PERSPECTIVES ON THE EVOLUTION OF THE AUTOMOBILE ...

Automotive Industry in China
IV Scenarios and conclusions
1. Scenarios: development routes
1.1 Drivers
1. The recovery of the Chinese Economy might come sooner than the European and
the U.S. economy’s recovery. Automotive companies in Europe and the U.S. are
among the most affected by the recession. Chinese automotive companies can react in
different ways to this fact.
2. Chinese government has labeled the Automotive Industry as a main pillar to
support the development of the national economy. As it has been analyzed in the
report, the current situation in the car industry in China is not sustainable. The
Chinese automotive industry cannot have a healthy development with the existing
surplus of manufacturers (around 100 car manufacturers).
Consequently, the government is pushing for the consolidation of the industry. The
government has a plan to reduce the number of car manufacturers in China to a group
of 5 Big companies and some few other medium ones.
Since the Chinese government controls the bank loans, it has a big power in the
decision making process of any merger or acquisition. In fact, the government could
almost determine which companies are merged together. The bigger the companies
resulting from the consolidation, the more power they will have. Besides, this new
companies will have enough capacity to begin to export massively. However, we
should not underestimate the complexity of the mergers & acquisitions.
3. China is facing tremendous environmental problems. The main ones are related
to the water availability and quality, and the air quality in the over crowded Chinese
cities. The situation has reached a critical degree where people’s health is at risk. The
government is taking action to avoid irreversible damages by the pollution and to
improve the quality of living.
4. With China entrance in the WTO, sooner or later the automotive industry will be
liberalized. When the moment arrives, the MNCs will not be forced to have a
Chinese partner. In this scenario, MNCs will choose to establish an independent
operation in China and therefore, the JVs will disappear. However it is not clear what
will happen in the market. Some people believe that Chinese manufacturers will buy
the assets from the JV. Other people defend that MNC will be in a very weak position
in the domestic market because, even if they acquire the Chinese part of the JV, from
one day to another they will lose their dealer network.
5. Protectionist politics worldwide: Chinese companies exporting abroad will not
only depend on their own capabilities to produce cars acceptable by the customers
and standards of the different countries. The protectionist policies that the
government may put in place to protect their national car manufacturers will
definitely play a main role.
Port of Barcelona Chair of Logistics 42