Chinese bureaucrats’ love affair with the Audi may soon come to an end. Beijing’s new list of foreign car brands for government procurement contains not one foreign supplier. That may be a response to huge overproduction by local firms, and foreign rivals may read it as foul play. But the real lesson is that when growth slows, domestic concerns seem more important than keeping trade partners, or Audi-driving officials, happy.
Car sales have been dragged lower as the economy has cooled. Difficulties in getting licence plates in big cities like Beijing have played a part, too. January’s volume of cars sold was 24 per cent lower than a year earlier, the biggest monthly drop in more than three years. Yet production continues. China had six million units’ worth of unutilised capacity in 2011, equivalent to 40 per cent of last year’s domestic sales.
The new policy will help a bit, especially by boosting smaller players like BYD and Geely. BYD sold 14 per cent fewer vehicles in 2011 than a year earlier; Dongfeng’s own brand car sales fell by six per cent, even as the number of imported Audis almost doubled. Not all Chinese suppliers will be thrilled, since foreign joint ventures such as Shanghai Automotive’s tie-up with General Motors, are not on the list either.
But the change may say more about political sensitivity than protectionism. The auto industry is a big employer. China is Audi’s biggest market, but the siren-toting black sedans have become a symbol for unbridled power and privilege. Finally, there’s public spending: as much as half of government expenses go on automobiles, according to the National Audit Office.
The policy looks like an unwelcome return to the controversial “Buy China” policy introduced for government procurement in 2009, and it follows a string of incidents that have rattled foreign companies, including Apple’s iPad trademark fight, and export restrictions on rare earth. But it shouldn’t be a surprise. When faced with a choice between foreign and domestic concerns, China usually opts for the latter.
