Geely Down, GM Up. And Why Favoring Foreigners Is Good For The Chinese Government

Bertel Schmitt
by Bertel Schmitt
geely down gm up and why favoring foreigners is good for the chinese government

We have been pointing it out for quite a while: Something counter-intuitive (and counter- conventional wisdom) is happening in China: While the growth of the general market is slowing down, it is at the expense of the Chinese brands. The foreigners are doing fine.

Nothing illustrates this better than the story of the two Gs, Geely and GM. In October, the growth of the Chinese market effectively came to a halt.

How did the two Gs fare during that braking maneuver?

The two Gs reflect a trend that has been evolving for a while in China: The foreign joint venture brands are getting stronger, the homegrown brands are losing share. The share of homegrown brands stands at an all-time low of 29 percent for the first 10 months of the year. The Chinese government has acknowledged that fact and is exhorting its manufacturers to speed up development in order to catch up with foreign brands and technology.

The Chinese government however is in a very interesting position: The joint ventures with foreigners are mostly in the hands of state owned enterprises. The homegrown brands are more in the hands of the independents. When it comes down to brass tacks, the Chinese government will favor its own enterprises, and oddly enough, that means favoring foreigners over pure Chinese brands.

PS: One thing should be kept in mind when comparing percentage numbers and when announcing the end of Chinese growth. We are now comparing with a last quarter of 2010 which was on an absolute tear. The Chinese market had been up 27 percent in October 2010. In the same month, GM China had been up 20 percent.

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  • Patrickj Patrickj on Nov 10, 2011

    My guess is that the Chinese government, for reasons of both infrastructure and social control, is not ready to put 1.5 billion people on wheels. Discouraging the sale of inexpensive cars that are far lower in crash, emissions, and quality standards of areas like Japan and North America is a useful indirect way to do that.

    • See 3 previous
    • Athos Nobile Athos Nobile on Nov 11, 2011

      @imag Patrickj and TonyJZX make some interesting points. Most of the people that come from my country to "down here" usually go and get a Toyota (most of them keep their Blackberry "fever" too). In Venezuela, the Corolla is the "market's most aspirational car" which is something to laugh or cry about, depending on the perspective. Some get a Camry, some a Corolla or an SUV. Where I work, many workers are from another Pacific-located country, and according to the locals, they "compete" to see who was the biggest Toyota SUV: Hilux, Prado, LC whatever. I think that kind of purchase is a direct reflection of the things that people are "lacking" in third world countries and their cultural reference points. In my case, I drove 4 cyl FWD cars for almost 15 years, and despite the high petrol prices, it's a V6/I6 or a V8 RWD what would do it for me. Currently I'm being kindly chauffeured by the public transportation, which WORK!!!. I would also like to hit the racetrack. The thing here is choice. And that is what that people don't seem to realize. In the 1st world you can have whatever car you like, as long as you can afford it. Edit: I forgot to mention that showing off to your 3rd world friends you have "arrived" (whatever that means) is that it may open the door to some unwanted risks.

  • Ronnie Schreiber Ronnie Schreiber on Nov 10, 2011
    The Chinese government however is in a very interesting position: The joint ventures with foreigners are mostly in the hands of state owned enterprises. The homegrown brands are more in the hands of the independents. When it comes down to brass tacks, the Chinese government will favor its own enterprises, and oddly enough, that means favoring foreigners over pure Chinese brands. The basic need for commerce in any society is that contracts will be enforced. When your partner, your customer, your supplier, your competitors and the judge who will adjudicate your contract disputes are all the government, how can you be sure that you'll be treated fairly? If I'm not mistaken, while Li Shufu is a Chinese Horatio Alger story and Geely is privately owned, some of Geely's subbrands are built in factories that are jointly owned with local and provincial governments. It's probably impossible to do business in China without having to work with a government owned business in one form or another.

  • Dave M. Although the effective takeover by Daimler is pooped upon, this is one they got right. I wasn't a fan of the LHs, mostly due to reported mechanical, NVH and build quality issues, but I though Chrysler hit it out of the park with the LXs. The other hyped release that year was the Ford Five Hundred, which, while a well-built car with superior interior space, couldn't hold a candle to the 300.
  • Art Vandelay I always liked those last FWD 300's. Been ages since I've seen one on the road though. Lots of time in the RWD ones as rentals. No complaints whatsoever.
  • Cardave5150 I've had 2 different 300's - an '08 300SRT and an '18 300C. Loved them both a LOT, although, by the time I had the second one, I wasn't altogether thrilled with the image of 300's out on the street, as projected by the 3rd or 4th buyers of the cars.I always thought that the car looked a little stubby behind the rear wheels - something that an extra 3-4" in the trunk area would have greatly helped.When the 300 was first launched, there were invitation-only meet-and-greets at the dealerships, reminding me of the old days when new model-year launches were HUGE. At my local dealer, they were all in formalwear (tuxes and elegant dresses) with a nice spread of food. They gave out crystal medallions of the 300 in a sweet little velvet box (I've got mine around the house somewhere). I talked to a sales guy for about 5 minutes before I asked if we could take one of the cars out (a 300C with the 5.7 Hemi). He acted like he'd been waiting all evening for someone to ask that - we jumped in the car and went out - that thing, for the time, seemed to fly.Corey - when it comes time for it, don't forget to mention the slightly-stretched wheelbase 300 (I think it was the 300L??). I've never found one for sale (not that I've looked THAT hard), as they only built them for a couple of years.
  • Jkross22 "I’m doing more for the planet by continuing to drive my vehicle than buying a new one for strictly frivolous reasons."It's not possible to repeat this too much.
  • Jeff S Got to give credit to Chrysler for putting the 300 as a rear wheel drive back on the market. This will be a future classic.
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