Automotive Insider

Focused on the Goal: China’s Automotive Industry

Beginning in the 1930’s with the making of a single truck, called Ming Sheng, China’s automotive industry has shown a steady increase in manufacturing ever since. This steady increase in production was visible throughout most of the 20th century, as in 1992, China’s yearly auto production broke the one million unit mark.

However, the major acceleration of China’s automotive industry came in 2001, when China entered into the World Trade Organization. Between this entry in 2001 and the year of 2007, China’s automotive industry grew by an average of 21 percent year-over-year, resulting in the production of over eight million vehicles by 2007. In 2008, China manufactured more than nine million vehicles, allowing them to pass up the United States to become the second largest auto manufacturer in the world, right behind Japan. If this isn’t enough to solidify China’s position as a major player in the automotive market, China surpassed Japan and all other nations in November of 2009 to gain the title of the world’s largest auto market.

It doesn’t seem China is willing to give up their place in the spotlight either. It has been observed that development of the automotive industry may be the driving factor in the big picture of China’s industrialization. Chinese government is banking on the fact that rapid growth in this sector will be a catalyst for the growth of all other sectors as well. And it seems as though they are right on track for this plan to reach its full potential. The intense focus that the Chinese government utilizes when overseeing the auto industry as well as the infrastructure supporting it has the potential to not only keep China’s auto industry at the top of the global game, but it is on its way to also upsetting many of the manufacturing and trade relationships that exist today.

As an example of China’s focused plan of attack paying off, while the U.S. was in a significant economic slump, China held their gaze straight ahead. Their auto market maintained its increase in manufacturing numbers, and this is when it finally pulled ahead of the U.S. in manufacturing units.

While it has not been as big of a focus for China’s automotive industry before, they are now working on a plan to not only increase domestic sales, but to also upgrade the quality of vehicles manufactured so they can become more of a player on the global market. This plan originated in the 1980’s, when many Chinese auto manufacturers entered into partnerships with major foreign auto companies with the stated goal of producing vehicles to world standards, and therefore create an auto market dominated by a small number of international joint venture manufacturers.

In terms of the other part of this two-pronged plan, the domestic sales aspect, China has a plan for this as well. In fact, in November 2008, the Chinese government introduced a fiscal stimulus packaged in order to avoid the economic slump that was then (and still) affecting nations across the globe. Within this plan was a cut on the sales tax of smaller cars, and incentives aimed to promote sales of vehicles to consumers in rural areas. It seems these plans have created their intended effects so far, but the rest remains to be seen.