According to market data, government procurement is responsible for about 8 percent of automobile consumption in China, the world's biggest auto market, but homegrown brands haven't benefited much from the generous spending.

About 90 percent of procurement funds have gone for cars made at Sino-foreign joint ventures.

In 2008, 80 billion yuan (US$11.72 billion) was spent to buy government vehicles. The figure will reach 100 billion yuan in the years to come, analysts said.

But the ratio is expected to change. A National People's Congress standing committee meeting said last month that domestic brand cars should account for no less than 50 percent of official vehicles purchased by all levels of government and public institutions.

The proposal was first raised at the start of last year when the State Council drafted stimulus plans for China's auto industry, but was not included in the final blueprint.

The government is reportedly also preparing new guidelines on engine displacement and prices for government vehicles in a bid to support the development of home brands.

The Ministry of Finance, the Government Offices Administration of the State Council and the CPC Central Commission for Discipline Inspection, are now studying implementation measures for the new policy.

According to the current standard of government cars released in 1994, cars for general officials should cost less than 250,000 yuan and have displacement lower than 2 liters. Cars for senior officials above the ministerial level are supposed to cost no more than 450,000 yuan and have engines smaller than 3 liters.

The new policy will reportedly favor smaller and cheaper domestic brand cars, especially cars for general officials. The engine displacement is likely to be reduced to 1.8 liters and the price limit lowered to 160,000 yuan, according to industry reports.

Industry analysts said the adjustment will mainly impact auto manufacturers with middle- and high-end products that retail between 200,000 and 250,000 yuan.

According to statistics from the China Association of Automobile Manufacturers, in the first 11 months of 2009, the sales of homegrown brand sedans reached 1.95 million units, accounting for 29.39 percent of the total sedan sales in China, showing the market, especially the much more profitable middle and high-end segments, is still dominated by foreign brands.

Most domestic carmakers are producing low-end vehicles. Manufactures like Chery, BYD and Geely have long been leading in the market for cars with engines smaller than 1.6 liters.

But domestic carmakers recently began to make middle- and high-end sedans in a bid to change the image of domestic cars as cheap and humble. Notable brands include the Riich from Chery, Emgrand from Geely, SAIC's Roewe and Besturn from FAW.

In March last year, Wang Fengying, CEO of Great Wall Motor, proposed on the sidelines of the annual session of the Chinese People's Political Consultative Conference that government should give priority to homegrown vehicles in procurement.

The procurement center for the central government declared in June that domestic brand cars should account for at least 50 percent of newly purchased central government vehicles.

At the same time, it released a procurement list with 38 carmakers, among which 21 have domestic brands.

Once the new regulation is released, lower-level governments will follow the central government to increase the proportion of home brand vehicles in procurement, according to media reports.

(China Daily January 4, 2010)