The more-discerning Chinese consumer could enable Chinese auto brands to narrow and even close this quality gap with foreign competitors within a couple of years.
This could force many of the most famous international car brands to forge long-term co-branding partnerships with China's leading automotive sector players such as Great Wall Motor, Geely and BYD.
The European and US automotive industries must acknowledge and accept this quality-driven and premium brand orientation that now permeates plenty of China's leading automakers.
Geely is perhaps most representative of this seismic shift. Until recently, the company has been associated with budget cars, but none of the models on display at the Shanghai show this year could be placed anywhere near this category.
Despite the surge in sophistication, it remains the case that foreign brands retain a substantial lead in domestic market share.
According to the China Association of Automobile Manufacturers, Chinese brands' combined market share of the domestic sedan market last year reached only 22.4 percent.
However, foreign automakers should take cold comfort from this statistic, which could serve to mask major changes in both Chinese car consumers' decision-making and Chinese automakers' brand-building.
Brand image and emotional brand associations are perhaps the reasons why foreign car brands retain such a substantial market share advantage across the Chinese mainland.
BMW and Audi, for example, still occupy an extremely attractive position in the network of associations inside the typical Chinese car consumer's mind.
But even this is now at stake. In much the same way that Chanel's heritage and plethora of associations is becoming less influential in the minds of its Chinese target markets, BMW and Audi's German brand background will not lead automatically to market success as it once did.
Chinese automakers are not only rapidly climbing the value chain with high-quality design and manufacturing, but are also more proudly presenting themselves as part of brand China.
Chinese consumers have been waiting a long time for the rise in quality of Chinese products, as well as the presentation of Chinese brands with Chinese associations. The time has come.
BMW can no longer present itself to the Chinese public as a German brand or even a global German brand. Instead, a subtle blend of foreign and, most importantly, Chinese characteristics will be demanded more by an increasingly savvy Chinese public.
As this new-found brand-building confidence sweeps across the Chinese automotive sector, expect to see more sophisticated representations of Chinese brand associations employed by leading automakers.
The European and US players quickest to understand these irreversible changes and form long-term alliances with suitable Chinese counterparts will turn this apparent market threat into a massive opportunity; a win-win for both foreign and Chinese co-brand partners.
The innovative clothing brand Shanghai Tang was the first Chinese company to break the poor image of "made in China" and employ Chinese-only brand associations. In only a few years it has arguably established itself as the first luxury Chinese brand. Expect the Chinese auto industry and many other sectors to follow suit.
This year's Shanghai auto show is perhaps the Chinese car industry's Shanghai Tang moment.
The author is a visiting professor at the University of International Business and Economics in Beijing and a senior lecturer at Southampton University. The views do not necessarily reflect those of China Daily.
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