How should the Chinese automotive industry move forward?

作者：韩维熙，英国Southampton University管理学在读博士，北京联合大学教师。曾供职于商业银行，主要研究供企业整合及供应链管理。 Han Weixi, PhD of School of Management, University of Southampton, Lecturer in Beijing Union University. Several years experiences in Commercial Bank, research in Enterprises’ Integration and Supply Chain Management.（作者更多文章More）

The automotive industry developed rapidly and did a great contribution to the economic development. Especially in the thirty years after China reform and openness, the quickly developed automotive industry has become one of the leading industries to promote the economy in China increase rapidly.

At present, China is the largest country of automobile production and marketing in the world. According to the statistics of CAAM (China Association of Automobile Manufacturers), the top six automotive holding companies total accounting for 87% of the total auto sales in 2012.

Since the implementation of the policy of actively using foreign capital in China, foreign-invested enterprises through horizontal mergers and acquisitions have entered into most industries of China, especially the industries and fields of automotive, communication equipment, etc. A foreign-led competition pattern has basically been formed. In terms of the automotive enterprises of joint venture modes, foreign-invested brands of joint venture automobile occupy most of the market in China.

In the trend of trade liberalization and globalization of the auto industry, multinational auto companies establish a global value chain and production network led by them by integrating the auto industry of the developing countries. As a country currently with the largest auto production and sales volume and the most market potential, China has become the regional manufacturing center of multinational corporations and strategic focus of their global expansion. In this context, together with the strong policy support of Chinese government, the joint venture model has become the dominant model of the automobile industry of China. Meanwhile, the cross-regional cooperation and restructuring of large auto groups is going on. For Chinese automobile industry, transnational merger and acquisition is another mode currently explored against the Chinese government's strategic background.

From the changes of market environment, with the improvement of Chinese per capita income level (according to the “Income Increase Situation of Urban and Rural Residents in 2011” released by national Bureau of Statistics, the per capita income of urban residents in 2011 reached RMB 23979, about ￡2300) and the encouragement and guidance of national policy on automotive consumption, China is increasingly becoming the world's largest auto market with the greatest potential, which is of strategic significance to any of the multinational companies. Most of the whole vehicle production technology and the production technology of quite a number of key parts and components are from various international technology transferred, automotive enterprises are basically joint ventures.

In this background, especially after Chinese accession to the WTO, on one hand, major automotive multinational auto companies of Europe, the United States, Japan and South Korea and others improve the investment level and reduce the prices of the products mostly by expanding investment, technology upgrade and increasing input of new products. Despite the differences of investment strategy and modes of the companies of Europe, the United States, Japan and South Korea in China, almost all of them adopt this strategy. On the other hand, as a result of the limitation of the development stage and dependence on the historical paths of existing joint venture model and the inertia effect, and the main policy of supporting the joint venture model as the basic orientation of China on the automotive industry development, the phenomenon that the major automotive joint venture with many multinational companies. On the premise of not giving up independent product development, such private enterprises engaged in independent development as Geely and Chery are also eager to cooperate with multinational companies. In general, seeking "joint venture" has become the basic strategy mode and choice of various automotive enterprises of China.

With the changes in the global auto market and especially the driving of intensive auto consumption encouragement policies of Chinese government, the auto market of China shows blowout growth; and influenced by the 2008 financial crisis, Chinese automotive industry has entered into a strategic adjustment opportunity period, scale expansion or market expansion through restructuring and merger and acquisition has become the internal demand of the auto industry of China under the new circumstances. Automotive industry is a typical scale economy with a high concentration, the restructuring mode or transnational merger and acquisition mode is the only way to the development and maturity of the automotive industry, and also the basic tendency of Chinese automotive industry policy in recent years. One is to achieve alliance of giants to integrate resource advantages and achieve complementary advantages and scale economy through the restructuring mode. On the other hand, the restructuring mode can reduce the internal friction of the industry, realize the integration and development between enterprises and enhance their competitiveness. Second is transnational M&A mode is one of the mainstream ways of international investment of world's major automotive enterprises.