Department of Languages & Intercultural Education

Exploring China 331

RESEARCH PAPER

Can Chinese cars sweep the globe?

Competitiveness of China’s auto industry

Name: Chang Deng

Student ID: 14068678
Lecturer: Dr Grace ZHANG
Date of Submission: 16/3/2001
Word Count: 681

Literature Review
The automotive industry is regarded as a flag of a nation’s economic progress, unique
in its far-reaching influence on the development of numerous related core industries,
such as a steel business and a plastic industry (Maxton and Wormald 2004, 1). The
research conducted by Domansky (2006, 13)point out that the minimal requirements
for a country succeed in automotive industry including a GDP of US$500 bn, a
population of 50 m, and auto production volumes of 2 m per year. Following this
measurement, (The long road 2007, 1) states that China satisfy all the requirements
and exceed them to a large extent, but that is because the majority production volumes
come from joint-venture firms rather than domestic firms. This statement seems is out
of date. According to Jian(2010), China has already became the largest automotive
market in the world, and approximately 52%(5.9millom) sales from domestic
automakers.

According to Yang (1995 115), the competitiveness of manufacturing sector is a

broad of multi-dimensional concept that includes many aspects such as quality,
efficiency, price, productivity and environment. In this section, various studies on
China’s automotive industry are reviewed that embrace competitive advantages and
challenges, and strategy.

One competitive advantage of China’s automotive industry is strong political and

financial backing from its government who strongly encourages Chinese carmakers
involving global competition (Alysha 2008). In addition, Zhao and Lv (2009) point
out that China’s core strengths in global competition are cheap labour cost and a large
number of young, well-educated and motivated workforces. Moreover, Jason (2006)
states that after a long time corporation with foreign joint-venture partners, China’s
carmakers observed advanced technology and management skills which are useful in
product-development on their own. However, Keith (2007) realise that heavily
reliance on corporation with foreign joint-venture automakers, to a considerable
extent, is hindering domestic firms’ capability of self-development involved in
creating entirely new vehicles , as research and development need long accumulation
of hands-on experience.

Farther researches conducted on current Chinese automotive industry shows that there
are many challenges in global expanding. Sun (2006) summarizes two significant
challenges that the rising Chinese automakers are facing in the global competition, are
lacking of operational experience in global market on a large scale and the ability of
core product-development. The research conducted by Alysha(2008) also realizes
these shortages and suggests Chinese automakers to recruit functional experts with
rich experience in international markets and to acquire existing auto firms with
professional technology in core areas but in financial problems. Moreover, Wang’
study (2008) on the Chinese automotive industry indicates that lack of brand
recognition and low quality restrict the growth of Chinese automotive industry in
global market, and suggests the Chinese carmakers to concentrate on branding and
improvement in researching and developing.

Baker (2007 208) states that the strategy of low price competition for Chinese
automakers is the first step toward becoming success in global automotive market.
However, Jugoslav (2006) argues that low price competition is only appropriate for
the less developed countries or developing countries where the demand for cheap
automobiles is huge, the mature market like Europe and South America are more
prefer cars with high quality and reliability. The development of automotive industry
is accompanied increasing population and fuel consumption. If Chinese automakers
keen to develop hybrid and fuel-cell vehicles will give them a big advantage in
competition, because the world automakers are almost standing at the same scratch
line in the area of exploring clean energy vehicle (Su 2006).

A few sections have been given inadequate attention in the literature. Firstly, there
have been almost no specific studies on financing and government policy that
supporting China’s automotive industry expanding. Secondly, no specific study
conducted on China’s development of clean-energy vehicle. Thirdly, China’s rapid
growth of the capability of independent research and development has been ignored.
Some studies still thought China’s auto industry heavily relied on foreign technology.
Therefore, the next section will focus on the three main aspects of competitiveness of
China’s auto industry which can make China a strongest automaker in the world,
namely strong financing and policy backing, independent research and development
and clean-energy vehicle.

References

Alysha, W. 2008. Chinese pitch innovation, not just price. Automotive News
82(6291): 73.

Baker, K. 2007. Economic Tsunami: China’s Car industry will sweep away western
car makers. NSW: Rosenberg Publishing Pty Ltd.

Domansky, L. R. 2006. Automobile industry: current issues. New York: Nova

Science Publishers.

Jason, S. 2006. Panel: Watch as China's carmakers go global quickly. Automotive

News 80(6209):45. EBSCOHOST. http://web.ebscohost.com (accessed March 28,
2010).

Jugoslav, S. 2006. Chinese car exports may bypass mature markets. MarketWatch:
Automotive 5 (3): 7-8.

Jian, Y. 2010. U.S. sales remain a distant dream for Chinese. Automotive News
84(6394): 17. EBSCOHOST. http://web.ebscohost.com (accessed March17, 2010).

Keith, C. 2007. Beware of Chinese-made vehicles. Tire Business 25(13): 8-9.

ProQuest. http://proquest.umi.com (accessed April 3, 2010).

Maxton, G. P., and J. Wormald. 2004. Time for a Model Change: Re-engineering the
Global Automotive industry. Cambridge: Cambridge University Press.

Sun, J. 2006. China: The Next Global Auto Power?. Far Eastern Economic Review
169(2): 37-42. ProQuest. http://proquest.umi.com (accessed April 5, 2010).

The long road. 2007. Business China January 33(9): 1-4.

Wang, H. 2008. Innovation in product architecture: A study of the Chinese

automobile industry. Asia Pacific Journal of Management 25(3): 509-535.

Yang, X. H. 1995. Globalization of the Automobile Industry: the United States,

Japan, and the People’s Republic of China. Westport: Praeger Publishers.

Zhao, Z. X., and Z. Lv. 2009. Global Supply Chain and the Chinese Auto Industry.
Chinese Economy 42(6): 27-44.