In Tibet, Xinjiang, Qinghai and Inner Mongolia, most government departments and companies use off-road vehicles. According to incomplete statistics, 60,000 off-road vehicles were sold in China last year and sales continued to grow fast. Propelled by the "Go West" strategy, sales of automobiles in the western provinces are brisk. In mountainous Sichuan, sales of off-road vehicles have registered an increase of more than 30% over last year. Experts predict that demand for these models will reach 120,000 by 2003 and 200,000 by 2009.

According to Jiang Zengyong, deputy director of Toyota's repairs plant in Lhasa, Japanese cars owe their large market share to the following factors in addition to early market access: 1) Japan enjoys geographical and cultural proximity to China and has a better understanding of China than any of its western rivals; 2) Japanese makes have fine workmanship and internal fittings; 3) good after-sales system.

However, users in the western region are becoming increasingly unhappy about Toyota's market dominance. First of all, Toyota cars have raised quality concerns in recent years and there are congenital defects in the safety mechanism of its off-road vehicles. Furthermore, their prices tend to be high. Toyota off-road vehicles cannot compare with European and American makes in terms of safety coefficient, material, durability and depreciation value, but they are by no means cheap. This is particularly true since China raised its import tariffs on Japanese cars in the wake of the trade war last year. A Toyota V8 cost over Rmb1 million in 2001, but a similar model only cost about US$20,000 in Hong Kong. Although the price has come down by 40% now, consumers are still unhappy about the rip-off price.

The dominance of Japanese off-road vehicles in China has been weakened in the past two years as a result of reports of Mitsubishi's faulty oil pipes, quality problems with Toyota cars and the Sino-Japanese trade war. Experts see this as a golden opportunity for other manufacturers to move in and grab a share of the market. Domestic manufacturers are also beginning to recognise the potential of this market. Beijing Jeep, Jinbei GM, Changfeng Liebao, Soueast and Chongqing Qingling have already made their moves. However, sales are not as good as expected because they do not know the market well enough and their market positioning is unclear.

Off-road vehicle manufacturers should take note of the following in their venture into the western region:

1. Pricing. Current sales suggest that top- and low-end models are most sought after. In the low-end market, Beijing's Zhanqi jeeps priced below Rmb100,000 are selling well.
   
   
2. Consumer preference. Jinbei GM's Chevrolet, which is popular elsewhere in the country, is not selling too well in the western region largely because it does not suit the aesthetic taste of the local people. Consumers also tend to have greater faith in imported vehicles. They would rather pay more for an imported model than settle for joint-venture products, which are of comparable quality but much cheaper.
   
   
3. Road conditions. Roads in the western region are much rougher than in developed countries. The trunk roads are quite standard, but conditions of the secondary roads leave much to be desired.
   
   
4. Marketing strategy. Institutional buyers are the main consumer of off-road vehicles in the region. Thus, marketing strategies that target private car owners and ordinary consumers do not work in the western region. Toyota, for instance, has always targeted the government sector.

Chongqing to Build Largest Auto Mart in Western China

An auto mart covering an area of over 27 hectares will be built in Chongqing with an investment of Rmb95 million. It will have 220,000 sqm of display area, 8,000 sqm of office space, and can house 200-250 dealers. When completed, it will be the largest auto mart in western China. While mainly dealing in trucks, coaches, engineering vehicles and special-purpose vehicles, it will also be a venue for the sale and exhibition of sedans. In addition, auto parts supply and the provision of vehicle management, maintenance and other services will be available. It is expected that sales volume can reach 80,000-100,000 vehicles a year with turnover amounting to Rmb3 billion.

This auto mart will be complemented by three other markets later, namely the Jiugongli Sedan Car Mart, Huaxi Used Car Mart and China Automobile Expo Centre. These together will form the "First Auto Street of Western China".

Auto markets in Chongqing are quite scattered at present, with trade marts at Caiyuanba, Nanping and Eling. However, the largest one at Nanping only covers an area of about 3.34 hectares with no more than 60 dealers and annual sales about Rmb1 billion.