Year of Horsepower: Car industry shifts gears(3)

Exports decline after years of growth

Despite a high increase in China's automobile sales in 2013, the country's vehicle exports started to decline due to a weak global economy, reversing the trend of rapid growth seen in recent years.

Customs statistics show that in 2013, total auto exports dropped 7.5 percent to 977,300 units from 2012, when the figure surpassed 1 million for the first time.

It was also the first decline in recent years, after China's auto exports registered a double-digit growth in 2006, 50 percent in 2011 and 30 percent in 2012.

By segment, passenger vehicle exports declined 9.8 percent year on year to 596,300 units, while commercial vehicle exports dipped 3.5 percent to 381,000 units. Cars and trucks were two sectors reported sharp export decrease and drag the two segments.

However, statistics also show that in the first 11 months, the export revenue increased 5.2 percent from a year earlier to $71.3 billion, despite the volume decline.

China's top vehicle export destinations continue to be developing countries, with Algeria, Russia, Chile, Iran, Peru, Colombia, Egypt, Iraq, Uruguay and Ukraine in the top 10. Combined exports to these countries accounted for 58.1 percent of the total number.

Tesla Model S priced lower than expected

Defying speculation that its Model S electric car would be priced at more than 1 million yuan in China, US manufacturer Tesla announced on Jan 22 that the model would sell for 734,000 yuan.

It also released a transparent pricing system as an effort to differentiate itself from competitors, some of which were accused of trying to make excessive profits on imports last year, according to the company.

In March, a month dedicated to protecting consumer rights, some automobile brands were identified as having unreasonable prices and generating excessive profits from their imported vehicles.

Later in August, the China Automobile Dealers Association announced that it started an investigation into the pricing of foreign car brands in China, covering costs, profit margins and taxes.

However, the probe goes with no further news so far.

Analysts said that the high prices of foreign-brand vehicles, especially imported vehicles, have drawn a lot of attention in recent years, as prices of some are two and a half times what they are in the United States and Europe.

According to a report on the Wall Street Journal, listed prices of luxury cars in China are on average 64 percent more expensive than similar vehicles sold in the US based on a comparison of three models - the Mercedes-Benz C-Class, Audi A4 and the BMW 3-Series.

Even without consumption taxes and value-added taxes, prices of those three models are still 37 percent higher in China on average.

JD Power: Locals now catching up on quality

Though market share by China's domestic brands continued to drop in 2013, a research conducted by JD Power & Associates Asia Pacific showed that they continue to improve vehicle quality and narrow the gap with international brands.

The survey also said the performance of local brands helped drive up the industry-wide average as reported problems were reduced to a record low.

By examining problems experienced by new-vehicle owners in the first two to six months of ownership, the overall initial quality score is defined by problems reported per 100 vehicles.

Overall initial quality of domestic brands improved to a rate of 155 in this year's survey, a significant drop from an average of 212 problems per 100 vehicles in 2012. The gap in quality scores between domestic and international brands narrowed to 51 in 2013 from 95 in 2012.

Analysts said that if domestic automakers maintain such improvement, they may keep up with their international rivals in initial quality in 2018, when the overall vehicle initial quality in China is expected to be similar to that in the United States.

According to China Association of Automobile Manufacturers, in 2013, combined vehicle sales by domestic brands increased 11.4 percent to 7.22 million units, accounting for 40.3 percent of the overall market, a drop in share of 1.6 percentage points from last year.