Post on 20-Jul-2020
China´s development in theChina s development in the Auto parts‐Automobile chain p
Song Hong, Senior Fellow/Professorg g, /Institute of World Economics and Politics(IWEP),
Chinese Academy of Social Sciences (CASS)Chinese Academy of Social Sciences (CASS)UNAM, 2015, Mexico
The outline of this presentation
• Key elements of China’s automobile industry;y y;• The development history of China’s
t bil i d tautomobile industry;• Localized supply of China’s car industry;pp y y• A emerging sourcing of auto‐parts supplyS hi i d d l• Some comments on this industry development
The production of Automobile in China, 1955‐2014
25000000Autombile,unit Truck,unit Car, unit
15000000
20000000
10000000
15000000
Post‐WTO accession era:2002‐‐
Early Domestic development ear:1949‐1980s
5000000 Joint venture era: mid‐1980‐‐2001
0
1955
1958
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
The leading producer of world automobile, 2013,%
25.33 30.00
Share of world automobile production,%
20.00
25.00
12.65 11.03
6 5510.00
15.00
6.55 5.18 4.45 4.28 3.50 2.90 2.73 2.49 2.48 1.99 1.83 1.38 1.30 1.29 1.12 0.91 0.85
0 00
5.00
0.00 China
USA
Japan
Germ
an y
S.Korea
India
Brazil
Mexico
Thailand
Canada
Russia
Spain
France
UK
Indonisi a
Zech
Turkey
Slovoc
Agentin a
Iran
y a a
W ld T 20 k f bli 2013 iWorld Top 20 markets of automoblie,2013,unit
25000000
Top 20 sale market of automoblie,2013,unit
15000000
20000000
5000000
10000000
0
5000000
na SA an zil
ny ia ia UK ce da ea ly nd sa ia co ia ey in ca
Chin US
Japa
Braz
German Indi
Russi U
Fran
c
Cana
d
South Ko
re Ital
Thailan
Indo
nis
Austria
li
Mexic
Agen
ti
Turke
Spai
South Afric
S S
Automobile firms in Global 500, 2013(6/24), ( / )2013,order 2012,order Company Revenue Profits
8 10 Toyota 265701.8 11586.6
9 12 V lk 247613 3 27909 19 12 Volkswagen 247613.3 27909.1
22 19 GM 152256 6188
23 21 Mercedes-Benz 146886.3 7832.9
26 45 EXOR Group(Fiat) 142226.4 511.5
28 27 Ford 134252 566528 27 Ford 134252 5665
45 64 Honda 118952.4 4421.3
47 42 Nissan 115961.4 4123.8
68 69 BMW 98759:5 6549
103 130 SAIC 76233 6 3289 1103 130 SAIC 76233.6 3289.1104 117 Hyundai 74998.5 7601.8
121 85 Pigeon 71255.2 -6438.5
141 165 FAW 64886 2622.4
146 142 DongFen 61721.9 1333.6146 142 DongFen 61721.9 1333.6
161 205 China bingqi group 58027.8 675.2
184 158 Renault 53037.2 2277.2
227 208 Volvo 44850.6 1630.5
252 266 Kia 41945.8 3431.4
316 314 TATA 34705 1818.3
336 - Beijing Hyundai 33374.5 1074.4
367 350 Suzuki 31048.7 968.1
440 428 Mazda 26556.3 413.1477 475 Geely 24550.2 52.4
483 - Gongzhou Automoblie group 24144.8 66
Th d lThe development process…k d l i h• 1955‐1978: Truck development is the top
priority of China, Car is only for the official use;
• 1979‐2000: Car production is only developed p y pafter mid 1980s, with the new joint ventures were set up; before that the car production in p; pChina is mainly semi‐man made, not mass production product;production product;
• 2001‐2015: big explosion of car production…
Early stage:1955 1978Early stage:1955‐1978
Auotombile,unit Truck Car
1955 61 61
1956 1654 16541956 1654 1654
1957 7904 6228
1958 16000 12865 57
196428062 20755 100
1978149062 96103 2640149062 96103 2640
The first truck factory in 1957 the firstThe first truck factory in 1957, the first truck in 1958
The first China’s car 1958: HongqiThe first China s car 1958: HongqiA 1955 i Ch l• A 1955‐ version Chrysler sedan;
• 1958 was produced in FAW1958 was produced in FAW in Changchun, Jilin Provenice;
• The revised version of car became the high‐level officals car since then inofficals car since then in China, has very import impact on the follow‐up d l f hidevelopment of this industry
Another Chinese car 1963: ShanghaiAnother Chinese car,1963: Shanghai
• a Benz 220S car • Shanghai Car
The second auto factory was built in 1960s, and finished in 1970s:1978, new truck
C d i d d d i llCar production and demand in earlly stage
• Car is only for officials use, not for family; and while Hongqi is for high level official, gq gShanghai is for low level official;
• The production of those cars were mainly• The production of those cars were mainly hand‐made, not mass production line
h lwithout scale economy;• For the truck subsector, China already builtFor the truck subsector, China already built up the mass production capacity.
