Variety of Development

Chinese Automakers in Market Reform and Globalization

Qiushi Feng

• Publisher: Palgrave Macmillan
• Year: 2017
• ISBN:
  9789811059124
• Topic: Business
• Subtopic: Industrial Management
• Index: Business

This book examines China, the world's largest auto market since 2008 and the story of how Chinese auto-makers developed is the story of the Chinese economy in microcosm. It focuses on China's systemically important automobile sector, this book reveals how local institutions have moderated structural changes at national and global levels, and consequently generated significant organizational diversity in the production sphere. This book begins with the intriguing observation that individual Chinese car makers have been evolving in different directions despite a shared context; what factors led to these diverse choices and positioning? It is the central aim of this book to explain the variety of institutional forms used by Chinese car manufacturers in navigating the market transition and answering the challenges posed by globalization.

© The Author(s) 2018

Qiushi FengVariety of Developmenthttps://doi.org/10.1007/978-981-10-5912-4_1

Begin Abstract

1. Introduction

Qiushi Feng¹

(1)

Department of Sociology, National University of Singapore, Singapore, Singapore

End Abstract

The meteoric rise of China in the global economy over the past 30 years, and the far-reaching effects of this on the social, political, and economic landscape of the country, have attracted wide attention throughout the social sciences. Since the start of the market reform in the early 1980s, China’s Gross Domestic Product (GDP) has maintained average annual growth of around 10%, catapulting the economy to become the second largest in the world. This dramatic shift was greatly facilitated by China’s entry to the World Trade Organization (WTO) in 2001. Within 10 years of this historic development, China had become the world’s greatest merchandise exporter, while simultaneously attracting the largest total Foreign Direct Investment (FDI) of all developing countries.

One of the best illustrations of the complex and often contradictory story of Chinese economic development can be found in the automobile sector. Consuming about half the world’s oil, the highly capital- and technology-intensive automobile industry is among the most significant economic sectors at the global level. At national level, this sector often plays a critical role in domestic economies, as it typically comprises long and heavily interdependent supply and production networks, managed through intricate coordination systems. For developing countries, the prevalence of car use for personal transport is a good indicator of development, industrialization , and consumer purchasing power. All of these considerations ring true in the context of China’s economic transition.

The Rise of the Chinese Automobile Industry

China is getting on wheels. In recent memory, for most Chinese bicycles were the mainstay of personal transport, but by the end of 2003 they were banned on Shanghai’s main avenues to make way for the rapidly expanding ownership and use of cars. Over the past three decades, with unparalleled speed, China has emerged as the world’s largest producer and consumer of automobiles. During the planned-economy era, from the 1950s to 1980s, China’s total annual automobile output never reached more than half a million vehicles per year. A complete reversal of this trend took place in the 1990s, gathering pace towards the turn of the new millennium. As can be seen in Table 1.1, China’s automobile output increased almost 1400% in 16 years, from about 1.6 million vehicles in 1998 to about 23.7 million in 2014. As output accelerated, so China gradually moved up the rankings of global automakers, from tenth in the world in 1998, reaching the top five after China’s achievement of WTO membership in 2001, and finally becoming the number one producer by 2009, when China’s output totaled about 14 million, almost equivalent to that of Japan and the United States combined. By 2014, China’s leading global position was firmly fixed, with a total output of 24 million automobiles, more than double that of the United States, and 2 million units ahead of the sum of the United States and Japan .

Table 1.1

World top ten automobile producing countries, 1998–2014

Rank	1998		2001		2002		2006		2009		2014
	Country	Output	Country	Output	Country	Output	Country	Output	Country	Output	Country	Output
1	USA	12,006,079	USA	11,424,689	USA	12,279,582	Japan	11,484,233	China	13,790,994	China	23,731,600
2	Japan	10,049,792	Japan	9,777,191	Japan	10,257,315	USA	11,263,986	Japan	7,934,057	USA	11,660,702
3	Germany	5,726,788	Germany	5,691,677	Germany	5,469,309	China	7,188,708	USA	5,709,431	Japan	9,774,665
4	France	2,954,160	France	3,628,418	France	3,701,870	Germany	5,819,614	Germany	5,209,857	Germany	5,907,548
5	Spain	2,826,063	Korea	2,946,329	China	3,286,804	Korea	3,840,102	Korea	3,512,926	Korea	4,524,932
6	Canada	2,172,662	Spain	2,849,888	Korea	3,147,584	France	3,169,219	Brazil	3,182,923	India	3,844,857
7	UK	1,975,656	Canada	2,532,742	Spain	2,855,239	Spain	2,777,435	India	2,641,550	Mexico	3,368,010
8	Korea	1,954,494	China	2,334,440	Canada	2,629,437	Brazil	2,611,034	Spain	2,170,078	Brazil	3,146,386
9	Italy	1,692,737	Mexico	1,841,008	UK	1,823,018	Canada	2,572,292	France	2,047,693	Spain	2,402,978
10	China	1,627,829	Brazil	1,817,237	Mexico	1,804,670	Mexico	2,045,518	Mexico	1,561,052	Canada	2,394,154

