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Industry Rethinking: Private Car Dealers' Hands and Roads
Before Chairman Yin Mingshan of Chongqing Lifan, a member of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), began his journey to Beijing, a series of old photos showing a rollover incident involving the Lifan 520 resurfaced online, sparking renewed public debate. These images, captured several months prior, reignited concerns about the brand’s safety and reliability.
In the industry, many remain skeptical about Lifan’s future. According to insiders, around 70% of professionals in the sector doubt the company’s long-term prospects, with the recent accident deepening those doubts. Yin Mingshan is well aware of the mounting pressure on his company, as Lifan finds itself at a critical juncture in its development.
Although China’s automotive industry has experienced rapid growth since the mid-1990s, private enterprises still occupy a small share. They account for roughly 13% of the industry in terms of number, and their output value is less than 10%. Despite this, private companies like Geely and Great Wall have emerged as key players, particularly in the development of domestic brands.
Geely, for instance, made headlines when it announced plans to enter the U.S. market in 2008, sending shockwaves through the global auto industry. Meanwhile, Great Wall became a top exporter during a period when China’s car exports surpassed imports. These successes highlight the potential of private enterprises in the sector.
However, not all private automakers have fared well. Companies such as Oaks, Midea, and Amoi have exited the industry, raising questions about the sustainability of private investment in automobiles. Critics argue that private firms often lack the patience and long-term vision required for such a capital-intensive and technically demanding industry.
Government policies also seem to reflect this skepticism. Before the 2004 automobile policy was introduced, private capital was heavily restricted from entering the sector. While the new policy appears neutral on the surface, it actually raises the bar for private enterprises. For example, setting up a new car manufacturing company requires an initial investment of at least 2 billion yuan, plus another 500 million for a research center—challenging for smaller, privately funded companies aiming for gradual growth.
Today, private automakers face increasing pressure. The issue of overcapacity looms large, and once the government labels the industry as overheated, stricter regulations are likely to follow. For private companies, the options are limited: either merge with state-owned enterprises or invest heavily—both paths come with higher risks.
A recent survey by the China Social Survey Institute revealed that consumers still trust traditional state-owned brands like FAW, Dongfeng, and SAIC. As Yin Mingshan points out, losing consumer confidence can be devastating. For private companies already struggling with internal and external challenges, the path forward is uncertain.
With rising technical standards and stricter safety and environmental regulations, the days of cheap, low-cost strategies are fading. The “Geely model,†which once helped build a 200,000-vehicle production line quickly, is no longer viable. With so many brands and affordable cars competing in the market, private automakers who rely only on low prices may find themselves increasingly marginalized.
As the industry evolves, the question remains: where will private enterprises go? Only time will tell.