Government reorganization and consolidation of the Chinese auto market should dramatically increase production and margins in 2010-2011.  Chinese auto makers BYD, Geely and DongFeng are well positioned for government funding because they supply the nation’s demand for inexpensive cars and work towards China’s goal to emerge as a leader in the electric vehicle (EV) market.

PGR Experts believe BYD’s branding, inexpensive products (F3) and leadership, as well as the Chinese government’s support, has positioned it to emerge as the global leader of the EV market in 2010.  BYD is a safe long term investment.

Meanwhile Geely’s integration of Volvo, which has the potential to become a giant failure, is a unique risk-reward scenario.  Geely is well positioned to achieve continued government support because of its strong brand and market share in China’s large affordable vehicles market.

Success for DongFeng will depend on its broad joint venture strategy with Nissan, Peugeot, Kia and Honda and its ability to develop a strong product line for commercial vehicles.

The tremendous growth of China’s auto market is fueled by the lower class’ increased demand for smaller inexpensive vehicles and government backed stimulus spending. Successful auto makers will use reverse engineering, discounted raw materials and other methods to keep costs down and position themselves for government funding.

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