Auto Year in Review

Editor's note: Growth in China's auto market was modest in the year following last April's Beijing auto show, while other signs the industry is maturing included stricter regulations on auto recalls and emissions. Domestic automakers strengthened their presence in global markets through more exports and investment overseas in the past 12 months, while foreign manufacturers made breakthroughs with more locally built models and even independent joint venture brands.

Developments that made the news and moved the world's largest market over the past 12 months

Volkswagen recall DSG

At the beginning of April, German automaker Volkswagen Group began its biggest-ever recall ever in China to fix problems on its much-touted dual shift gearbox.

The company said 384,181 vehicles equipped with the seven-speed DSG transmission will be recalled to replace the mechatronic unit and upgrade software.

Affected vehicles include several imported models as well as a wide range of locally produced cars, mostly made from 2009 to 2012 at Volkswagen's two joint ventures in China.

The long-awaited recall came after State-owned broadcaster CCTV reported on problems with the DSG on March 15, World Consumer Rights Day.

Consumer complaints about the high-tech transmission began more than four years ago. Problems include abnormal noise, excessive shift shock and shift failure, but the most alarming reported problem is a sudden lapse in power followed by unintended rapid acceleration.

The company did not disclose estimates on the cost of the recall, but LMC Automotive said it might add up to 3.7 billion yuan.

Daimler invests in BAIC

In February, Daimler AG agreed to take a 12 percent stake in the passenger car unit of its Chinese partner BAIC Group ahead of a planned initial public offering by BAIC Motor.

Subject to government approval, the transaction is expected to be finalized by the end of the year or in early 2014, making Daimler the first foreign auto company to take a stake in a Chinese passenger car manufacturer.

The agreement includes a clause giving Daimler two seats on the BAIC Motor board of directors.

The two companies also agreed that BAIC will increase its stake in the joint venture Beijing Benz Automotive Co by 1 percent to 51 percent to consolidate the joint venture within BAIC ahead of its IPO.

At the same time, Daimler will increase its share in the newly integrated sales joint venture Beijing Mercedes-Benz Sales Service Co by 1 percent to 51 percent.

New BMW Brilliance brand

In a move to tap the nation's fledgling electric car market, BMW unveiled a new brand in China earlier this month that will carry the nameplate Zinoro, or Zhinuo in Chinese. The all-electric vehicle will make its debut in November at the Guangzhou auto show and hit the market in the first quarter of next year.

The Zinoro brand is owned by BMW's local partnership with Brilliance Auto, which will make the new car at its plant in the northeastern city of Shenyang where it now produces the BMW 3 Series, 5 Series and X1.

The company said Zinoro cars will have an independent distribution channel that could include markets outside China.

Dongfeng-Volvo venture

In January, Dongfeng Motor Corp and AB Volvo agreed to form a joint venture to produce medium and heavy-duty trucks carrying the Dongfeng nameplate for sale in both domestic and overseas markets.

Dongfeng said the "strategic alliance" with Volvo will help the company quickly improve its R&D capability and accelerate its entry into international markets.

According to the agreement, Dongfeng will own 55 percent of the venture and Volvo will pay about 5.6 billion yuan for a 45 percent stake.

Dongfeng's truck unit was previously part of its partnership with Nissan Motor Corp. The recent agreement calls for Dongfeng to buy out Nissan's share in the truck unit and transfer a 45 percent stake to Volvo.

The new venture, Dongfeng Commercial Vehicle Co, will retain the former production facilities in Hubei province, the home base of the second-largest automaker in China.

Still pending government approvals, the transaction is expected to be completed in 12 months, according to a statement from Volvo, which said the partnership will be the world's biggest maker of heavy-duty trucks by annual sales and help it reach key Asian markets.

Jeep resumes production

With its sights on the booming SUV market, Chrysler's Jeep brand will resume production in China at a joint venture between Fiat SpA and Guangzhou Automobile Group Co, three decades after it was one of the first foreign passenger vehicles assembled in China.

Chrysler and its majority owner Fiat signed an agreement with GAC in January to expand cooperation in manufacturing and sales, including making Jeeps for the Chinese market.

According to GAC, Jeep production at the joint venture is likely to begin in the second half of 2014.

Jeep now imports the Grand Cherokee, Wrangler, Compass and Patriot to China, where it delivered more than 50,000 vehicles last year.

