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People's Daily Online>>China Business

New sourcing list may boost China-brand vehicles

By Vivian Jin (Shanghai Daily)

09:31, March 08, 2012

Government officials who used to luxuriate in the back seats of fancy Audi sedans may soon be chauffeured around in China-brand autos.

A recent preliminary list for 2012 government fleet purchases from the Ministry of Industry and Information Technology showed only Chinese models are eligible for procurement.

The new guidelines, which have been circulated for public comment, cover 265 sedan models, 78 sport-utility vehicles, 46 multi-purpose vehicles and five green vehicles from domestic automakers such as SAIC, FAW, Geely and BYD.

Government fleets were previously dominated by foreign brands as a statement of status, with their larger space and higher-profile reputations.

The central government hasn't disclosed its reasons for the policy change. Dong Yang, secretary-general of the China Association of Automobile Manufacturers, said the new policy follows a common international practice of favoring domestic brands and that government purchases are excluded from World Trade Organization rules on competition.

However, industry analysts surmise that it may be part of a plan to control costs by resorting to cheaper Chinese brands and also to show the government wants to bolster the domestic industry as the quality of its cars improves.

"Domestic carmakers in China are under pressure from international brands," said Klaus Paur, director of automotive research group Ipsos in Shanghai. "A ban on foreign cars for official vehicle fleets would ensure additional sales for domestic brands and a more enhanced public exposure."

The government's policy switch came as no surprise to many foreign automakers. New procurement standards, released last November, require models with engine capacities of less than 1.8-liters and costing no more than 180,000 yuan (US$28,571). The new criteria eliminates major luxury carmakers.

The stringent guidelines also require domestic carmakers to invest at least 3 percent of their core revenue into research and development, and bar any major new Sino-foreign joint ventures that only assemble cars in China.

John Zeng, head of LMC Automotive, estimates that government purchases account for about 10 percent of the nation's auto sales, a relatively small proportion of China's overall market. But given the fact that more than 18 million vehicles were sold last year in China, it's still a very lucrative segment.

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