Explain China's localization of automobiles

There is not much to do in the development of China's auto industry for 50 years. However, the industry’s most talked about when it comes to self-development is the problem of localization. This fundamental problem that has plagued the industry for many years has put us in an embarrassing situation. It has so far become a "chaos." What is puzzling is: Why does China's auto production and sales go up all at once, but it is so difficult to make localization? What is the crux of it?
Localization: the common ideal of the car industry In China's auto manufacturing companies and joint ventures of foreign companies, without exception, the localization of imported products or technologies has been achieved, and then we have improved our own manufacturing and technology levels, and formed our own The development capability has enabled China's auto manufacturing industry to rank among the world's first as a joint venture. The relevant government departments of our country also regard the goal of localization as an important content and purpose of attracting foreign investment, establishing joint ventures, and raising the level of domestic manufacturing. Since 1984, the Chinese government approved the first Sino-foreign joint venture of the automobile manufacturing industry, Beijing Jeep Automobile Co., Ltd. In the past 20 years, dozens of Sino-foreign joint ventures established in China have been trying to increase the level of localization. Raising the capacity for independent development is a difficult journey. Learning the Korean model (product-oriented, ie, self-developed) and avoiding the Brazilian model (industry-dependent, ie foreign-led) has become the consensus and goal of the domestic automotive industry.
At the same time, as the “protagonists” of foreign giants, although controlling the key aspects of technology development, it is very likely that in the next few years, with the loosening of policies, their own wholly-owned or holding companies will be established. However, in the face of increasingly fierce market competition and a unified and open market in China, it is necessary to further speed up the process of localization, invest heavily in transforming or developing marketable auto products, and firmly occupy and expand the Chinese market that has entered, in order to seek overall Increased profits.
It can be seen that Chinese and foreign auto companies have different development goals, but they have established the ideal of “localization” in the same way. Localization has become the common ideal of the automotive industry.
The road to localization is not smooth. Although everyone understands, however, the beautiful ideals and goals cannot be achieved smoothly. The process of localization of China's auto industry is not smooth.
"Domesticization" does not merely refer to the simple concept that a domestic company is fully capable of producing and manufacturing an imported product, but it is a systematic system covering many contents such as capital, technology, production, and market. In this system, the balanced development of all links has become an important basis and condition for achieving “localization”. Although the current domestic automobile production, varieties, technical content, manufacturing equipment and scale have all developed rapidly, the intellectual property rights, core technologies, product concentration, independent development capabilities, and number of professional and technical personnel in the product There are still many gaps and difficulties in all aspects, such as the simultaneous development of business literacy, related industries, and the market environment, all of which are constraining the realization of the localization process. This is why the automotive industry has been importing foreign capital for 20 years. The vast majority of its products have been the root cause of the Chinese version of foreign brand cars. Not to mention the blockade imposed by foreign companies on core technologies, that is, domestic enterprises also have the disadvantages of exclusive resources, mutual blockades, redundant construction, repeated introduction, and loss of funds, which also hinder the process of improving the overall level of the domestic automobile manufacturing industry. .
In addition, the “localization” funds invested in product development are staggering, generally accounting for more than 4% of sales in the current year. Since the mid-1960s, General Motors Corporation has spent more than US$5 billion each year on research and development. For example, in 1991, the input was more than US$5.8 billion, accounting for 4.8% of sales in the current year. Ford Motor Company invested more than 3.7 billion U.S. dollars in research and development in 1992, accounting for 4.2% of sales revenue for the year. Even the data of 10 years ago is enough to make Chinese automobile manufacturers feel ashamed. The Chinese auto industry has long made "domesticization" a "platitude", and one of the reasons is probably that.
However, competition is unavoidable. No one wants to see the Chinese auto industry become a “manufacturing base for other brands”—a foreign man-made brand and a Chinese man-made car. Therefore, no matter how big the difficulty is, it must be overcome. Only by truly realizing “localization” and vigorously developing competitive and independent products will it be the foundation for the national brand to break through and the future and hope of the Chinese automobile industry will emerge. .
"Domesticization" has fallen into a misunderstanding. Since all parties concerned are not opposed to raising the localization rate, and the "Auto Industry Industrial Policy" promulgated in 1994 has also made the localization rate mandatory, why did the KD wave appear recently? The Chinese auto industry has been slow to achieve "domesticization" and seems to be caught in a so-called "win-win" misunderstanding. After China's accession to the WTO, in order to ease the impact of imported vehicles on domestic automakers, the Chinese government has secured a five-year period of protection. During this period, the tariff of imported vehicles is much higher than that of imported spare parts, and on import quotas, There is also a clear tilt to imported parts. For example, of the total quota of US$7.935 billion for automobiles and key parts in 2002, about 30,000 vehicles were imported in the first half of the year, which was less than 40% of the quota. At the time, CKD output was 43,000, an increase of 35.51% year-on-year. It is much higher than the growth rate of imported cars of about 23%. Almost anyone can see the difference in tariffs between bulk imports and vehicle imports.
