SHANGHAI -- For most automakers, the Shanghai auto show will provide a showcase for hot cars, glitzy technology and preening models. But Chery Automobile and BYD will take the opportunity to declare they've learned their lesson from past mistakes.
Both companies grew too quickly, but China's gold-rush economic expansion concealed their weaknesses -- for a while.
Chery, a small carmaker launched in 1997 in the east China city of Wuhu, transformed itself into China's largest domestic automaker in just ten years. But its products suffered as Chery expanded. Hobbled by poor quality and a weak brand, Chery stagnated after 2008. As sales went soft, the company survived on subsidies from Wuhu's municipal government.
At the show, Chery is expected to announce plans to streamline its product mix and ditch the three sub-brands it created in 2009. In the future, all models reportedly will be marketed under the Chery brand.
BYD also is suffering a hangover from reckless expansion. The Shenzhen-based company started out as a battery maker, then began making cars in 2003. Six years later, BYD overtook Chery to become China's largest carmaker. But BYD sowed the seeds of future trouble when it over-built its dealership ranks.
The automaker couldn't develop enough products to feed its bloated distribution network, and many of its 1,000-plus dealerships went bankrupt in early 2010.BYD's sales quickly went soft and have remained sluggish ever since. Earlier this year, Chairman Wang Chuanfu declared he would cut the company's dealership network to 800 stores. In Shanghai, he is expected to tell the audience how he plans to revive the company's sales.
While Chery and BYD lick their wounds, other domestic automakers will use the auto show to highlight plans to grow.
Dongfeng Motor Corp., China's leading truck maker, is expected to disclose ambitious plans to expand its passenger vehicle business. Great Wall Motor Co., China's largest SUV maker, will provide more details about its aim to create a network of dealerships that specialize in SUVs.
When the auto show opens to the public on Sunday, China's domestic automakers won't match the technology and glitz of their international rivals. But the event presents a good opportunity to observe their progress --growing pains and all.