In the past two decades, China's domestic car brands have largely operated in isolation. However, this year's first half has seen a sudden surge in collective efforts from these brands. Geely Automobile announced an investment of over 3 billion yuan to build two new production facilities; FAW launched its "2009 Million Brand" initiative; and SAIC set a target of investing 10 billion yuan into its own brand during the "Eleventh Five-Year Plan." Industry leaders have even remarked, "Chinese cars can't survive without madness." What exactly are these companies doing?
The State Council released the "Outline of the National Medium- and Long-Term Scientific and Technological Development Plan (2006–2020)" earlier this year, emphasizing that China would gradually increase its R&D investment as a percentage of GDP, aiming for 2% by 2010 and 2.5% by 2020. The plan also emphasized the government’s role in guiding investments through various financial measures like direct funding and tax incentives.
True innovation requires long-term vision. Li Dongsheng, chairman of TCL, once said that building independent innovation capabilities needs sustained investment and strategic planning. It's not about quick profits but about testing large-scale markets, especially international competition.
Looking at industry trends, companies like Toyota and Hyundai took nearly 30 years to develop their own R&D capabilities. According to *The Far Eastern Economic Review*, Chinese car companies may need 10 to 15 years to master product development and compete globally. Even with current investments, shortening this timeline to three or one year is unrealistic.
While national projects can inspire progress, there's a risk of companies taking shortcuts if they're too focused on guaranteed success. This mindset reflects a broader cultural tendency in China—seeking quick results and instant benefits, which influences both businesses and policymakers.
Part I: The National Team Steps Up
As the auto industry entered a period of intense independent innovation, FAW and Dongfeng were not left behind. Despite initial hesitation, they eventually moved toward self-reliance under government pressure.
Within FAW, opinions differ: some believe the company can now develop its own brand, while others argue it lacks the depth. A FAW official admitted that the company was pushed by the SASAC and the National Development and Reform Commission to act. The funds allocated for revitalizing the Northeast region also motivated FAW to participate.
Zhang Jiejie, general manager of FAW Car Co., acknowledged that the C301 model borrowed core technologies from the Mazda 6 platform. Similar design elements appear in other models, such as the Hongqi HQ3 and small cars.
Unlike private companies, state-owned enterprises like FAW must be cautious about public perception to avoid damaging the government’s image. When accused of copying, Ge Shuwen, head of FAW Sales, defended the company by distinguishing between "original innovation" and "integrated innovation."
FAW is seeking more government support, especially to prevent talent loss. The C301 project requires additional funding, and a FAW official noted that despite challenges, producing a vehicle is better than nothing.
Dongfeng, on the other hand, faces different challenges. Its focus has shifted to joint ventures with Nissan and Honda, leaving little room for independent development. While it claims contributions to commercial vehicles, experts remain skeptical about its passenger car brand initiatives.
Part II: Second-Tier Brands Go All-In
Second-tier brands like Chery and Geely are pushing forward aggressively. Chery recently launched the V5 model and reported top-three sales performance, while also reducing prices on several models to clear inventory. Its sales target for the year is 300,000 units, double last year's figure, putting immense pressure on dealers.
Geely is expanding rapidly, signing agreements to build new factories in Jinan, Cixi, Lanzhou, and Xiangtan. The company insists that all land acquired through these projects will be used for automotive production. Local governments are eager to attract such investments, offering infrastructure support and loan assistance.
Chery, Geely, and Brilliance are also seeking further financing. Chery plans to go public, Geely is considering convertible bonds in Singapore, and Brilliance is looking for new investors. These moves reflect the growing momentum behind China's push for self-reliant brands.
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