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China’s foreign minister has driven a domestically manufactured sedan since June 17. Wang Yi chose as his official government vehicle the same brand of car once driven by China’s founding fathers .
The ministry’s announcement was welcomed by domestic automakers and won praise online for restarting a long-stalled plan to compel government officials to eschew the purchase of foreign luxury cars using public funds.
The First Automobile Works Group Corp.（FAW） markets the Hongqi H7， priced from 299，800 yuan to 479，800 yuan （$49，000-78，000）， with top government officials specifically in mind. More than 1，000 have been purchased by government departments， said Zhang Xiaojun， President of FAW’s sales subsidiary， who reports a more modest figure for individual purchasers.
“Government officials should have been using domestic cars even earlier，” said Huang Shengmin， Director of the School of Advertising at the Communication University of China in Beijing. Huang noted that the move could set an example for other consumers and promote the once-weak domestic auto industry.
Most of China’s official cars are foreign brands， despite a 2002 procurement law stipulating the purchase of domestic models.
“The government vehicle market is still dominated by foreign brands such as Audi. Homegrown brands account for only 10 percent，” said Zeng Zhiling， Director of Asia Pacific Forecasting at LMC Automotive， a global automotive industry research group headquartered in Britain.
President Xi Jinping called on officials to gradually shift toward domestic car brands in December 2012. A month later， acting as general secretary of the Communist Party of China， he urged all Party organs and members to practice frugality.
Brand switch
The Ministry of Industry and Information Technology released a list of approved vehicles for government procurement in February 2012， which included 412 models of domestic cars. Audi， Volkswagen， Toyota and other foreign brands were absent despite inclusion in a similar list in 2009.
Ren Jianming， a professor at Beijing University of Aeronautics and Astronautics， said that exclusive procurement of domestic vehicles for official use is not unique to China.
“It is a good method of promoting domestic brands and increasing consumer confidence in local products，” said Ren， adding that previous efforts lacked effective supervision and enforcement.
“Consumers may be able to choose between a domestic brand and a foreign brand， but government procurement， which uses taxpayers’ money， should be limited to domestic products，” said Wang Yong， Secretary General of the Beijing-based non-governmental Brand China Industry Union. Local governments have also turned to domestic brands.
Last year， the Fujian Provincial Government bought 72 Besturn B90 sedans， according to Cui Dayong， a senior sales manager at FAW.
Other domestic brands， such as the Trumpchi produced by the Guangzhou Automobile Group and the Roewe 950 of the Shanghai Automotive Industry Corp. （SAIC） Group， have also made their way into the official vehicle market in Guangdong， Zhejiang， Jiangsu and Shandong provinces.
According to a June 23 report from The Beijing News， the Beijing Automotive Group has sold more than 100 Senova cars to several government agencies in the capital as well as the municipal Party committee.
Also in June， the SAIC Group received an order for 150 Roewe cars from the General Administration of Customs.
SAIC’s government orders increased by 109 percent in 2012 and the number is expected to grow by another 115 percent in 2013， China Business News reported.
While the moves by central and local governments have won media praise， some experts warn against dramatic changes in government procurement.
“In many cases， government agencies rush to purchase domestically made cars without considering their own budget conditions. This can easily lead to extravagance，” Ren said.
According to a budget released by the Ministry of Finance in April， central government agencies will spend 4.4 billion yuan （$717 million） this year， 1.77 billion yuan （$289 million） less than in 2010.
Time-honored brand
First manufactured in 1958， Hongqi sedans ferried top state leaders like Mao Zedong and Deng Xiaoping to major celebrations， and even Richard Nixon rode in a Hongqi during his icebreaking visit in 1972.
In those days， profitability was not a priority for a state-owned enterprise like FAW. It made the cars mainly for official use and operated at a loss.
The government ordered FAW to cease producing the brand in 1981 because of inefficiencies in production and fuel consumption. It had produced 1，540 sedans by then.
FAW tried to revive the tarnished brand in the 1990s by resuming production using foreign technology， but sales were poor and production ceased once again.
