—offers valuable lessons for other companies striving to develop independent brands. It demonstrates how a well-planned, resource-driven strategy can lead to sustainable growth.
From the perspective of SAIC, the development of independent brands requires support from various sectors, including state-owned enterprises, private companies, and foreign joint ventures. As key partners, German automaker Volkswagen and U.S. automaker General Motors have expressed understanding of SAIC's unique approach and shown interest in future collaboration.
As the Chinese auto industry enters a new strategic phase, the three pillars of SAIC—Shanghai GM, Shanghai Volkswagen, and SAIC Motor—are set to represent a model of differentiated development. They showcase how SAIC combines its internal strengths to pursue a path best suited for its long-term growth.
While others hesitated or questioned whether they needed to develop their own brands, SAIC took a steady, deliberate approach. It did not rush into launching its own brand projects but instead laid solid groundwork. With the establishment of SAIC Motor, the company demonstrated its commitment to a development path that aligns with its own strengths and vision.
In summary, the journey of China's auto industry is complex and evolving. The success of independent brands depends on strategic choices, global integration, and long-term planning. SAIC's approach offers a compelling example of how a company can navigate this landscape effectively.