The SUV segment continued to register the fastest growth in China's auto market last year with more than 2 million units sold, a 25.5 percent increase from 2011, according to the China Association of Automobile Manufacturers.

Japanese brand decline

A sales decline for Japanese brands that started last autumn continued into the first quarter of this year following a boycott in the wake of territorial dispute over the Diaoyu Islands.

Statistics from the China Association of Automobile Manufacturers show that the big-four Japanese automakers Toyota, Honda, Nissan and Mazda all had sales declines in 2012. Toyota and Nissan both dropped some 5 percent from the previous year while Mazda slumped nearly 13 percent.

They continue to be mired in sluggish sales in the first quarter this year.

Toyota just sold 184,700 units in the first three months, a decline of 12.7 percent. Honda sold 140,400 vehicles, down 5.2 percent as Nissan dropped 15.1 percent to 284,000 units. Mazda's sharp slide continued with a drop of 21.5 percent to just 45,200 units.

Chery-JLR joint venture

Jaguar Land Rover and Chery Automobile established a 10.9 billion yuan joint venture in November for vehicle and engine production along with R&D and sales.

Based in Changshu, Jiangsu province, the project will be operational in 2014 with annual production capacity of 130,000 units, according to the agreement.

Analysts said the tie-up is a mutually beneficial deal.

Jaguar Land Rover needs local production to be more competitive in China's luxury auto segment where other premium carmakers Audi, BMW and Mercedes-Benz have already strengthened their foothold through localization.

The benefit for Chery - known for small, economical cars - is an opportunity to move up the value chain, improve profitability and boost its brand image.

Jaguar Land Rover announced earlier this year that China overtook Britain as its largest market in the world last year after it sold 71,940 vehicles in the country.

Stricter emission standard

Continued smog in Beijing and other cities has sharply raised concerns about air quality in the country. With vehicle emissions a major source of air pollution, experts are calling for stricter tailpipe standards.

The Beijing Environmental Protection Bureau announced in mid-January that from Feb 1 the capital city will implement its Beijing V emission standard closely modeled on Euro V requirements.

Following a month-long transition period, light gasoline vehicles that do not meet the Beijing V standard were banned from sale beginning on March 1.

Beijing V will be the pilot standard for China V, the national standard that will be implemented later.

Exports surpass 1 million

China's vehicle exports surpassed the 1-million benchmark last year, a growth of 29.7 percent over 2011, according to statistics from the China Association of Automobile Manufacturers.

Among the total, 661,200 were passenger vehicles, a surge of nearly 39 percent from a year earlier. The remainder were commercial vehicles whose numbers increased some 17 percent.

The association said sedan exports grew more than 44 percent, while exports of SUVs and MPVs both rose 30 percent.

Domestic demand is projected at about 20.8 million units in 2013, while exports are expected to reach 1.3 million units.

Local brands in govt fleet

Following a call from the central government to tighten budgets this year, provincial authorities have already begun to switch their choice of cars from foreign-brands to lower-priced Chinese autos.

A new government vehicle procurement regulation still under revision stipulates that domestic brands should comprise at least 50 percent of the government procurement list.

It is "strictly stipulated" that ordinary government cars should cost less than 160,000 yuan and have engine displacement smaller than 1.8 liters. Cars for deputy-minister officials should cost less than 300,000 yuan and have engines smaller than 2.5 liters. Higher-ranking officials are allowed to use cars costing up to 350,000 yuan and engines of up to 2.5 liters.

Last year the Ministry of Industry and Information Technology released a new catalog of recommended cars for government fleets. All 400 models listed are made by domestic brands.

Qoros debuts in Geneva

The Qoros brand made by a joint venture between Chery Automobile and Israel Corp made its world premiere as the only Chinese marque at the Geneva Motor Show on March 6.

It brought a series of new models designed for young and fashionable customers both in China and Europe.

Among the global premieres was its first production vehicle, the Qoros 3 four-door compact.

Two concept models on show included a hybrid and estate car.

Established in Changshu, Jiangsu province in 2007 with 3.4 billion yuan in registered capital, Qoros Auto Ltd has developed an initial production capacity of 150,000 cars annually. The number could be increased to 450,000 units in the future.

Its products will first be sold in China and major European markets with future plans for other countries and regions.