J i V i i i i i 1980Joint Venture initiatives in 1980s1984 th fi t j i t t t i• 1984, the first car joint venture was set up in Shanghai between Shanghai automobile factory and Volkswagen of Germany and Santanaand Volkswagen of Germany, and Santana model was introduced;
• 1990, the second car joint venture was set up in1990, the second car joint venture was set up in Changchun between China’s Auto first factory and Volkswagen, and Jetta model was introduced;
• 1992, the third car joint venture was set up in h b hi ’ d fWuhan between China’s Auto second factory
and Citroen, and Fukang model was introduced
XialiXiali
Audi 100Audi 100
FukangFukang
Santana
JettaJetta
Daihatsu technologies and the ‘Xiali Model’
I 1984 Ti ji A bil I d C i d• In 1984, Tianjin Automobile Industry Company signed an agreement with Japan’s Daihatsu on theintroduction of a set of complete technologies for manufacturing the Hijet850, a p g g j ,kind of minibus, and Charade 1.0, a mini two‐ box car.
• The Chinese name, pinyin ‘Xiali’, is used to name the car d l Xi li b d f h ld hi lmodel. Xiali‐ brand cars were one of the most sold vehicle
brands in China in the late 1990s, ranking second only to Santana. The annual sale volumes of Xiali‐ brand cars reached 100,000 in 1998 and 1999, and production capacity reached 150,0000 cars and 200,000 engines. Thi h d b d f i l i h• This had become amodern car manufacturing plant with a certain scale.
Audi 100 technologies and the ‘Hongqi Model’
FAW i d i h V lk M• FAW signed an agreement with Volkswagen on May 17, 1988, on the transfer of Audi products and technologies to update its Hongqi brand cartechnologies to update its Hongqi‐ brand car.
• It stipulated that FAW would introduce third‐generation Audi 100 cars from Volkswagen andgeneration Audi 100 cars from Volkswagen, and start from SKD (semi‐ knocked down) and CKD (completely knocked down) car assembly, before(completely knocked down) car assembly, before gradually raising the local content level.
• After reaching certain standards, these introducedAfter reaching certain standards, these introduced products will be allowed to use their own Hongqi brand.
Joint venture development, 1979‐p ,2000
Year Automobile,unit Truck Car
1979 185700 119501 4152
1985 443377 236934 5207
1986 372753 218863 12297
1992 1061721 626414 162725
1993 1296778 774868 229697
1996 1474905 688614 3910991996 1474905 688614 391099
1998 1627829 661701 507103
1999 1831596 756312 566105
2000 2068186 751699 607445
Joint venture projects in 1980s 1990sJoint venture projects in 1980s,1990s
• Shanghai Volkswagen: Santana In October 1984 Shanghai• Shanghai‐ Volkswagen: Santana In October 1984, Shanghai Automotive Industry Corporation (SAIC) set up a joint venture with Germany’s Volkswagen for the manufacturing of the Santana with both holding 50 percent of sharesof the Santana, with both holding 50 percent of shares.
• FAW‐ Volkswagen: Jetta In 1991, the FAW signed an agreement with Volkswagen for the production of Jetta vehicles, with FAW holding 60 percent of shares and Volkswagen 40 percent. Later, the proportions were adjusted to 50 percent each.p
• Shenlong Fukang: Fukang vehicles On May 18, 1992, the Dongfeng Automobile Company and the French Citroen Automobile Company set up the joint Dongfeng PeugeotAutomobile Company set up the joint Dongfeng Peugeot Citroen Automobile Company Ltd in Wuhan, Hubei province, with a 70 percent to 30 percent share‐ holding proportion between the Chinese and French sidesbetween the Chinese and French sides.