“Chinese people have a special attachment to the Hongqi brand because it carried China’s automotive dreams in the early years of new China. The brand lost its market once already and cannot afford to lose it again，” said Zhong Shi， an independent auto industry analyst in Beijing. “Homegrown cars in China emerge almost every day. If Hongqi can successfully market its new H7 model as it has said， targeting officials above ministerial level and high-end users， it may see a turnaround，” Zhong said.
Audi， Hongqi’s major competitor which has dominated China’s official car sector since 1996， reported that no more than 10 percent of its total sales come from government purchases. However， industry analysts say that Audi’s image as an official car has driven sales to business leaders.
Cui with the China Passenger Car Association said that general sales of domestic auto brands could be boosted by the increase in government orders.
“In the past， people thought it would be a loss of face to drive a domestic car， but domestic brands will gradually have a bigger influence thanks to government support， and individual consumers will pay more attention to these brands，” he noted.
However， Fu Zhiyong， Managing Director of Beijing-based ACME Management Consulting， spoke of his concern that the prospect for homegrown auto brands is still unclear， since they lag far behind foreign and joint-venture auto rivals in terms of design and technology.
Quality is the key to success and domestic automakers should not rely too much on government policies or purchases， he noted.
According to Zhang Pijie， General Manager of the FAW Car Co. Ltd.， it was the lack of independent development capabilities that led to difficulties in FAW exploiting the market in the past.
This time， the Hongqi H7 is equipped with an independently developed engine， chassis and transmission， by using technologies developed under the Hongqi Revival Program， Zhang said， adding that FAW owns complete intellectual property rights for the vehicle.
FAW initiated the program in 2008 with a total investment of 5.2 billion yuan （$852 million）. Its first Hongqi H7 car rolled off the assembly line on July 15， 2012.
According to the company’s Hongqi brand development strategy， its H-series sedans compete with German luxury brands Audi and Mercedes-Benz. FAW introduced five models on May 30， and plans to gradually shift the marketing strategy to target individual consumers.
FAW will invest an additional 10.5 billion yuan （$1.71 billion） by 2015 to improve Hongqi’s research and development capability and launch two SUV models， a multi-purpose vehicle for business use and a medium-sized limousine coach for ceremonies and parades.
“The company will also create more distribution channels to provide high-quality service for consumers，” FAW’s Board Chairman Xu Jianyi said.
The ministry’s announcement was welcomed by domestic automakers and won praise online for restarting a long-stalled plan to compel government officials to eschew the purchase of foreign luxury cars using public funds.
The First Automobile Works Group Corp.（FAW） markets the Hongqi H7， priced from 299，800 yuan to 479，800 yuan （$49，000-78，000）， with top government officials specifically in mind. More than 1，000 have been purchased by government departments， said Zhang Xiaojun， President of FAW’s sales subsidiary， who reports a more modest figure for individual purchasers.
“Government officials should have been using domestic cars even earlier，” said Huang Shengmin， Director of the School of Advertising at the Communication University of China in Beijing. Huang noted that the move could set an example for other consumers and promote the once-weak domestic auto industry.
Most of China’s official cars are foreign brands， despite a 2002 procurement law stipulating the purchase of domestic models.
“The government vehicle market is still dominated by foreign brands such as Audi. Homegrown brands account for only 10 percent，” said Zeng Zhiling， Director of Asia Pacific Forecasting at LMC Automotive， a global automotive industry research group headquartered in Britain.
President Xi Jinping called on officials to gradually shift toward domestic car brands in December 2012. A month later， acting as general secretary of the Communist Party of China， he urged all Party organs and members to practice frugality.
Brand switch
The Ministry of Industry and Information Technology released a list of approved vehicles for government procurement in February 2012， which included 412 models of domestic cars. Audi， Volkswagen， Toyota and other foreign brands were absent despite inclusion in a similar list in 2009.
Ren Jianming， a professor at Beijing University of Aeronautics and Astronautics， said that exclusive procurement of domestic vehicles for official use is not unique to China.
“It is a good method of promoting domestic brands and increasing consumer confidence in local products，” said Ren， adding that previous efforts lacked effective supervision and enforcement.
“Consumers may be able to choose between a domestic brand and a foreign brand， but government procurement， which uses taxpayers’ money， should be limited to domestic products，” said Wang Yong， Secretary General of the Beijing-based non-governmental Brand China Industry Union. Local governments have also turned to domestic brands.
