China’s Dongfeng Motors battles in crowded market

With car sales across the country stalled it has been suggested by media there that the brand should focus on its commercial operations (light trucks) and abandon efforts to make its own passenger vehicles.

But Dongfeng is determined to build its own make of cars, even though it already operates passenger vehicle joint ventures with Honda, Nissan, KIA and PSA Peugeot Citroen, the brand plans to launch two cars in the first half of this year, a 2.4-litre mid-sized sport sedan and a 1.6-litre compact hatch (both petrol) - a move that will cost the firm 10 billion yuan ($1.5 billion AUD).

Marketing these cars will however be a challenge for Dongfeng with China already having more than 20 domestic brands as well as strong representation from all the international car makers.

Despite the brand being one of China's oldest (incorporated in 1969) and enjoying strong and profitable growth from building commercial vehicles it is feared this alone will not necessarily help it sell cars.

Dongfeng has however managed to stay strong in the wake of the economic downturn and still posted profits of 372 million yuan ($54 million AUD) in its commercial vehicle business in the first three quarters of 2008, down by only five percent from a year earlier.

To shore up the domestic economy, the government has unveiled a 4 trillion yuan ($585 billion AUD) stimulus package. The money will be mainly spent on various infrastructure construction projects.

Commercial vehicle sales will therefore likely recover faster than car sales meaning Dongfeng would be wise to invest profits in light trucks and stick to what they know best, but it would seem th lure of making cars is simply too strong.