Strategy of Sino-foreign car ventures in doubt
December 21, 2011 Category Automotive, Automotive Metals & Minerals
In 2000, the year preceding China’s entry into the World Trade Organization (WTO), there were 2.06 million new cars, trucks and buses sold in China. Last year, the figure soared to 18.04 million. No market anywhere has grown as fast or, since 2009, sold as many vehicles as China. The bigger question is whether Beijing’s decade-long efforts to foster homegrown national champions in the car industry by partnering them with experienced foreign players are producing the desired results. “Entry to the WTO had an enormous impact on China’s auto industry,” said Dominik Declercq, Chief Representative of the European Automobile Manufacturers’ Association in Beijing. “The question to ask is whether the joint-venture structure has fulfilled the original goal of making the state-owned companies stronger through these partnerships. The answer to that is not evident. Look at the independent companies like Chery, BYD and Geely. They have become equally strong, if not stronger, than the state firms, despite being without joint-venture partners,” he added. The Chinese government requires that all foreign carmakers form joint ventures with Chinese players in manufacturing, distributing and selling cars in China, with their ownership capped at a maximum 50%. This was seen as a way to foster technology transfer and boost development of state-owned carmakers such as FAW Group, Dongfeng Motor, Shanghai Automotive Industry, Beijing Automotive Industry and Guangzhou Automobile Group. But foreign branded cars still dominate the market, and are gaining market share. From January to October, Chinese carmakers’ share of the car market was 42.1%, down 3.27 percentage points from the same period last year, according to data from the China Association of Automobile Manufacturers (CAAM). Given slowing demand and the intensely competitive domestic market, many Chinese carmakers have turned to exports to boost sales, but with mixed results. Today, China imports mainly German luxury cars and exports parts and cheap commercial vehicles, resulting in an automotive trade deficit totaling USD3.36 billion in the first nine months of the year, the South China Morning Post reports.
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