Teaching Comparative Government and Politics

Monday, November 27, 2006

China's auto industry and public policy

The Beijing Auto Show brought out the foreign reporters, each with a story to tell.

Asia Times Online noted the booming sales of luxury cars in China. Business Week focused on the introduction of new "made in China" models. The Economist asked whether China's domestic market was sacrificing quality for quantity and lower prices.

In spite of the relatively small numbers of buyers for very high end autos, political scientists have to ask what effects this new socio-economic group will have on Chinese politics and government. Similarly, those political scientists would ask about what roles the government played in the creation of new auto companies and models. Finally, those same observers would ask about the public policies that encourage the production of cheaper and shoddier merchandise.

On the second day of the show, a Rolls-Royce Phantom on display was bought for 6.6 million yuan (US$838,681)

Luxury car sales booming in China

"Sales of luxury cars are booming in China, with the world's top luxury-auto makers viewing the country as an increasingly important market...

"China imports more than 100,000 cars every year, most of which cost more than $40,000, according to customs figures. Import figures reached 147,000 cars, valued at $4.84 billion, for the first eight months this year, up 56.1% and 71.8% respectively from the same period of 2005. The rise in unit price shows that luxury cars are now a key import sector...

"Some luxury-auto makers, including DaimlerChrysler, BMW, Audi and Volvo, have set up assembly lines in the country to take advantage of lower production costs...

"It is estimated that only 5% of Chinese can currently afford private cars, but that translates into 65 million people given the huge population..."

Business Week reported much the same information.

Chinese Luxury Cars Debut at Beijing Show

"At this year's Beijing auto show, China will introduce high-end vehicles it hopes will compete in both the international and the domestic markets

"The big trend to watch this year, analysts contend, is the arrival of some much awaited model launches by Chinese automakers. These companies are under considerable pressure from Beijing to develop their own competitive brands in the face of the rapid expansion of luxury models coming into the market... 'The biggest difference between this year’s Beijing auto show and previous auto shows in China is that many more luxury and super cars will be on display,' notes Hong Kong Citigroup auto analyst Charles Cheung...

"(Luxury car sales have rocketed upward about 24% during the first eight months of 2006.) Even high-end and small production-run automakers such as BMW’s Rolls Royce are expanding. Rolls is finding a buoyant market in China for its $380,000 super-luxury Phantom..."

The Economist asks in The fast and the furious, "Are Chinese carmakers trying to do too much, too soon?"

"Chinese firms felt confident enough to show off not just their newest low-cost runabouts, but also luxury and sports models, 'concept' cars showing possible future designs and even a few hybrid and electric vehicles. Local carmakers in the world's fastest-growing and third-biggest car market would appear to have come of age. But like a teenager trying to behave like an adult too soon, the rush for high-tech street-cred may not be so wise...

"How much of this miracle is the result of good business sense—rather than the special treatment granted to local firms—is not entirely clear... Yet this is arguably no different from the sort of support given to Japanese carmakers 40 years ago, or to South Korean firms 20 years later...

"According to the latest China Automobile Customer Satisfaction Index, the number of faults per 100 cars made in China rose from 246 in 2005 to 338 this year. Four out of five cars now experience a problem in the first six months of ownership. But with average retail prices falling by RMB10,000 ($1,250) a year, producers are racing to cut costs, not improve quality...

"Local carmakers in Japan and South Korea gradually came to dominate their domestic markets through a combination of cost competitiveness, nationalistic buying and technological leadership. Today, Japan's Toyota and South Korea's Hyundai make some of the most a


At 9:48 AM, Blogger Ken Wedding said...

Xinhua, the Chinese news agency, covered the Beijing Auto Show, too.

The featured article there was The Top 8 Models from the Beijing Auto Show


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