The reason why many companies do not engage in localization and are keen on KD is in fact a misunderstanding. In the sense of “emptiness” in the national policy of drilling, in a sense, even the tariff benefits that the country should impose on imported vehicles are transferred to the enterprises. The benefits that should have been obtained by the state are obtained by the enterprises. And for companies, adopting the KD approach does not require significant R&D investment. As a result, the domestic parts and components industry will not be able to develop due to the large number of imported foreign parts assembled in China. In the eyes of foreign investors in joint ventures, the KD approach is also a good choice, because whether it is selling the whole vehicle or selling spare parts to the Chinese, the foreign occupation of the Chinese market is the same, and the brand and technology are still theirs. Moreover, the KD's car has more than the imported vehicle, and it also accounts for a small amount of money. It is this kind of seemingly "win-win" model that has prompted both Chinese and foreign parties to be keen on KD.
But is this really a "win-win"? The only academician of the Chinese Academy of Engineering, Guo Konghui, said: “I have no objection to Sino-foreign joint ventures and cooperation. However, when Chinese parties cooperate with foreign countries, they must first have their own abilities.” On the premise that there is no ability, no money, and no technology, It is impossible for the relevant Chinese parties to continue their cooperation with the market only and foreign companies. After China's accession to the World Trade Organization, Sino-foreign cooperation will be more reflected in technical cooperation, and there will also be cooperation in management and market. This requires China's relevant parties to speed up the pace of localization, as soon as possible to form a strong independent development capabilities, master the core technology. If China abandons localization and does not work hard to master core technologies, then it will only be dependent on foreign technology, and it will be caught in the “less ability to rely on more and more to rely on the lack of ability”.
Therefore, it was vividly described that the current status of the Chinese auto industry is: “The foreign party sneezes and China takes a cold.” The initiative is basically in the hands of others. Once the tariff of the vehicle in 2006 has dropped significantly, the foreign party feels that the time is ripe. If you discard your Chinese partner, there will certainly be a considerable number of domestic auto companies that are in desperation. Recently, some people have called out loudly: For the ever-increasing KD production, it is time for someone to stand up and talk, and go back to the old road of localization rates!
The experience of SAIC is worth learning from. Now, we should realize the importance of the localization of the auto parts industry more than ever. Because the auto parts industry is the basis of the automotive industry. In this regard, the experience of localization of components of SAIC Group is worth learning from. Shanghai’s auto parts and components company, which was once the only company in Shanghai that has once stood out for its own localization of Santana cars, made the Shanghai sedan industry rise rapidly in the 1980s. The development of the vehicle industry has also driven the development of the auto parts industry. The entire vehicle industry and parts and components industry are mutually causal. Now that some people in the country have adjusted the importance of the car industry, they have forgotten the foundation of the auto parts industry, and the Chinese auto parts industry has not kept up. For example, the domestic automobile engine has not been able to pass and it is a prominent problem. There is no shortage of capital, talents, markets and good opportunities for development in China. What is lacking is the environment for the development of talented people without technology. If the relevant parties analyze and rationally guide them, they are fully capable of localizing the auto parts industry.
Analysing the development track of the localization of auto parts in Shanghai, the auto parts supporting system in Shanghai is gradually formed on the basis of localization of Santana cars. The beginning of localization was very difficult, starting from scratch; after three years, the localization rate of Santana was only 3.9%. With the continuous expansion of the localization community of Santana cars, the localization rate of Santana reached more than 90% in the mid-to-late 1990s. People are pleased to see that in the past 10 years, the “domesticization” of Shanghai auto parts companies has been blooming. The products of many parts and components companies are not only for Shanghai Volkswagen and Shanghai General Motors products, but also for major domestic vehicle manufacturers such as Guangzhou Honda, FAW-Volkswagen, Shenlong Fukang, Changan Ford, Tianjin Toyota, and Shenyang Jinbei. What is most encouraging is that the strategic perspective of Shanghai auto parts companies is scanning the world auto parts market, and a large number of competitive, high-quality localized parts and components products are continuously entering the North American, Japanese and other OEM supporting markets. The outward direction of the parts and components industry is constantly increasing.
The localization development of auto parts in Shanghai is a challenge for SAIC Group to cope with China's accession to the WTO and economic globalization. It insists on the globalization strategy of “bringing in” and “going out” and the implementation of the strategy of “grabbing and circumventing” the business strategy. . Experts believe that the first realization of localization of auto parts is not only the only way for the development of auto parts industry in China, but also the only way for the development of China's auto industry. It has an important strategic significance for the Chinese auto industry's dream of localization and the formation of independent development capabilities.

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