Chinese auto makers have realized the importance of independent research and development from the arising intellectual property rights (IPR) disputes.

"We must respect others' intellectual property rights and try to create our own through learning from and co-operation with them," said Xu Gang, chief executive officer of Geely, a private car maker in East China's Zhejiang Province.

Geely, which is one of a few Chinese auto makers making its own brand cars, will speed up research, development and collaboration with international automotive design firms, Xu said.

The company plans to add an investment of 100 million yuan (US$12.1 million) to expand its research and development institute during the second half of this year.

Geely will launch a slew of new models, designed by partners from South Korea, Italy and Germany, later this year and next year.

The company, which is making the Merrie, Haoqing, Ulion, Maple and Meirenbao, won a trademark infringement lawsuit made by Toyota at the end of last year.

"The recent IPR cases are just the tip of the iceberg, more intellectual property disputes will emerge in the future with the advancement of a mature and fair market-driven economy in China," said Jia Xinguang, chief analyst with the China Automotive Industry Consulting and Development Corp.

The problem has existed in the auto industry for many years, mainly due to "the lack of intellectual property awareness and the foreign auto makers' restraint to penetrate into the Chinese market," Jia said.

"Independent automotive development is very costly. But if we always copy others, we will lose our credit and will lag further behind in development capability. This is why our car market is controlled by foreign brands."

Nine-tenths of China's annual new car sales comes from foreign auto makers, such as Volkswagen, GM, Honda, Toyota, PSA Peugeot Citroen and Ford. All of which have built one or more joint ventures in China.

Jia suggests the Chinese Government make specific laws and regulations concerning IPR protection for the auto industry as soon as possible and speed up efforts to aid domestic vehicle producers' independent research and development.

"We always complain that foreign auto makers are unwilling to transfer their advanced technologies to us. But if they are always stolen, who would like to invest in new technologies?" Jia said.

He urged domestic auto makers to follow international practice and co-operate with foreign counterparts to enhance their own development capability.

"China's auto industry is on the fast track. Manufacturers should have seen it ahead of time and actively conducted development and technical innovation to provide more and better products to customers and boost the industry's health development," Honda Motor (China) Investment Co said in a statement to China Daily.

"Those who violate intellectual property rights are likely to earn short-term profits, but they will disrupt normal market orders."

The auto industry will be bogged down in "sheer price wars, even stagnation" and producers' development enthusiasm will be dampened, if massive imitation problems happen, the company said.

"China is attaching more importance to the intellectual property problem and have fairly perfect laws in this regard. It is more important to ensure law enforcement," the statement said.

Honda also operates a joint venture in South China's Guangdong Province, making the Accord, Fit compact sedan and Odyssey commercial wagon.

"The intellectual property problem is also driven by bumper profits in the auto industry and fast-growing car demand in China," said Zhang Xin, an auto analyst with Guotai & Jun'an Securities Co.

The average auto profit margin in China stands at 10 per cent, much higher than 3 to 5 per cent in developed markets.

The auto sector's profits in China grew by 11.71 per cent year-on-year to 36.19 billion yuan (US$4.37 billion) in the first six months of this year.

China remains the world's fastest-growing auto market, despite a recent growth decline in vehicle sales.

Sales of made-in-China vehicles reached 2.55 million units during the first half of this year, jumping 24.2 per cent from a year earlier.

"If foreign auto makers could cut prices while maintaining the quality of their products in China, it would help squeeze out local plagiarizers," Zhang said.

(China Daily 09/06/2004 page5)