The difficult process of localization in the late of 1980s in China
• After the establishment of Shanghai Volkswagen in 1984 it carried out SKD• After the establishment of Shanghai Volkswagen in 1984, it carried out SKD and CKD assembly for three years and the localization rate reached only 2.7%.
• As the localization rate was unable to improve, the state began to limit the amount of SKD or CKD import, thus forcing Shanghai to accelerate the process of localization.
• In order to realize as soon as possible the localization rate, Shanghai local government gradually reduced the import of parts to conserve foreign exchange and set up a special localization office for Santanaexchange and set up a special localization office for Santana.
• Virtually all parts producers underwent thorough improvements, either importing technology to improve product quality or entering into joint ventures with foreign companies or carrying out technical cooperation to develop products jointly.
• The efforts paid off. The localization rate rose steadily until it reached over p y40% by 1989 and 60% by 1990 and 90% by 1996, basically realizing local production.
The process of localization—Santana model
0 91
Santana model‐‐The process of localization,%
0.70.80.9
0.40.50.6
0 10.20.3
00.1
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
The process of localization—Xiali model
1.00
The process of localization‐‐Xiali model
0.70 0.80 0.90
0.40 0.50 0.60
0.10 0.20 0.30
0.00 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Major brands and their market shares in 2000Major brands and their market shares in 2000
% in total sales(not
Brand
% in total sales(not including import and
export) Market share %Santana Volkswagen 31 38 30 88Santana, Volkswagen 31.38 30.88
Jetta, FAW 15.51 15.26Xiali, 13.86 13.64
F k Sh l 8 49 8 35Fukang, Shenlong 8.49 8.35Changan Alto(including sales networks
of other assembling plants) 7.63 7.51Honda Accord 5 26 5 18Honda Accord 5.26 5.18
Shanghai GM Buick 4.98 4.90Passat, Volkswagen 4.91 4.83
A di FAW V lk 2 64 2 60Audi, FAW-Volkswagen 2.64 2.60Red Flag, FAW 2.5 2.46
Cherokee, 0.75 0.74
Market opening and internationalMarket opening and international competitionp
• The competition between different MNEs‐‐‐‐h d h ldThe new entrants and the old ones; Japanese, Korean firms and those of EU and USA;
• All the MNEs, for the major model and car, the “local sale and local production” strategythe local sale and local production strategy was pursued.
Market opening and international titi 2001competition, 2001‐‐
Auotombile,unit Truck Car
2001 2341528 803076 703525
2002 3253655 1092546 1092762
2003 4443491 1228157 20378652003 4443491 1228157 2037865
2004 5070452 1514869 2312561
2005 5707688 1509893 2767722
2006 7279726 1752973 3869494
2007 8882456 2157335 4797688
2008 9345101 2270207 50373342008 9345101 2270207 5037334
2009 13790994 3049170 7471194
2010 18264667 3920363 9575890
2011 18418876 3450972 10137517
2012 19271808 3241730 10767380
2013 22116825 3468501 121007722013 22116825 3468501 12100772
2014 23722890 3195901 12481052
The local new entrants• Chery Automobile Co, the first car was produced in 1999;
• Geely Holding Group Co: In the 2001, the first car was made, and in 2009, purchaed Volvo car b hbranch;
• Great Wall Motor Company Limited: mainly f SUV k t d f l difocus on SUV market, and are one of leading supply of SUV;BYD: in 2003 BYD entered the car marketBYD: in 2003, BYD entered the car market.
