A Note on the Chinese Automobile Industry
It is also required to open certain services markets such as distribution, financing, insurance, etc that will have a significant impact on the automobile sector.
The Chinese government has on its own also imposed stricter laws
regarding emissions and fuel economy standards with stiff penalties and
broad coverage. The law also called for incentives for clean and
renewable energy. The Chinese automobile industry is made up of several
big and small players. The smaller players, in most cases, are
inefficient and technologically outdated. Most of the larger players
entered into joint ventures with foreign OEMs. The sudden surge in
demand has prompted most major JVs to expand their operations to the
extent that there is a fear of a supply glut in the future. Though the
auto industry is growing by leaps and bounds, it is dogged by issues of
poor quality and IPR infringement, which are attributed to the poor R&D
capabilities of the country. The major players in the Chinese auto
industry are called the 'Big Three'. They are FAW, SAIC and Dongfeng who
were partners of major global OEMs like GM, Volkswagen (VW), Toyota etc.
There are other players like Chang'An, Geely, Chery, and Brilliance who
show promise. But all said and done, the Chinese auto industry,
especially the passenger car segment is still dominated by foreign
models and brands. VW and GM were the most successful, followed by
Honda, Suzuki, Toyota, PSA Peugeot Citroėn etc. As of 2005,
restructuring of the industry so as to enable the emergence of large and
efficient Chinese OEMs seems to be top on the to-do list of the
Government. Falling margins and continued restrictions on equity seem to
have dampened the spirits of foreign players. But considering that
growth levels and margins continue to remain higher than western
markets, China is still attractive. In the future, competition is
expected to intensify.
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