Deng Xiaoping was introducing. It was part of a modern society, one of the “pillars” of economic development, critical to technical advance and to creating jobs for those moving from farms into cities.
But how to do it? China was so far behind the United States and Japan in terms of technology and industrial capability, and had been so isolated, that there was no point in trying to start from scratch.
And so the answer turned out to be joint ventures. The first one, however, Beijing Jeep, never fulfilled the original hopes. Volkswagen scored the first successful joint ventures when it teamed up, beginning in the mid-1980s, with Shanghai Automotive Industry Corporation and China’s First Auto Works. Yet by 1990 China was still producing only 42,000 cars a year, and the roads still belonged to the great swarms of bicyclists. But General Motors, Toyota, and Hyundai were also establishing joint ventures, to be joined by Nissan and Honda, among others.
China’s accession to the WTO in 2001 really ignited the growth of the auto industry—fueled by the emergence of distinctly local companies with such names as Chery, Geely, Great Wall, Lifan, Chang’an, and Brilliance. As the Chinese sales grew, the other international automakers realized that they could not afford to be left out of the most dynamic automobile market in the world, and they too signed up for joint ventures.
Indeed, auto executives could now see a point on the horizon when China might actually overtake the United States as the world’s largest automobile market. It was inevitable, they said. It was just a matter of time. In 2004 General Motors predicted that it could happen as early as 2025. Some went further and said it could happen as early as 2020. Maybe even 2018. But, they would add, that would be a real stretch.
As things turned out, it happened much sooner—in 2009, amid the Great Recession. That year China, accelerating in the fast lane, not only overtook the United States but pulled into a clear lead. The massive and swift Chinese economic stimulus program targeted the automobile industry as one of the “core pillars of growth” with tax cuts on new vehicles, cash subsidies, and price reductions on some vehicles. Car sales increased 46 percent over the previous year, while in that same year U.S. sales plummeted to the lowest level since 1982. Seen in perspective, the shift in relative positions was staggering. In 2000, 17.3 million new cars were sold in the United States, compared with 1.9 in China. By 2010 only 11.5 million were sold in the United States, while China had reached 17 million. By 2020 sales in China could reach 30 million—and keep going.
AUTO NATIONS: U.S. AND CHINA
Source: IHS Global Insight
American automakers may be struggling at home but not in the booming Chinese market. General Motors now does sell more automobiles in China than in the United States. The name Buick may not anymore exude class to American or European ears, but the black Buick Xin Shi Ji (“New Century”) luxury sedan had a powerful allure for Chinese. Buick was so dominant a brand that by the early 1930s, one out of every six cars on China’s streets was an imported Buick. Not only had Buick been Sun Yat-sen’s favorite car, but also much favored by Zhou En Lai. Indeed, when GM first started manufacturing cars in the country, the Chinese insisted that Buick be the brand name, and for several years Buick led as a luxury car. Audi, Mercedes, and BMW might have overtaken the luxury segment, but Buick still remains a stalwart in the market.8
GOING OUT—ON WHEELS
Some of the Chinese companies are already producing inexpensive automobiles that are being sold in increasing numbers into developing countries. Chinese companies, like Indian manufacturers, also have their eye on a new, potentially very big market—cars priced from $2,500 to $7,500 and aimed at the hundreds of millions of people climbing up the rungs of the income ladder.
But the specter that haunts Detroit and Tokyo and Stuttgart and the other auto cities is whether—and when—China’s auto companies (supported by local components suppliers) will reach a level of sophistication at which they can directly compete in the United States and Europe against the likes of GM, Ford, Toyota, and Daimler. Price will likely not be enough. Assuring quality and safety will also be essential. Fuel efficiency will be a criteria. They will also have to build dealer networks.
One Chinese company that has partly solved that problem is Geely, which got started in