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Chinese Auto Industry Squares up to Foreign Competition
Reorganization and co-operation with foreign competitors are the best way out for China's auto industry which will soon be facing mounting competition from overseas with the country's impending entry into the World Trade Organization (WTO), China Daily Business Weekly reported on June 11.
"Only through restructuring can we gain enough strength to deal with the challenges," said Miao Wei, general manager of the Dongfeng Motor Corp in central China's Hubei Province.
A majority of domestic auto makers cannot rival foreign companies in many aspects at present, he said.
China now has more than 120 auto makers, and only three of them each have an annual production capacity of 200,000 units. Last year, domestic auto output amounted to 1.83 million units, half of a medium-sized global auto maker's output.
"Accelerating re-organization and establishing competitive enterprise groups is a must for China's auto industry to survive global competition after the nation's WTO entry," Miao said.
WTO entry, expected to occur this year, will grant foreign auto makers free market access to the Chinese auto market.
According to a Sino-U.S. WTO access deal signed last November, China will cut its tariffs on auto imports to 25 percent by mid- 2006 from the original 80 to 100 percent.
The WTO deal between China and European Union (EU) last month will enable foreign auto makers to freely make marketing decisions on a purely commercial basis; all restrictions concerning the categories, types and models of vehicles produced in China will be lifted within two years.
Miao urged the Chinese government to reorganize more than 10 leading auto makers into some giants within the "buffer" period after the WTO entry.
The Chinese Government has decided to support three to five key auto makers in line with its strategy for the auto industry, a new growth engine for the country's economy.
Reorganization has already become a global trend since the world auto industry suffers a production overcapacity of approximately 18 million units annually.
"WTO entry will speed up reorganization of China's auto industry and will lead to further cooperation with global auto makers," said Zhang Suixin, vice president of Volkswagen (China) Co Ltd.
It is also a pressing task for domestic auto makers to strengthen cooperation with foreign companies and sharpen competitive edges, said Lin Ganwei, vice president of the First Automotive Works (FAW) in northeast China's Jilin Province, known as the cradle of the country's auto industry.
Cooperation with foreign auto makers should involve investment, production platforms, technologies and product development, and sales networks, Lin said.
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