China to exclude all foreign cars from public procurement

The Chinese government plans to completely eliminate car brands like Volkswagen and Audi, as well as all other foreign brands from public procurement. Local officials will have to purchase the products of the Chinese autocompanies for official use.

As proposed by the Ministry of Industry and Information Technology, all 412 models of cars that have been approved for procurement by state agencies this year, will be Chinese brands. According to the Ministry, a preliminary list will be open for public comment until 9 March. Thus, foreign corporations have lost the largest purchaser of cars in the world’s largest car market.

Among the local brands that are allowed to “enter” in the government garage, – Dongfeng Automobile Co. and Great Wall Motor Co. Through this decision, the government plans to support Chinese autocompanies which are forced to compete with foreign giants as General Motors and Volkswagen in the market.

“Apparently, the Chinese car market is slowly but surely closed to foreign investment,” – commented General Secretary of the European Union Chamber of Commerce in China, Dirk Moens on the decision of the Chinese authorities.

“This is a very radical step, so that I can imagine the resistance from the local government procurement. If you are – a high-level official, you still want to Audi. Brand, reputation, rank, – all this is very important,” – said Klaus Paur, director for automotive analysis at market research agency Ipsos in China.

Another requirement of the authorities – machines that are used for regular office visits, for example, collecting taxes, shall be equipped with an engine capacity not exceeding 1.8 liters and cost no more than 27,800 dollars. The government imposes certain requirements to the automaker. For example, in the last two years companies have to spend no less than 3% of annual revenue on research and development.

In 2010 China spent 12.3 billion dollars on the purchase of official vehicles, at an average cost of 24.7 thousand dollars per machine. With the transition of government procurement to domestic producers – foreign automakers may concern the market they could lose. 20% of Audi vehicles sold in China were sold to the state. Brands like VW, GM, Toyota and Nissan are about 10%.

According to the representative of Audi in China, government purchases provide only a small part. About 90% of buyers of Audi vehicles in the Middle Kingdom are private individuals. Nissan said that “the company respects the laws and regulations.” Toyota spokesman said the company does not comment on political decisions.