Domestic auto brands falter as industry growth brakes

China's fledgling domestic car brands, which once aspired to be globally competitive, now face the risk of crashing as the world's largest car market loses steam, analysts said at an ongoing auto show in northeast China.

Auto sales grew 2.9 percent in the first half from a year earlier to 9.6 million vehicles, showing stronger signs of slowing down compared with the 3.4-percent gain registered the previous year and a 48-percent surge in the first half of 2010, data from the China Association of Automobile Manufacturers (CAAM) showed.

Homegrown brands bore the brunt of the slowdown after robust gains in previous years. According to a CAAM report, domestic companies sold 3.15 million passenger cars in the first six months of the year, down 0.2 percent from the same period in 2011.

The domestic share of the passenger car market also fell by 3 percent to 41.4 percent in the first half, further down from an annual 3.4-percent decline in 2011.

"Nearly every local brand has suffered sluggish sales since January. Both sales volume and market share have slipped," said Huang Haitao, deputy general manager of sales at Geely, a major domestic auto manufacture.

Geely acquired Volvo Cars during the heyday of China's auto market in 2010, when overall car sales jumped by 32 percent from a year earlier.

But now many sales mangers worry about fulfilling this year's sales targets if the market's growth continues to dive.

"The modest growth in the first half hurt every domestic carmaker. There will be no decrease in pressure in the second half," said Xiao Luman, a regional manager for JAC Motors.

But Xiao said he is even more concerned about next year, as a slowing economy and purchase limits will continue to sap demand.

China's GDP growth receded to 7.6 percent in the second quarter, the slowest in three years. In addition, the country's three biggest cities all imposed limits on car purchases, with Guangzhou capping annual issuances of license plates earlier this month following similar schemes in Beijing and Shanghai.

Global manufacturers, on the other hand, have seen their own sales grow faster than the market. Sales by Volkswagen and its Chinese partners rose more than 15 percent in the first half of this year, despite a high-profile quality dispute over some of its vehicles' transmissions.

Global carmakers have weakened the price advantage of homegrown brands with steep price cuts, making domestically produced cars less appealing than their more advanced foreign counterparts.

Encroachment by some global auto firms concerns Yu Yanjun, a domestic auto dealer from northeast China.

"In addition to the price cuts, global automakers has rapidly expanded their sales network. They are devouring market share, even in small cities and towns," Yu said.

Dong Yang, general secretary of CAAM, said half of China's domestic auto brands may be wiped out over the next few years, since their poor sales are unlikely to reverse anytime soon.

"China's homegrown automakers need to hit the accelerator and boost themselves now," said Sun Zhiming, dean of the economics center of the Academy of Social Sciences in Jilin province.

"Domestic carmakers can no longer survive simply by copying popular car designs. It's time to really consider the core quality of the companies," Sun added.