China cars: local heroes

In China imitation is less a form of flattery than a business strategy. This week luxury carmaker Jaguar Land Rover, UK subsidiary of India's Tata Motors, fingered local carmakers Jiangling Motors and Chang'an Auto for making a copycat version of the company's sport utility vehicle. Jiangling Motors called the claim "irresponsible".

Chinese car marques have had a hard time at home. Wealthier consumers have preferred foreign brands as a sign of status and for their perceived superior quality. According to the China Association of Automobile Manufacturers, domestic passenger vehicles' share of the Chinese market has fallen in each of the past four years. It now sits at 38 per cent.

That may be changing. In the first quarter, Chinese passenger vehicle volumes grew one-fifth, with market share up 4 percentage points. The reversal is down to SUVs. Sales of these more than doubled year on year, outstripping sales of Chinese branded saloon cars and accounting for a third of the 2.3m Chinese branded cars sold in the first quarter.

Foreign brands have been the losers: according to Bernstein analysis, in the first quarter, foreign brands' passenger car sales volumes were flat. BMW this week became the latest foreign carmaker to lower prices in China. It will also cut output.

Some Chinese carmakers are gaining abroad, too - though not using Chinese brands. Hong Kong listed Geely, owner of Volvo since 2010, said that it would build its first US facility to produce Volvo cars. It will also ramp up Volvo output in China, which this year became the Swedish marque's biggest market.

Chinese brand Great Wall - due to launch the delayed refresh of its H8 model this month - have led the low priced SUV category. If the SUV trend continues, foreign marques may find themselves forced into imitating Chinese pricing strategies in a market that no longer flatters their earnings.

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