Copy, imitation and innovation of local new entrants
f h f i l d l h• Copy of the foreign popular model. So, there are a lot of lawsuit with MNEs during 2001‐2004;
• Joint development with professional car p pdesign firms in the west;
• The indigenous development of new modelsThe indigenous development of new models, mainly base on reverse engineering firstly, then gradually base on indigenousthen gradually base on indigenous engineering…
The major brand of car in Chinese market in 2013,%
Brand Production saleShare of
productionShare of sale,%
凯越1.5 294110 296183 2.43 2.47 Jetta 捷达1.6 262836 263408 2.17 2.19
新福克斯1.6L 237529 238317 1.96 1.98
新朗逸1.6L 231217 226976 1.91 1.89 新宝来1 6L 223386 221333 1 85 1 84新宝来1.6L 223386 221333 1.85 1.84 朗动1.6L 203754 204595 1.68 1.70 瑞纳1.4 202237 198525 1.67 1.65
帝豪EC71.8 192791 193210 1.59 1.61
雪佛兰科鲁兹1.6L 179024 185773 1.48 1.55雪佛兰科鲁兹1.6L 179024 185773 1.48 1.55
NMS1.8T 185253 183111 1.53 1.52
悦动三厢1.6L 172849 171490 1.43 1.43
速腾1.6L 170346 166269 1.41 1.38 新轩逸1.6 163202 162142 1.35 1.35 新轩逸
迈腾1.8T 154877 149331 1.28 1.24
花冠1.6 147418 147921 1.22 1.23 英朗GT1.6L 142727 138767 1.18 1.16 K3 1.6L 139435 134613 1.15 1.12
新赛欧 厢新赛欧三厢1.2L 133454 134580 1.10 1.12 Santana 全新桑塔纳1.6L 131991 132186 1.09 1.10
新骐达1.6L 138427 128903 1.14 1.07 新赛欧三厢1.4L 128456 128583 1.06 1.07 长城C301.5 123317 126036 1.02 1.05长城C301.5 123317 126036 1.02 1.05 宝马5系3.0 126888 123852 1.05 1.03 速锐1.5 123065 123643 1.02 1.03
4208589 4179747 34.78 34.80
The foreign share of Chinese marketThe foreign share of Chinese market
45 00 35 0
35 00
40.00
45.00
30.0
35.0
25.00
30.00
35.00
China‐total GermanyJapan USASouth Korea France 20.0
25.0 China‐carGermanyJapan
15.00
20.00
10 0
15.0
JapanUSA
5.00
10.00
5.0
10.0
0.00 0.0
The leading firms in Chinese market,2013The leading firms in Chinese market,2013
FirmsSale,2013,uni
Growth rate
Share of Growth of Order 2013
Change of Firms
trate,
%2013,% share,%
Order,2013order
SAIC-GM 1376445 8 11.44 -0.4 1 0
FAW-VW 1371822 11 11.41 -0.2 2 0SAIC-VW 1285826 20 10 69 0 7 3 0SAIC VW 1285826 20 10.69 0.7 3 0
DF-Nissan 785936 22 6.53 0.5 4 1BAC-Hyundai 746803 9 6.21 -0.2 5 -1
Changan-Ford 525817 7 4.37 -0.2 6 0Sh LShenLong-Fukang
497689 13 4.14 0 7 1
Geely 486583 6 4.05 -0.2 8 -1DF-KIA 413529 14 3.44 0 9 3
FAW T 411398 10 3 42 0 1 10 0FAW-Toyato 411398 10 3.42 -0.1 10 0GAC-Honda 407550 38 3.39 0.6 11 2
BYD 406500 10 3.38 -0.1 12 -1Cherry 338951 -18 2.82 -1 13 -4
Changangroup 311545 40 2.59 0.5 14 0SAIC 219513 14 1.83 0 15 1
Geat Wall Auto
202146 1 1.68 -0.2 16 -1
FAW Car 196830 9 1.64 0 17 1
GA-Toyato 190784 21 1.59 0.1 18 2
Huachen-BMW 180240 27 1.5 0.2 19 2
Domestic production vs. CKD production, 2000‐15(July)
100.00
102.00 2500000
Domestic production of autombile,unit Production of autombile, unit share of domestic production
94.00
96.00
98.00
1500000
2000000
88 00
90.00
92.00
1000000
1500000
84.00
86.00
88.00
500000
80.00
82.00
0
2000
01
2000
07
2001
01
2001
07
2002
01
2002
07
2003
01
2003
07
2004
01
2004
07
2005
01
2005
07
2006
01
2006
07
2007
01
2007
07
2008
01
2008
07
2009
01
2009
07
2010
01
2010
07
2011
01
2011
07
2012
01
2012
07
2013
01
2013
07
2014
01
2014
07
2015
01
2015
07
2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Share of local production(domestic production + CKD)Share of local production(domestic production + CKD) in local sale(local sale + import‐export),%
200.000Total truck car
150.000
200.000
100.000
0 000
50.000
0.000
1998
1999
2000
2001
2002
2003
