Thursday, August 11, 2016

American Auto Firms in China: A Brief Survey

This short account that is a draft of what I will insert in the 2nd edition of my "Automobile and American Life."  Comments and criticism, please!

Chinese firm GAC Group returns to Detroit auto show, aims for North American sales by 2017

A New Global Order: China, the Largest Market for Automobiles in the World
            China gained technical expertise, manufacturing capabilities and product resources as a result of the 2009 financial crisis. [endnote]. For example, Geely purchased Volvo from Ford, and G.M. Tengzhong Heavy Industries obtained Hummer from G.M.  The auto industry in China is characterized a geographically dispersed, with concentration in cities of Changchun, Beijing, Tiangen, Shanghai, Guangzhou, Chongquing. It is organized for the most part by a number of joint ventures, including FAW/VW; Dongfeng Automobile and Citroen; SAIC/GM. These joint ventures are minimally 50% Chinese; note that the Chinese partner always comes first in the firm’s name. While both Ford and G.M. did business in pre-Revolutionary China, the industry’s modern origins go back to 1953, with the establishment of FAW–First Automotive Works. Stimulated by Mao’s first 5-year plan between 1953 to 1957 with its emphasis on steel and machinery production, a Second Automotive Works was founded in 1969, later renamed Dongfeng Motor Corporation. But it remained in the 1980s when a – “One Country, Two Systems;” policy established Special Economic Zones (SEZs). It was then that several joint ventures with European and American firms crystallized: SAIC and VW in 1985 (Passat); SAIC and Buick 1995; FAW and VW in 1991 (Audi A6 and Jetta). Other joint ventures with Toyota, Citroen, Nissan, and Kia followed. These operations are geographically dispersed in what is called the “many Detroits.”
The industry was significantly influenced by Government planning. One observer described the entrance into the Chinese market this way:
As you enter the gates and prepare to pass through into this lucrative and boundless market, you discover that they are locked.  Never mind looking for a key.  These forbidding gates can be opened only from the inside.  You must be invited to enter.  And then you may proceed only in the company of a chaperone. This isn’t a dream sequence. This is the reality of doing business in China. [Endnote]
 Communist China, like the former Soviet Union, organized planning around 5-year plans. For example, the 2007 11th Fifth Year Development Plan for China Automobile Industry set the following goals by 2012:
One or two firms making over 2 million cars per year.
Several “backbone” firms with production capacity of 1 million.
Ten small scale production and sales firms less than 100,000 serving as candidates for acquisition and restructuring.
            In 2011 China was the largest automobile market in the world, and its remarkable rate of growth only tapered off in 2015. Some 62% of its brands were foreign in 2014.

Passenger Vehicles

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