Nongovernmental sector no longer favors auto industry

The Auks Group announced its retreat from the auto industry recently, even after buying 95 percent of the Shenyang Shuangma automobile company a year ago.

In 2003, when it was hot, the Media, Auks, Bird Groups were all attracted into the auto industry. However, since last year, these private enterprises have decided to hold back investment.

Due to the economic environment and macrocontrol policies, it felt impossible to apply for a sedan license, which was its main intention, so it had to give up, Auks said.

The choice Auks has made is quite wise, said Xu Gang, president of a successful nongovernmental group Geely. He said the auto industry should combine personnel, capital and technology. So when enterprises enter into the industry, they are likely to bump into political and market barriers.

Experts said difficulties also arose for private enterprises because China's huge potential market has attracted world-famous manufacturers which pose a threat to domestic companies.

According to the National Bureau of Statistics, sales and production of Chinese automobiles began to decline as of the second half of last year. In January and February this year, the overall production volume dropped 1.5 percent and profit reduced 78.4 percent compared with the same period in the previous year. Only 11 out of the 34 main auto manufacturing companies saw profit increases.

Due to rising oil prices, more and more potential buyers are hesitant. Experts from New Hongji Group said because supply surpassed demand, auto sales will not be inspiring in the first half of the year.

Still, some argue that reduced growth in 2004 is quite natural after the high increases in the years before.