In terms of market structure, thanks to a new consumer tax policy, the demand for passenger cars in China has been greatly stimulated. Passenger cars are taking up an increasing proportion of the market rising to 72% in 2006 from 69% in 2005.
As for production, manufacturers are now introducing richer products, which in turn intensify competitions. This continues to push forward the optimization of talent, capital and information resources allocation. It also drives technology and management progress and guides the market to maturity.
As for consumption, consumers have gradually become more practical when making decisions. This places an irreplaceable role in pushing forward continuous product improvement, continuous marketing innovations and the formation of overall competitive advantages.
As for policies, China has successively introduced a defective automobile recall system and new policies encouraging independent innovations and the development of energy-saving and environment-friendly automobiles. These policies have indirectly pushed forward the maturity of the automobile market.
CCID Consulting believes that the ''multi-polarization'' of the global automobile industry will lead to a healthy development of the Chinese automobile market.
In 2006, foreign capital grew fast in China. All multinational groups have invested and built their second or third factories in China. Joint venture enterprises saw a big increase in their automobile sales. US brands' elegant outer appearance and high oil consumption, German brands' excellent technology, Japanese and Korean brands' high configurations but low oil consumption have left deep impressions on people.
Domestic automakers in China have long adopted a strategy of ''technology for market'' to cooperate with foreign enterprises in an effort to improve their competitiveness. In fact, the year 2006 also saw China's national brands start to step up their efforts. Different from the past, Chery, Geely and BYD Auto won more market recognition. FAW, SAIC, Changan and Brilliance Auto also introduced their own new models and won considerable market recognition. In 2006, sales of national brands accounted for 26% of the total automobile sales in China, up 6% over 2005.
To sum up the performance of China's automobile market in 2006, technology progress, price marketing and improved services quality contributed to a great increase in customer loyalty. The ''multi-polarization'' of the global automobile industry intensified market competitions in China. It will also lead healthy development of the Chinese market.
CCID Consulting forecasts that China's automobile market will grow steadily in the future, but market competitions will intensify. Changes in market demand due to policy and social factors resulted in the following characteristics in consumption behavior in the automobile market in 2006: more private consumption of automobile, small automobile displacement and low oil consumption. Changes on automobile appearance fashion will continue to 2007-2009. As for product supply, sales volume in China's automobile market will grow by over 10%, 2007-2009. By 2009, sales volume is expected to top 10 million.
In the next 3 years, market competitions will intensify. This will be reflected in the following aspects: Firstly, more attention will be paid to mergers and restructuring of enterprises, which will result in a higher level of market concentration. Secondly, price competitions will be more standardized. Price competitions will be mainly dominated by manufacturers. This will avoid willful price cuts by dealers. As price cuts become more frequent, the price strategy will be reflected in the price of new vehicles in the market. This will change the usual practice of price cuts for new vehicles within a few months. Thirdly, services will feature more in market competitions. Improving after-sales services quality and forming a good services reputation for brands are no doubt the best marketing means. As the credit system has yet to be improved and automobile price cuts are so frequent, it is very difficult to see major improvement of automobile finance in the short term.
