The History of China Automotive

Within the Chinese industrialization process, the auto industry has played a significant role. It has been one of China’s pillar industries and since the 1990s, the government’s supportive infrastructure developments and policies have ensured China’s auto industry has developed rapidly. The Chinese policy makers originally set out 6 major centres (the so called Old Lions) in 1986 in which auto production should be a core competence as follows:

Beijing                 Beijing Auto Industry Corporation (BAIC)

Shanghai             Shanghai Auto Industry Corporation (SAIC)

Changchun          First Auto Works (FAW)

Wuhan                Dongfeng Motor Corp (DMC)

Chongqing           ChangAn Automobile Co

Guangzhou          Guangzhou Automobile Industry Group (GAIG)

The Government then got local producers to form joint ventures with foreign companies e.g. GM and VW separately with Shanghai Auto Industry Corporation (SAIC), Dongfeng with both Honda and Nissan. The idea was that they would learn from the foreign joint ventures and then build their own, but in actuality, they have built few genuinely new models (e.g. the SAIC Roewe and FAW Besturn) and have been content to be relatively passive partners (i.e. the core competence of design, manufacturing and distribution has remained with the global players). Then in the late 1990s, relatively out of nowhere, came new entrants - the so called ‘young tigers’. The three best known of these are: Geely, founded by Li Shufu who originally made refrigerator parts then motorcycles, which has just bought Volvo; BYD, founded by Wang Chuanfu whose company made cell phone batteries and where Buffet made an investment; and Chery, founded by Yin Tongyao who ran a VW assembly plant and was then asked by his local Mayor to build a car plant in the Anhui province if he raised the finance. Chery currently primarily make smaller cars. In 2008 Chery sold 350,000 cars of which 100,000 were exported. These 3 companies haven’t yet made...