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      Auto industry changing gears

      2014-12-26 11:12 Global Times Web Editor: Qin Dexing
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      A look back at the changes shaping the auto industry in 2014

      2014 has been an eventful year for China's auto sector, with the industry seeing a significant slowdown compared to previous years. The government is also tightening regulations, issuing several antitrust tickets to the sector. The auto page this week will take a look back at the major events that have taken place in China's auto industry this year and also give the experts' views on the sector's future.

      New normal

      China's auto industry reported much slower growth this year. The country saw 21.08 million units of cars sold during the January-November period, up 6.1 percent year-on-year, according to data from the China Association of Automobile Manufacturers (CAAM). The growth is 7.4 percentage points lower than the same period last year.

      Sales of passenger cars in China reached 17.64 million units in the first 11 months, up 9.2 percent over the same period last year, 5.9 percentage points lower than the same period last year, CAAM data showed.

      For the year 2015, CAAM predicted that the growth rate may be around 7 percent, the same level as economists' predictions on China's GDP growth in 2015. But in 2013, the sector saw 13.9 percent growth year-on-year.

      China's economy is in a process of transition from its previous high-speed growth to a "new normal" of medium-to-high growth in the future. The same goes for the auto industry, as the performance of the sector is closely tied to that of the overall economy, said Mei Songlin, vice president and managing director at Shanghai-based consultancy J.D. Power China.

      Slower sales go hand-in-hand with a higher inventory. The inventory among auto dealers in November has increased by 33 percent year-on-year, and only some 30 percent of dealers are able to make profits at present, according to data from the China Automobile Dealers Association.

      Long gone are the good old days when most automakers in China could see rapid growth, Mei said, adding that with the industry's slowdown, some automakers may face tough times ahead.

      "China has seen rapid growth in the auto industry for many years and it is unlikely for the sector to keep reporting hyper-growth with the large base number," Beijing-based auto analyst Zhang Zhiyong told the Global Times Tuesday.

      Antitrust probes

      Antitrust probes into the auto sector have been conducted for more than three years, but this year, the investigations finally yielded some results.

      Automakers have been accused of engaging in monopolistic behavior when handling their dealers, as carmakers have absolute dominance in vehicle distribution. For instance, dealers can only sell auto parts from the automakers and are not allowed to make purchases from other suppliers.

      But the investigation is not confined to automakers, as dealers and auto parts makers may also have abused their market power by engaging in monopolistic practices such as price manipulation.

      Antitrust authorities in 2014 have issued several punishments, but the investigation is far from over, experts said, as the government intensifies its efforts in the enforcement of antitrust laws.

      In response to the government's antitrust probe, major automakers such as Jaguar Land Rover, Audi, Chrysler and Mercedes-Benz in July and August announced to lower auto parts and car prices before the antitrust authorities unveiled any results.

      On August 13, four BMW dealers in Central China's Hubei Province were fined a total of 1.62 million yuan ($260,964) by the local pricing authority for monopolistic pricing.

      On August 20, China's antitrust authority issued a record fine totaling 1.24 billion yuan on 12 Japanese auto parts and bearings producers, including Denso Corp and Mitsubishi Electric Corp, for price manipulation.

      On September 11, FAW-Volkswagen, one of the German automaker's joint ventures in China, was fined 248 million yuan by the pricing authority in Hubei, for monopolizing prices in the sales of its premium Audi brand. Eight Audi dealers in the province were also fined.

      Electric push

      Despite the slowdown in the overall auto industry in 2014, the country has seen robust growth in the sales of new-energy vehicles.

      In the first 11 months, a total of 56,700 new-energy vehicles were sold, nearly five times the number in the same period in 2013, data from the Ministry of Industry and Information Technology showed.

      The rapid growth was mainly driven by the government's favorable policies, J.D. Power China's Mei said.

      The State Council in July announced that consumers would be exempt from the 10 percent purchasing tax if they decided to buy new-energy cars, which has been a great boost to the sector.

      The government has also reiterated its determination to develop new-energy cars in China. During a visit to SAIC Motor in Shanghai in May, President Xi Jinping said that developing new-energy vehicles is the only way for China to grow into a strong power in the auto sector.

      The entry of US premium electric car brand Tesla into China, which has gained widespread attention from the public, has also made people more open to the idea of buying an electric car. In the first nine months of this year, China imported 3,431 units of Tesla cars, according to news portal aastocks.com in October, citing customs data.

      Traditional automakers such as Volkswagen and BMW also stepped up their efforts in rolling out new-energy vehicles in 2014. BMW's i3 electric car and i8 hybrid landed on the Chinese market in September.

      Rapid growth in the sector also prompted more companies to jump into the sector. Internet firm LeTV said earlier this month that it is planning to develop electric cars in cooperation with BAIC Motor.

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