Long-term consideration

The revitalization package, for a long-term domino effect, would also direct the segmented domestic industry to a right way for future development, as it encourages industry restructuring and integration.

"Industry reshuffle is routine in the downturn. As the whole vehicle manufacturing industry in China is not so capable and segmented comparatively, the government should encourage and regulate the parts and components industry more," said Jia Xinguang, an independent auto analyst based in Beijing.

Jia said there are about 5,000 part and components manufacturers in China, with most of them having assets of no more than 100 million yuan, producing low-value products.

Winfried Vahland, president, Volkswagen Group China agreed that "the industry downturn should be an opportunity for China's auto industry to optimize itself through mergers and acquisitions of smaller enterprises with low capacity and capability".

Werner Struth, president of Bosch Chassis Systems Control, likened China's auto industry as a healthy man who's suddenly caught a cold in such a freezing environment. "By taking the right medicine, it will become stronger after the illness," he adds.

The government has also said it would also support the alternative-energy vehicle sector by promoting the mass production of electric-powered cars in big and medium cities.

Over the next three years, the government would provide 10 billion yuan to help automakers upgrade their technology and develop alternative energy vehicles.

BYD Auto has gained an edge over rivals like General Motors, Ford, Toyota and Nissan by being the first in the world to sell the mass-produced plug-in hybrid vehicle since December.

Zhang Xiaoyu, vice-president, China Machinery Industry Federation, disclosed that the Ministry of Science and Technology is considering to expand China's alternative-energy vehicle fleet to 10,000 units by 2010 through promotions in 10 big cities over the next three years.

(China Daily February 9, 2009)