2004
2005
2006
2008
2009
2010
2011
2012
2013
2014
1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2
The import and export %The import and export,%16 007 00
14.00
16.00 Share of export,%‐totalshare of export,%‐truckshare of export,%‐car
6.00
7.00 Share of import,%‐totalshare of import,%‐truckshare of import,%‐car
10.00
12.00
4 00
5.00
6.00
8.00
3.00
4.00
2 00
4.00
1.00
2.00
0.00
2.00
1998
1999
2000
2001
2002
2003
2004
2005
2006
2008
2009
2010
2011
2012
2013
0.00
1998
1999
2000
2001
2002
2003
2004
2005
2006
2008
2009
2010
2011
2012
2013
1 1 2 2 2 2 2 2 2 2 2 2 2 2 21 1 2 2 2 2 2 2 2 2 2 2 2 2 2
The key features…y• China, not only the largest producer of automobile, but also the largest market of it in the world;
• Local production and local sale model;• There are a very divers and deep local parts• There are a very divers and deep local parts supply system;
China Brazil and IndonesiaChina, Brazil and Indonesia
160.00
180.00
Ratio of local sale to local production,%,2013
120.00
140.00
160.00
60.00
80.00
100.00
0 00
20.00
40.00
0.00 S.Korea
Mexico
Spain
Thailand
Japan
Germ
any
Canada
Turkey
India
China
Brazil
Indonisi a
Agentina
France
USA
Russia
UK
y a a
A emerging sources of auto‐parts supply, 2013
Import, unit import,$10000 Export,unit Export,$10000
I. Engine 818178 237632.2 3312488 157463.9g①≤50mL
(gasoline)608 15.8 132264 2636.2
②50mL-250mL(gasoline)
4651 125 2576780 33267.9250mL(gasoline)
③250mL-1OOOmL(gasoline)
4270 1149.2 34252 3254.8
④1OOOmL-3OOOmL(gasoline)
780106 210659.8 457992 62174.9
⑤>3OOOmL(gasoline)
16535 10428.3 546 449.2>3OOOmL(gasoline)
⑥p≥132.39kW(diesel)
4614 11721.7 17280 20623.6
⑦P<132 39kW(diesel)
7394 3532.3 93374 35057.4P<132.39kW(diesel)
II. Parts - 3277993.4 - 6459160.7
Parts of Automobile
- 2836173.5 - 5505252.6
Parts of engine - 437914 - 614645.3
• In 2013, there are 202 main auto‐parts, and there are 2151 firms. Of which, 412 is foreign gfirms, or joint ventures. That is, in terms of firm number 19 15% is foreign firmsfirm number, 19.15% is foreign firms.
• In terms of value, 2013 China exported $ b l $engine $1.575 bilion, and import $2.376
billion, with deficit $0.81 billion; • As far parts are concerned, China had $31 81billion surplus$31.81billion surplus.
Most the car on the way in the city are foreign brands…
How and why this model was built?How and why this model was built?
• 1)The government requirement in the mid‐1980s;
• The compitition among MNEs in 2000s;Th ff f h l l fi• The efforts of the new local entant firms;
• 2 ) China is a big country, largest market in ) g y, gthe world;M k t’ l i fit d ffi i l l• Market’s logic‐‐‐‐profit and efficiency: local demand and local production;
Why so bad for car industry?Why so bad for car industry?
• Offical goods, not national good or civilal goods: the demand is limited, and the quality and varietaries of those goods lost their dynamac, can’t be changed or updated dramatically;
• Joint venture is the priority choice, not joint cooperation, or technology importation; and only that of MNEs and SOEs were permitted, no other local firms, especially private firms were allowed enter into.
The way forward…
• Firstly, to become a major supply of parts of automobile, especially the cars;
• Then to become a indigenous brand supply• Then, to become a indigenous brand supply of local market, like that of mobile phone and TV dTV sets and so on;
• Lastly, to go to the outside worldy, g
Thank you very much!Thank you very much!