Source: Statistics from Organisation Internationale des Constructeurs d’Automobiles (OICA) http://​www.​oica.​net/​category/​production-statistics/​

Passenger cars, mostly sedan models, hold a unique position in the exponential growth of Chinese automobile production. Prior to the market reform , cars occupied less than 1% of total national output, which was overwhelmingly geared towards functional vehicles such as trucks. The balance began to tip in the late 1990s, as the domestic consumer market started to expand and passenger car output increased to about 30% of total automobile production. Over the next ten years, cars continued to gain prominence. By 2006, about 70% of Chinese automobile output was accounted for by passenger cars, reaching 84% in 2014. This shows the clear role of passenger cars in the recent development trajectory of China’s automobile sector.

The rise of the Chinese automobile sector , particularly the production of passenger cars, is firmly linked to the integration of China within the globalizing economy and the concurrent transformation of domestic institutions resulting from the market reform . The past three decades have seen China’s automobile sector become ever more closely integrated with the world automobile industry. China’s foreign trade in automobiles and automotive parts has been highly active since the late 1990s (Fig. 1.1). In 1998, auto-parts imports and exports amounted to less than US$ 1 billion in China, but had soared to about US$ 100 billion by 2014. Regarding trade in complete vehicles, in 1998 China imported about 40 thousand automobiles and exported about 14 thousand; by 2012, imports and exports had both increased to around 1 million units.

Fig. 1.1

Foreign trade in automobiles and parts in China, 1998–2014Note: Left axis shows foreign trade in automobiles per 1000 units; right axis shows foreign trade in auto-parts per US$ 1 billionSource: China Automotive Industry Yearbooks

Behind burgeoning automotive foreign trade were large inflows of FDI to the Chinese automobile sector from international automakers (Table 1.2). Since the American Motors Corporation, later taken over by Daimler Chrysler (DC) , set up China’s first joint venture to produce jeeps in 1983, and Volkswagen (VW) set up China’s first joint venture for sedan cars in 1985, a succession of leading international automakers have swarmed into China. By 2004, major foreign manufacturers had mostly completed establishing their production arrangements in China. VW and General Motors (GM), being among the longest established investors in the Chinese auto sector, currently occupy the largest share of the market, though relative latecomers such as Ford and Toyota are fast catching up. Accompanying these foreign manufacturers were international suppliers, which followed on the heels of their clients to make inroads into the emerging Chinese market. Incoming international corporations greatly facilitated the integration of China’s automobile sector within global production networks.

Table 1.2

Main assembly projects of transnational automobile corporations in China, 1983–2004

Automakers	1983	1985	1991	1992	1993	1997	1998	2001	2002	2003	2004
DC	●										●
VW		●	●
PSA		●		●
GM						●
Honda							●			●
Ford								●
Toyota									●		●
Hyundai									●
Kia									●
Nissan										●
BMW										●

Source: Based on China Auto News (2005)

From a domestic perspective, the development of China’s automobile industry was driven by the sweeping institutional transformations put in place by the market reform . China’s communist leaders had highlighted the importance of automobile production at the outset of the planned economy , considering the expansion of mechanized transport and related manufacturing capabilities indispensable to national industrializat ion. In consequence, the automobile industry was built as a national te...

Table of contents

• Cover
• Frontmatter
• 1. Introduction
• 2. FAW, “Senior Son” of the Chinese Automobile Industry
• 3. SAIC, a Giant of the Domestic Market
• 4. Chery Auto, Champion of National Brands
• 5. Geely Auto, Pioneer Grassroots Automaker
• 6. Conclusion and Discussion
• Backmatter