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Domestically-made world brands in dilemma

By Lin Guan (chinadaily.com.cn)
Updated: 2007-11-12 15:10

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Despite the rosy picture in domestic demand, international luxury carmakers are facing problems concerning low localization rates, high costs and tariffs, and possible loss in brand name, the Economic Observer reported.

Over the last two months, luxury carmakers launched the new BMW5 Li, the new Mercedes Benz C class, and the new Volvo S40, all of which are already or yet to be on Chinese assembly lines.

Domestically-made cars enjoy great popularity. In the first three quarters of the year, BMW sold 12,236 BMW5 Li models, a 53 percent year-on-year increase. And in Volvo dealerships, more than half the vehicles sold were the S40.

However, sales alone won't cheer up these brands, for which possible losses in brand reputation and low localization rate are persistent worries, said an executive in a luxury cars joint venture. According to Chinese auto regulations, cars with 40 percent domestically-made spare parts are categorized as Made-in-China; those below 40 percent fall into the exported car category and should be taxed on an export product basis. On intangible brand losses, he added Audi has already lost its symbol as a luxury brand to BMW and Benz, thanks to the rapid pace of its mass production in China.

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The full text is available in the November Issue of Auto China.