With too many kids, Chery Auto lives off Beijing benefits

"All indigenous brands were neck-and-neck in competition 4 to 5 years ago. But those with a focused product strategy and a cautious approach are now ahead," said Sheng Ye, associate research director for Greater China at industry consultancy Ipsos.

Research by state-owned China Lianhe Credit Rating Co shows that Chery would have lost money in each of the past three years were it not for government subsidies. The losses for 2009 and 2010 are noteworthy because auto sales soared then, thanks to Beijing's incentive programs.