THE EMERGENCE OF THE AUTOMOTIVE INDUSTRY IN CHINA
Abstract
The engineering industry, including the automotive industry, belongs to the strategic branches of the country’s economy and to a large extent determines the level of development. The Chinese automobile industry dates back to 1953, and the first automobile factory, the First Automobile Works (FAW), was started in Beijing. Over the next few years, several more car factories were established in Nanjing, Khanhai, Jinan and Beijing. The requirements of funds, technologies and automotive modernization stimulated the attraction of external investment. A number of restrictive measures have been adopted to curb external competition, reduce car imports and attract innovative technologies, including high tariff and non-tariff barriers, screening, and restrictions on foreign capital, Limiting market share to foreign companies. When signing the joint-venture agreement, the Chinese side insisted on technology transfer and subordination to the Chinese leadership. Volkswagen first built a car factory in China. Today almost every progressive car company is represented in the Chinese car market, such as Mercedes-Bens, Ford, General Motors, Suzuki, Daihatsu, Honda, Subaru, Citreon, Toyota. Most of them have partnerships with one of China’s top three car manufacturers. American, European, and Japanese automakers see China as a promising market as demand for vehicles in the US and Europe shrinks. To the Chinese automobile market, the cars are made according to the requirements of the local consumer – conservative, with high-quality design, low and middle price segment. Since 2009, foreign automobile companies have accounted for 85% of the Chinese car market. About 60% of the cars sold in China are locally produced. However, China’s automobile industry is highly fragmented and mostly consists of small companies that produce a small range of components. Such production is labour-intensive with relatively low use of advanced technologies compared to car manufacturers in developed countries, often lacking economies of scale. Research expenditure accounts for a large part of the expenditure structure. Most companies produce low-tech parts with significant import presence.
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