The Westernization Movement vs. The Revolution of China's Autonomous Brands

The win-win theory of "market-for-technology" proved to be a wish in practice. Now, the market space is vacated to foreign companies, but technology and brand are still tightly tied to each other. In the face of the overwhelming advantages of strong manufacturing brands such as Europe, the United States and Japan, it is more urgent to explore how to be invincible than to explore how to win the world.

Although Chinese manufacturing is the starting point for China’s industrial upgrading, we must also see the huge costs paid for it while ushering in this historic opportunity.

In other words, the opportunity and crisis are like the two sides of a copper board. The pros and cons must be constantly balanced.

After experiencing the wave of automobile layout consolidation in 2002, the Chinese automobile industry ushered in a strong policy typhoon in 2003. On April 28, the National Development and Reform Commission released the "New Automobile Industry Policy" to all sectors of society to solicit opinions for revision. It took nearly seven months to come out on December 15th. Before this, on October 3, the industry’s long-awaited “Administrative Measures for Auto Finance Companies” has just landed. When the two major policies announced the world, a "brand franchise management measures" (draft for solicitation) has long been distributed to relevant ministries in August this year.

The policy of little action before this, in the beginning and the end of the year, made the entire automobile industry feel faint. The verdict on the fate of the Chinese auto industry in the future has entered a countdown.

"Westernization Movement"

The Chinese car industry really started 16 years ago. In March 1985, Shanghai Volkswagen Automotive Co., Ltd., a joint venture between China and Germany, was officially established. In the atmosphere of urging the development of the national automotive industry, the establishment of SAIC Volkswagen has in fact opened up a joint venture with the Chinese automobile industry to “defend against foreigners” in the future.

The original intention of the policy at that time was that China had to take a high starting point, large quantities, and professional roads to develop cars. The leaders of the State Council hope that these companies will adopt the CKD method (assembly of foreign parts and components) to introduce the first-generation products. Through digestion and absorption, they will accelerate the formation of self-development capabilities and eventually achieve the goal of getting rid of technology dependence and creating their own brands. This strategy was then summarized as "market-for-technology."

No one doubts the Chinese government’s determination to “change the market for technology”. However, the support of the three major groups from another perspective is equivalent to putting the fate of the entire Chinese auto industry on the top three auto groups. Facts have proved that the change in the situation is far from the blueprint of the Chinese government. The strategy of “strateging the skills of the foreigners to control foreigners” has not become a reality. On the contrary, the joint venture road of the three major auto groups has gone very hard at each step.

For multinational corporations, the higher the degree of localization, the less profitable foreign capital will be. Therefore, both the general public and Citroen have adopted delayed tactics to delay the upgrade. And in terms of brand marketing, pricing, etc., foreign parties are always reluctant to relax control.

Blindly stressing the national productivity has also brought another result. In the process of CKD, the company will invest all its capital and human resources in the process of localization. The capacity for independent development and design will gradually shrink, and basically no funds will be invested in the development. The technology development agencies are also mainly merged into agencies that provide services for localization. Technology is increasingly dependent on technology.

Independent development is the hallmark of an independent industry, and if it is copied entirely in accordance with CKD, technology dependence will make the national automobile industry an overseas processing factory for multinational companies.

The three major three small structures have changed

The game of the joint venture process has caused the three major juniors and the deceased to change their minds and minds. The spirit of “changing the market for technology” has gradually faded in the game. Around the year 2000, the situation in the auto industry investment "rebuilding vehicles and light parts, re-introducing and lightly developing" began to prevail.

An expert from the Policy Research Center of the State Council told the reporter: “People bring in mature products and help you do brand marketing, and as long as you assemble the car, you can jointly enjoy the vast Chinese market and share it with multinational companies 30 years a year. % of high profits."

The real change occurred in 2000. In order to welcome access to the WTO, in 2000, China amended the "Funded-funded Enterprises Law" and no longer required localization rates. It was later proved that this incident directly disrupted the strategic deployment of the three major companies in the 1988 Circular on Strictly Restricting the Production of Cars.

Without the hard constraints of the policy, many joint ventures gradually began to replace localization with global procurement. Domestic car manufacturers have embarked on the road of CKD and SKD in large numbers, and many models have even adopted large-scale assembly methods.

This is the result that the multinational joint venture hopes to see at the beginning. According to an engineer involved in Shanghai Volkswagen CKD, the price of Poussin has dropped from more than 200,000 to more than 90,000 in the 20 years since it was put into operation, but in 1998 and 1999, it produced more than 230,000 cars. Shanghai Volkswagen still earns about 6 billion yuan in profits. Similarly, FAW-Volkswagen sold 60,000 cars in 1998 and made a profit of 800 million yuan. In 1999, it sold 82,000 cars and earned a profit of 1.3 billion yuan. In the same year, Guangzhou FAW production Accord, 20,000 cars also earned 600 million yuan in output. Profits have become Honda's most profitable company in 19 depots worldwide.