Last year， the Fujian Provincial Government bought 72 Besturn B90 sedans， according to Cui Dayong， a senior sales manager at FAW.
Other domestic brands， such as the Trumpchi produced by the Guangzhou Automobile Group and the Roewe 950 of the Shanghai Automotive Industry Corp. （SAIC） Group， have also made their way into the official vehicle market in Guangdong， Zhejiang， Jiangsu and Shandong provinces.
According to a June 23 report from The Beijing News， the Beijing Automotive Group has sold more than 100 Senova cars to several government agencies in the capital as well as the municipal Party committee.
Also in June， the SAIC Group received an order for 150 Roewe cars from the General Administration of Customs.
SAIC’s government orders increased by 109 percent in 2012 and the number is expected to grow by another 115 percent in 2013， China Business News reported.
While the moves by central and local governments have won media praise， some experts warn against dramatic changes in government procurement.
“In many cases， government agencies rush to purchase domestically made cars without considering their own budget conditions. This can easily lead to extravagance，” Ren said.
According to a budget released by the Ministry of Finance in April， central government agencies will spend 4.4 billion yuan （$717 million） this year， 1.77 billion yuan （$289 million） less than in 2010.
Time-honored brand
First manufactured in 1958， Hongqi sedans ferried top state leaders like Mao Zedong and Deng Xiaoping to major celebrations， and even Richard Nixon rode in a Hongqi during his icebreaking visit in 1972.
In those days， profitability was not a priority for a state-owned enterprise like FAW. It made the cars mainly for official use and operated at a loss.
The government ordered FAW to cease producing the brand in 1981 because of inefficiencies in production and fuel consumption. It had produced 1，540 sedans by then.
FAW tried to revive the tarnished brand in the 1990s by resuming production using foreign technology， but sales were poor and production ceased once again.
“Chinese people have a special attachment to the Hongqi brand because it carried China’s automotive dreams in the early years of new China. The brand lost its market once already and cannot afford to lose it again，” said Zhong Shi， an independent auto industry analyst in Beijing. “Homegrown cars in China emerge almost every day. If Hongqi can successfully market its new H7 model as it has said， targeting officials above ministerial level and high-end users， it may see a turnaround，” Zhong said.
Audi， Hongqi’s major competitor which has dominated China’s official car sector since 1996， reported that no more than 10 percent of its total sales come from government purchases. However， industry analysts say that Audi’s image as an official car has driven sales to business leaders.
Cui with the China Passenger Car Association said that general sales of domestic auto brands could be boosted by the increase in government orders.
“In the past， people thought it would be a loss of face to drive a domestic car， but domestic brands will gradually have a bigger influence thanks to government support， and individual consumers will pay more attention to these brands，” he noted.
However， Fu Zhiyong， Managing Director of Beijing-based ACME Management Consulting， spoke of his concern that the prospect for homegrown auto brands is still unclear， since they lag far behind foreign and joint-venture auto rivals in terms of design and technology.
Quality is the key to success and domestic automakers should not rely too much on government policies or purchases， he noted.
According to Zhang Pijie， General Manager of the FAW Car Co. Ltd.， it was the lack of independent development capabilities that led to difficulties in FAW exploiting the market in the past.
This time， the Hongqi H7 is equipped with an independently developed engine， chassis and transmission， by using technologies developed under the Hongqi Revival Program， Zhang said， adding that FAW owns complete intellectual property rights for the vehicle.
FAW initiated the program in 2008 with a total investment of 5.2 billion yuan （$852 million）. Its first Hongqi H7 car rolled off the assembly line on July 15， 2012.
According to the company’s Hongqi brand development strategy， its H-series sedans compete with German luxury brands Audi and Mercedes-Benz. FAW introduced five models on May 30， and plans to gradually shift the marketing strategy to target individual consumers.
FAW will invest an additional 10.5 billion yuan （$1.71 billion） by 2015 to improve Hongqi’s research and development capability and launch two SUV models， a multi-purpose vehicle for business use and a medium-sized limousine coach for ceremonies and parades.
“The company will also create more distribution channels to provide high-quality service for consumers，” FAW’s Board Chairman Xu Jianyi said.