Personal Cars and China (2003) / Chapter Skim
Currently Skimming:
3. Structure and Capability of China's Automotive Industry
3. Structure and Capability of China's Automotive Industry
Pages 37-60
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 37... ...
EVOLUTION OF THE CHINESE AUTOMOTIVE INDUSTRY China began to develop a domestic motor vehicle industry in the 1950s. By pooling together investment and imported technology, primarily from the Soviet Union, the government was able to undertake establishment of the First Auto Works (FAW)
|
From page 38... ...
In May 1983 Beijing Jeep Corporation, the first joint venture for manufacturing complete vehicles, was established. Later, Shanghai-Volkswagen, FAW-Volkswagen, Dongfeng-Citroen Company, and other joint ventures came into being.
|
From page 39... ...
Motorcycle output and product variety meet current domestic market needs. The quality of vehicles produced in China is improving rapidly because of the tremendous growth in the production of vehicles by the joint venture companies, which provide their proprietary product design and modern factories.
|
From page 40... ...
And in 2000 China produced 2.07 million motor vehicles (a 43 percent increase from 1995) , 605,000 of which were passenger cars (an 86 percent increase over 1995)
|
From page 41... ...
Passenger cars. The Audi A6, Passat B5, and Bola models meet current international technology standards, as do the newly imported Buick Century and Honda Accord models.
|
From page 42... ...
Japan and Korea, by contrast, have developed their own indigenous automotive industries lapan beginning in the 1950s and Korea in the
|
From page 43... ...
The Japanese industry also benefited greatly from having small, highquality cars available when the market for small cars suddenly expanded. By contrast, there is no obvious technological capability in China from which Chinese industry might gain a major advantage that does not exist in foreign OEMs.
|
From page 44... ...
The largest three companies should enjoy a 70 percent share of the domestic market. These guidelines represent a significant restructuring of the industry, from one that is heavily dependent on technology from outside sourcesprimarily from the world's leading OEMs that are partners in joint ventures to one that is closer to being self-standing and capable of developing and introducing the latest technologies into Chinese products.
|
From page 45... ...
In addition, as noted earlier, several of the vehicles produced by the joint ventures do not possess the latest technologies. It seems very unlikely that a competitive stand-alone capability can be achieved in the near term through the existing joint ventures without a drastic restructuring of these enterprises to ensure that the Chinese partner will gain the experience and know-how to design and develop worldclass vehicles.
|
From page 46... ...
Past business arrangements apparently did not require such transfers, and it is unlikely that joint venture partners would be willing to agree to such a structure in the future. Because each of the overseas members of the joint venture would want assurance that any proprietary information transferred to the joint venture would be kept confidential from other overseas members, who are likely to be competitors in other markets, the Chinese partner is likely to find it very difficult to receive and use this information to develop its own intellectual capabilities.
|
From page 47... ...
Even some companies that are presently joint venture partners of Chinese firms may find that this is a more advantageous way to participate in the growing Chinese market. Already some major overseas component manufacturers for example, Robert Bosch, Corning, and Engelhard have wholly owned subsidiaries in China.
|
From page 48... ...
Inasmuch as the latter alternative will do little toward accomplishing the stated objective of building a freestanding, indigenous industry, the government will have to seriously consider its various alternatives. The dilemma that China faces can be summed up in one question: Will China be able to revolutionize the structure of its automotive industry and encourage that industry to achieve a level of competitiveness at a time when much of the near-term market for small cars is affected by imports, thereby denying the local industry an important fraction of the revenue needed to develop the independent capability it is seeking?
|
From page 49... ...
China does possess several world-class manufacturing facilities and some scattered but excellent R&D capacity, both in and out of the industry, but its broad engineering and development capabilities relevant to the automotive sector do not appear to be comparable to those of the world-class OEMs. Currently, some 3,000 engineers are employed in research and development within the Chinese state-owned companies and the joint ventures involving foreign OEMs, but these engineers are not involved in the design and development of current vehicles.
|
From page 50... ...
(One of the Chinese enterprises informed the committee that it is currently investing 2 percent of sales in research and development, and that it is seeking to raise that figure to 2.5 percent. A second enterprise claimed to be aiming for an R&D expenditure of 3 percent of sales.)
|
From page 51... ...
Engineers should be sent to as many international conferences, meetings, and short courses as possible to stay up to date on technological progress. The joint ventures should be encouraged to provide these opportunities, and state-owned enterprises and private companies with laboratories should participate in the training of students.
|
From page 52... ...
Its liefang series buses and trucks constitute a large share of the market, and its Red Flag limousines are quite well known. The FAW Group also has entered into a joint venture with Volkswagen to produce letta and Audi sedans.
|
From page 53... ...
The Shanghai Group also plans to develop its production of heavy-duty trucks, large buses, and light-duty vehicles. As of 2002 the Shanghai Group had established 44 joint ventures with global automotive companies.
|
From page 54... ...
Volkswagen remains the strongest producer of cars in China with total production of 412,127 in 2001 (Wall Street Journal, 2002~. Shanghai Automotive Industry Corporation signed an agreement on April 12, 2002, with Volkswagen AG to extend their joint venture, Shanghai-VW Automobile Company, for another 20 years to 2030, according to a recent report (CBU-AutoEnews,2002b)
|
From page 55... ...
Currently, Ford-brand vehicles control 0.5 percent of the Chinese auto market share, according to the company (Xinhua News Agency, tune 18, 2002~. Chang'an Ford is Ford's first passenger car joint venture with Chang'an Motor Corporation based in Chongqing in southwest China.
|
From page 56... ...
Renault also has talks under way with Beijing Automotive Industry Group about producing the "Scenic" sedan and with Dongfeng Motor Corporation on trucks. As noted earlier, DFC is reportedly in the final stages of negotiating a joint venture with Renault-Nissan (CBU-AutoEnews, 2002a)
|
From page 57... ...
The vehicle, the midsize Sonata Saloon, will be produced by a 50/50 joint venture of Hyundai and Beijing Automotive Industry Corporation. Daewoo To qualify for sedan manufacture, Daewoo established two large ventures in China in the mid-199Os: FAW-Daewoo Automotive Engines and
|
From page 58... ...
The specific goals that affect the automotive industry are listed below: · Total annual vehicle production of 16.2 million units is sought, of which passenger cars will be 1.1 million units and motorcycles 13.0 million units. · Two to three large automobile groups will be formed, with a sales, distribution, and after-sales service system commensurate with international standards.
|
From page 59... ...
· For passenger cars, emphasis will be on developing economy models that have engine displacement of 1.3 liters and that are smaller and priced around RMB80,000 ($9,600~. Such economy models should meet national safety, fuel efficiency, and emissions standards and the demand of individual consumers.
|
From page 60... ...
· National standards will be developed for car purchase and use by eliminating excessive fees; simplifying the procedure for car purchase, registration, and use; and increasing the availability of car purchase loans. · For nationwide fuel economy and promotion of economical cars, a comprehensive fuel tax system will be implemented.
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.