The Future of Chinas Automobile Industry

1TheFutureofChina’sAutomobileIndustryXingminYinChinaCenterforEconomicStudiesFudanUniversity21.IntroductionThebadeconomydoeshitallcarsales.Productionofpassengercarsandlighttrucksdeclinedfrom70.9millionunitsin2007to68.1millionin2008.Salesfigurestellasimilarstory,fallingfrom69.5millionvehiclesin2007to66.3millionin2008;thenumberisforecastedtosagfurtherto59.2millionin2009.Theindustryasawholeisfacinganunprecedentedcombinationofcyclicalandstructuralissues.3TheoutlookisnownegativeacrossthewholeautoindustryexceptforChina.Alltheestablishedautomakerswillneedtotakethisopportunity,duringthedownturn,torethinktheirstrategiesandponderwhattheyshouldbedoingoverthenext10or15years.Wherecanthemajorglobalautomakersfindtheirnewmarkets?HowdoesChinafitthefutureofglobalautoindustry?42.China’sPlaceinGlobalAutomobileTheautoindustryisoneofthekeysectorsofChineseeconomy.Theindustrycontinuestogrow,registered20percentperyearovertheperiod2002-2007;and13percentin2008.TheChina’sautoindustrymadeoverabout10millioncars,vans,tracksandbusesin2008.Changesofthegloballeaguetableovertheperiod2000-2007.5TheGlobalLeagueTable2007Vehicles(‘000)Share(%)2000Vehicles(‘000)Share(%)1.Japan1159615.851.USA1280021.932.USA1078014.742.Japan1014117.373.China888212.143.Germany55279.494.Germany62138.494.France33485.745.Korea,Rep.40865.595.Korea,Rep.31155.346.France30164.126.Spain30335.207.Brazil29714.067.Canada29615.078.Spain28903.958.China20693.549.Canada25783.529.Mexico19363.3210.India23073.1510.UK18143.11Others1783424.38Others1163019.89GlobalTotal73153100.00GlobalTotal58374100.006NewDevelopmentin2008Japanwastheundisputedleaderinlightvehicleproductionin2008,at11million.U.S.outputdroppedby2millionto8.5million(andmayfallaslowas6.3millionin2009).Chinaedgedintosecondplacewith8.52million(with10millionprojectedin2009).InfourthplaceisGermany,with5.8millionvehicles,downfrom6million.Korea,Brazil,France,Spain,MexicoandCanadaaccountedfortheremainderofthetop-10lightvehiclemakersin2008.7China’sShareofGlobalAutoProduction0246810121420002001200220032004200520062007VehiclesPassengerCars%8Clearly,China’sshareofglobalautoproductionhasbeenincreasingsince2000.Intotal,Chinawillproduceroughly11millionvehiclesin2009,upfrom10milliontheyearbefore.Somewherearound2010-2012,ChinawillsurpassJapanastheworld’slargestautoproducers.93.CapacityExpansioninAutoIndustryAbigshiftintheglobalautoindustryWhileglobalplayersareturningtotheemergingmarketssuchasChinaforprofitstheycannolongerrealizeintheUnitedStates,EuropeandJapan,domesticmanufacturersinChinaarebuildinguptheirownautoindustrywithtechnologytransferredbythemultinationalsthroughjointventures.Discussionondevelopmentstrategiesforhomegrownautomakersinthepastyears.103.1HomegrownAutoMakersIndustrypolicyonJV.Currently,about65percentofcarsmadeinChinaaremanufacturedbynon-Chinesecompanies.ButmultinationalautomakersalsofacekeencompetitionfromhomegrownmanufacturersinChina.CanChinesehomegrownautomakerssurviveintheircompetitionwithleadingmultinationals?11ChinesemanufacturerslikeShanghaiAutomotiveIndustryCo.(SAIC),CheryautomobileCo.,GeelyAutomotiveHoldings,DongfengMotorGroup,GreatWallMotorandBYDAutomobilemakeandselltheirownindependentbrands.Somehomegrownmanufacturershaveevenbegunexportingandestablishedoverseasplanstoentertheglobalmarkets.12GrowthofHomegrownAutoProductionGroup20032004200520062007FAW556587639394691BeijingAutomobile262539559298454DongfengMotor368442593258437Chery101/186319428SAIC228309518207313Hafei200206225265231Geely/9215020721713Group20032004200520062007AnhuiJianghuai9413116763210GreatWall/556840123JiangxiChanghe118104116137112BYD///60101Subtotal19212465312122473316%ofTotal43.2448.4254.0730.8737.31Total4444509157057279888914Verysignificantly,boththeproductionofautomobiles,andintherelatedauto-partsindustry,China’sautomakersarepushingforinfluencebothwithinChina’sexpandingdomesticmarketandthroughexports,particularlythroughpartnershipswithforeigncompanies.Itispossibletojudgethathomegrownautomakerswillgrowupintheboomingmarkets.153.2GlobalValueChain:LearningbyEx-ImportingExport-orientedindustrializationtheoryhashadasignificantimpactonChina’sautomobileindusialpolicies,especiallysinceChina’sentryintotheWTOin2001.TheChineseautomakersaregettingintheworldautoindustryandaregoingtoaffectsomeautomakersmorethanothers.16China’sAutoEx-Imports0246810121416200020012002200320042005200620072008ImportsExportsUSDmillion17VehicleExportsTheexportamountofvehiclesfromUSD1.34billionin2000toUSD9.6billionin2008.WillChina’sexportsofvehiclesfollowthemodelofKoreainthecomingdecade?Ifexperienceorhistoryteachanything,ittakes10to15yearsforaforeignautomakerfromadevelopingcountrytobeaseriouscontenderinadevelopedmarket.ItisnoticedthatoneofthebiggestChina-relatedshiftsthusfarisnotintheproductionofautomobilesthemselves,buttheexportsofpartsandcomponents.18Ex-ImportsofAutoParts0246810121416200020012002200320042005200620072008ImportsExportsUSDmillion19Auto-PartsExportsThisboominChinesepartsexports,coupledwiththemanymultinationalautomakersnowsettingupsho