Two venerable old Chinese auto brands are poised for revival as China redoubles its efforts to breathe new life into the domestic car industry.
The Shanghai brand, whose production was suspended more than 20 years ago, reappeared on a list of new car previews posted recently by the Ministry of Industry and Information Technology.
China's largest auto group, SAIC Motor Corp, said it is in process of planning to revive production of the Shanghai brand and include it among its stable of domestic brand vehicles.
The time-honored Red Flag sedans, made by FAW Group Corp, are also being resuscitated. Red Flags were once the official cars of top national leaders. The brand may once again serve as the official car for ministerial-level officials, according to Chinese media.
The Red Flag and Shanghai brands were milestones in the Chinese auto industry during the 1960s and 1970s. At the time, they represented the best in domestic car manufacturing capability.
But the two brands faded after China opened its market to foreign carmakers, which quickly became the driving force of technological development in the sector.
It's interesting to look back on the car history of the past half century.
In 1958, SAIC rolled out its first auto. It was called the Phoenix, but the name was changed to Shanghai in 1963. About 80,000 of the cars were manufactured before production stopped in 1991.
By that time, SAIC was investing most of its resources into its joint venture with Volkswagen AG. Demand for Shanghai brand cars faded.
Although production of the Red Flag never quite ceased, its sales, too, suffered from the appearance of Western-style models in China - many of them were produced in new joint ventures.
Now that China has become the world's largest auto market, the nation's leaders are keen to revive domestic industry prominence.
Premium Car
Both Red Flag and Shanghai cars are targeted at the premium car segment, which will help them tap into government fleets now dominated by the likes of Audi, BMW and Mercedes-Benz.
China's domestic carmakers have been calling on the government to buy more Chinese brands to set a good public example and to encourage consumers to buy them. Earlier, the government released new guidelines on government vehicle purchases. They require officials cars to have an engine displacement at or below 1.8-liter and be priced no more than 180,000 yuan (US$28,571).
The rules supersede old criteria that set the threshold at 2.0-liter and 200,000 yuan. The new guidelines are expected to open new business opportunities for Chinese automakers.
It's not just that the Chinese government is trying to encourage sales of domestic brand cars. Beyond that, there's a desire to upgrade innovation and technology in the domestic manufacturing sector.
In recent years, foreign investment has dominated China's car industry. Nearly all mainstream international automobile manufacturers have set up Chinese ventures and factories, putting the squeeze on domestic rivals, whose manufacturing prowess still lags in technology and design.
The Chinese government opened its auto market to foreign carmakers to bring advanced technology to the country. But instead of sharing their know-how, many overseas carmakers eager to get a toehold in China have zealously kept their expertise to themselves, leaving their Chinese partners with token crumbs. Only in recent years did the central government intervene to push domestic auto groups to develop their own models and to upgrade their technologies to compete on global standards.
Too little, too late?
Beginning this month, China ended its official policy of encouraging foreign investment in the car industry.
The question remains: Is it all too little, too late? As auto sales begin to slow, Chinese brands may have missed their golden opportunity for growth.
Foreign auto companies are now firmly entrenched in China and there will continue to be stiff competition for domestic companies. They are not only turning out stylish models that consumers crave, but they are also expanding into inland cities where cheaper Chinese cars once dominated.
Although Chinese companies have been catching up by acquiring overseas companies with advanced technologies and by buying complete product lines, their output still suffers from weak brand recognition and a general perception that Chinese domestic brands just aren't as well made as foreign cars.
I still remember when SAIC launched its first Roewe 750 sedans, a brand developed from Rover 75 models after the Shanghai-based company bought from the bankrupt British carmaker. The Shanghai municipal government purchased the cars for its official fleet.
But many of those Roewes were replaced by the Buick Regal, a model produced by SAIC's venture with General Motors, because there are malfunctions in the model from time to time. It often seems the case that actual orders don't live up to government procurement promises.
The lesson seems clear. Chinese car brands will be successful only if domestic automakers lift their game and match the innovation, technologies and designs of their rivals. They won't survive on government crutches alone.
In its plans to revive the Shanghai brand, SAIC has unveiled an electric model of the car, along with a fuel-cell model.
FAW Group also said in August in 2010 that it plans to invest 3.1 billion yuan to develop new Red Flag models. It will have annual production capacity for 30,000 premium C131 sedans by next year.
The road ahead is a bumpy one. The government has thrown its support behind China's domestic auto brands.
Now it remains to be seen: Will consumers embrace them, too?
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