EASY MONEY, LAZY RESEARCH

Easy money and overdependence on foreign technology mean Chinese automakers have very little interest in research and development, said Jia.

Many Chinese brands use chassis technology and engines of foreign partners, sometimes even outdated technology.

First Automobile Works Group (FAW), the company that made the China's first truck in 1958, relies on foreign products, including the Audi 100, Lincoln Town Car and Toyota Crown Majesta, for the range of FAW vehicles sporting the Red Flag badge, a communist symbol.

FAW has joint ventures with Volkswagen, Toyota and Mazda. It sold 2.6 million automobiles and raked in 370 billion yuan (60 billion U.S. dollars) in 2011. It was ranked 197 on the 2011 Fortune Global 500.

FAW has no shortage of funds, but the National Audit Office revealed in June 2012 that the company had not invested enough in research and development of proprietary models and that its 2008-2010 profits stemmed largely from joint ventures.

Angry voices have been raised as Chinese automakers, in cahoots with their joint venture associates, launch so-called "self-developed" and "local brand" cars. These are nothing more than cut price, rebadged and relaunched versions of superannuated foreign models that have gone out of production.

Government assessment of state-owned automakers mainly focuses on profitability, which is detrimental to product development, said industry analyst Xu Binjin.

Private automakers do not get the same support from the government and it is an unequal struggle, competing with foreign and state-owned automakers, said Xu.

What is required is an adjustment to auto industry policy, cooling the cozy relations between state-owned and foreign automakers and obliging state carmakers to stand on their own feet, said Wang Xiaoguang of the National Development and Reform Commission.