As BMW, Volkswagen, Toyota -- andother foreign auto manufacturers -- have or plan to have a strong presence in one of the world's biggest auto market, China's local automobile manufacturers are finding an increasingly small stake.

The situation can be easily noticed at two major ongoing event in China -- the Bo'ao Forum for Asia in southernmost Hainan Province and the Shanghai Auto Show, where executives of foreign auto businesses discuss China's auto industry at present and in the future.

While Shanghai Automotive Industry (Group) Corporation (SAIC), one of the world top 500 businesses in 2004, can only boast performance of its "hybrids" -- cars jointly developed with foreign partners, Beijing Hyundai, which burst on to the stage with surging sales last year for its Elantra and Sonata cars, is identified by many as being of South Korean, instead of Beijing, origin.

Only the FAW Car Co., Ltd., the home to China's first self-developed Jiefang truck and Red Flag sedan in the 1950s, seems to hold up its own banner. But pushed by competition pressure, the Red Flag sedan, China's national car emblem, has to use Audi's body and Chrysler's engine to remain attractive.

Worse still, more foreign players announced their plans of expansion at the Shanghai Auto Show to compete on the world's third largest auto market, where some 5 million autos were sold last year and more than 570,000 sold in this year's first quarter.

"An auto brand crystallizes many factors such as technology, marketing, after-service and reputation. Without your own brands, no matter how many cars you are producing, you are doing it for others' glory," said Dr. Wan Gang, President of the Shanghai Tongji University.

According to China's commitment made at its entry to the World Trade Organization in late 2001, China repealed import quotas of autos and key auto parts and cut the tariff to 30 percent as of 2005.

As a result, foreign auto manufactures are able to promote their products at much lower prices than before. Take Modeo of Ford for example. The middle-class car sells at around 230,000 yuan (27,710 US dollars) and the price is expected to drop more. The car used to sell at 300,000 yuan (36,144 dollars).

In return, domestic auto companies have to further lower their prices, with Cherry sees the price of its mini QQ series falling from 45,000 (5,421 dollars) to less than 30,000 (3,614 dollars) atpresent.

In addition, strong research and development capacities of foreign auto manufacturers have compounded challenges for Chinese companies.

Big names such as General Motors and Ford invest five to six billion dollars in R&D, but Chinese auto companies generally spendless than two percent of their sales revenue on R&D.

So far, 51 companies with auto production background in the world top 500 businesses have set up joint ventures in China, making auto competition in China thronged with foreign competitors.

"The auto industry is a dynamic strategic industry. No economicpower is willing to sell its auto industry development rights. Thekey auto technology cannot be bought," said Lin Xiaogang, president of the Brilliance China Automotive Holding Ltd.

"The only choice for China's auto sector is to stick to self-development by learning from world advanced technology and conductR&D by itself," he said.

Maybe Chinese auto entrepreneurs should also bear what BMW President Helmut Panke said in mind: advanced technology and strong development capacity are the fundamental guarantee for BMW's huge success in the Asian market.

Source: Xinhua