PERSPECTIVES ON THE EVOLUTION OF THE AUTOMOBILE ...

Automotive Industry in China
Some hints about the automotive market in China
Worldwide, the business of car companies has three business lines:
New car sales
After sales (including spare parts sales)
Services (financing, service center and used cars)
In developed countries:
Around 10-20% of profits come from sales
Around 50% of profits come from after sales
Around 30-40% of profits come from services
However the average in China is the following:
80% of profits come from sales
20 % of profits come from after sales
0% of profits come from services
In China, in the auto assembly sector, foreign companies cannot have more than a
50% equity share. Consequently, the Chinese industry is composed of local
manufacturers and Joint Ventures of foreign and local companies 5 . Some sources say
that there are around 120 car manufacturing companies in China while others say that
there are 100 to 80. (See Annex 2 for list of companies in China). Although we do not
have the exact number, the reality is that there are far more companies than the
industry can support.
The relationship between foreign and local companies is said to be quite complicated.
Indeed, each local company can have several foreign partners and each foreign
company can have several local partners 6 . Furthermore, local companies can also
produce alone. Consequently, the local companies which are far behind in knowledge
than their foreign partners, are in a continuous process of learning and transferring
knowledge from the JV to the local company (refer to Annex 1 for a better
understanding of these Joint Ventures).
Most of the Joint Ventures produce the cars which development cost is already
amortized in Europe or United States. However, often some minor changes are
introduced to adapt the cars to the Chinese market. Few models are fully developed
for the Chinese market (See Annex 3 to see the car models that are being produced in
China).
5 Chinese law forces foreign car makers to have a local partner and consequently, the success of a
foreign company in the Chinese auto sector has a great deal to do with the JV structure.
6 Up to now, foreign auto makers are not allowed to cooperate with more than two Chinese auto
makers.
Port of Barcelona Chair of Logistics 10