Development of the Chinese Automotive IndustryAscertaining its future path
Development of the Chinese Automotive Industry
Ascertaining its future path
Good morning everyone, we are group 4. and this is the topic of our project: Development of the Chinese Automotive Industry ‹#›
Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion Brief background
Before we begin with the presentation proper, we play a little trivia Sold 18.06 million in 2010 (more than 20% of the world car sales), produced 18.27 million in 2010 These facts point to the huge size of the autoindustry in china. it is one of the main reasons why our group decided to analyze this lucrative industry. ‹#›
3 parties- SOEs, Private Chinese Automakers and Foreign Automakers Requirement of foreign automakers to form JVs Structure of Industry Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
There are 3 main parties that are involved in the autoindustry. There is a requirement of foreign automakers to form JVs if they want to produce and sell cars in china ‹#›
JV JV 1 2 2 1 2 Main Structures Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
As such, these 3 parties come together to form 2 main structures of automakers The first group of automakers produce cars on their own, without help from foreign automakers as represented by areas denoted (1). These companies could be state-owned or private. Examples include manufacturers like Geely. The second group of automakers enter into a joint venture with foreign automakers, and they rely on their technology, branding. This is denoted by area shaded (2) Example of China taxis. ‹#›
Share of Factory Units
This represents the share of factory units in china, based on the 2 different structures of firms mentioned earlier. We can see that 76% of the factory units are dominated by the JVs and independent chinese automakers only account for 24%. From this, we can see that the Chinese automotive industry is heavily reliant on JVs with foreign automakers. ‹#›
Future of the Industry Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
So what will the future of this industry in china hold? ‹#›
Research Question Will the Chinese Automotive industry continue its reliance on joint ventures with foreign automakers or see the increased independence of local automakers? Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
This brings us to our research question. ‹#›
Significance of our question Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
Foreign: worthwhile to sustain heavy investment, and generously share their technology with their chinese counterparts Investors: as investors, they would want to know the prospects of companies. If they see the future being dominated in local automakers, they would definitely invest more in local automakers in turn, determine or gauge the capital inflows that local automotive manufacturers can expect. And they can start making realistic future expectations ‹#›
Our Thesis The Chinese Automotive Industry will see an increased independence of local automakers Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
After much research, this is our thesis. The chinese automotive industry will see an increased independence of local automakers. ‹#›
Market Forces Our Approach The Chinese Automotive Industry will see an increased independence of local automakers Market Forces Analyze Investors Local firms Foreign firms Current Government Policies Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
Evaluating current Governmental Policies
The first step in arriving at our Thesis:
JV Regulations Consolidation of the Industry Independent Innovation Global Expansion Market Forces Governmental Policies Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
JV Regulation Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
Consolidation of Industry Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
Independent Innovation centred on green technologies Independent Innovation Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
national project- “Electrical vehicles R&D and Commercialization”, via administration of the Ministry of Science and Technology, which aims to develop China’s own new energy vehicle technologies for the next generation with an over-arching intention to commercialize these technologies through government-led efforts (Luo, 2004). All these signal a future path towards the development of independent Chinese electric/hybrid brands. ‹#›
Going global: Expanding into foreign industries Global expansion Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
Cost Management Competitive Pricing Better Quality Products Low Profit Margin Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
Recently, there has been a trend of growing strength within domestic car makers. Local automobile companies are able to benefit from the transfer of technology ‹#›
Chery Automobile’s Achievements Chery Auto led the way with 211% rise in profits BMW X3 selling for US$31,00 Chery’s equvalent model sells for US$15,000 Capturing a market share of 7.5% within 10 years Chery with its short history, currently ranks 4th in the automotive industry in China 2007 2008 2009 Chery Example Recap Developmental Paths Research Question Government Policies Market Forces Challenges Limitations Conclusion
So with effective cost management, local manufacturers can slowly achieve increased independence ‹#›
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