The huge market did not in exchange for the technology of multinational companies, but it led to another result. Civil and other industrial capitals have been stunned by the auto industry and created a number of heroes. In 1996, Li Shufu began planning to enter the automobile industry. In 2001, Geely was listed in the automobile catalog and obtained a license for legal production. Chunlan Group had launched the motorcycle and merger truck factory as early as the 1990s. Tao Jianxing's purpose was to accumulate technology for entering the car manufacturing industry. Tao Jianxing, holding billions of funds in his hands, promised once and again that he would pledge to shoulder capital investment of several billion yuan. If it is not enough, he can absorb more than 10 billion yuan of funds.

Time was fixed in 2002. The original "Tianjin Xiali, Beijing Jeep, Guangzhou Peugeot" was three small, Tianjin Xiali has been merged, Guangzhou Peugeot closed down, Beijing Jeep is still waiting, replaced by Anhui Chery, Shenyang Brilliance, Zhejiang Geely and other non- The rise of fixed-point car companies.

The policy of “supporting the three major and three small” has been replaced by the pattern of dominating the group. The "Westernization Movement" of the Chinese auto industry has actually deviated from its original intention.

Where to find the second road

From the tech-intensive and capital-intensive nature of the automotive industry, neither the government nor the automotive industry has much hope for the future of private and local auto companies. The government’s hopes for the development of the Chinese auto industry are still pinned on large-scale joint ventures.

On December 15 this year, the National Development and Reform Commission decided to "reduce the code to deal with chaos" -- the introduction of a new automobile industry policy. The new policy proposes four major rules: Governments at all levels must not use fiscal funds for new construction or expansion of automobile projects; for investment projects that do not comply with industrial policies and fail to report and approve according to prescribed procedures, commercial banks must not make loans; The competent authorities should effectively strengthen the management of land use for automotive enterprises. The construction and expansion of land for automobile enterprises must be in conformity with the overall planning for land use. The scale of land use must comply with the provisions of the “land use index for construction of project projects” promulgated by the State; all relevant enterprises must strictly abide by the development of the automobile industry. "Regulations" concerning the approval management system for investment projects in automobile manufacturing enterprises.

According to relevant experts from the China Association of Automobile Manufacturers, “the rectification of the automotive market, the phenomenon of poor distribution, the competent authorities are hoping to support the three major automobile groups in a more vigorous policy.” However, Chinese auto companies that have lost their brands and technologies have in fact become The processing base of multinational companies in China. Having experienced the failure of the first Westernization Movement, where is the second road of the Chinese auto industry?

·Reporter's notes

The opportunity of the world automobile factory?

This year, GM, Volkswagen and other companies have proposed an ambitious plan to further expand the Chinese market. On July 15th, Dr. Pace Reid, chairman of Volkswagen AG, announced that: German Volkswagen will increase investment in Shanghai and Changchun. Total investment in the South and North of China amounts to about 6 billion Euros, of which 60% is new product input. Volkswagen plans to produce 1.6 million vehicles.

In November this year, General Motors Chairman and Chief Executive Officer Wagner also said before the Tokyo Motor Show that the company plans to do its utmost to increase China's production capacity in the quickest and most effective way.

Behind the massive expansion of multinational companies in China is actually a signal that these companies' global manufacturing centers are transferring to China. At present, GM is encouraging its US parts suppliers to transfer some of their production to China and intends to increase the purchase amount of Chinese suppliers.

Ford set up a procurement center in Shanghai in April 2002, and purchased 1 billion US dollars of components in China in 2003 for the company's markets in Europe and North America. If it goes well, it will increase the purchase amount to 10 billion in 2010. USD, which is equivalent to 15% of its global annual spare parts procurement; from establishing a joint venture in Shanghai in 1995, GM has now developed more than 300 competitive suppliers in China, but regardless of its own purchase volume or large or Small, GM’s four requirements for suppliers’ quality, service, technology, and cost are always the same.

The choice of strategic direction of multinational companies is obviously more for their own interests. A very real problem is that due to competition and cost considerations, modern and intensive e-procurement is becoming an important process for the operation of multinational companies. At the same time, multinational companies are more focused on core competencies than in the past, and outsource non-core businesses in the supply chain to partners.

As the United States' three major auto companies have made plans to purchase parts and components from China, in August 2003, the American Automobile Union once demanded negotiations with General Motors Ford and DaimlerChrysler. The auto union believes that such measures by the three giants are a factor that caused the "losing of two million manufacturing jobs in the United States in the past two years."

As early as when China chose the Brazilian model or the Japanese-South Korean model, some experts put forward the view that “China should not mention the national auto industry again under the background of world economic integration”. The factual basis for supporting this view is that only a few countries such as Germany, the United States, and Japan currently have their own automobile industry in the world, and other developed countries in Europe and the United States do not have their own automobile industry, but this does not affect the industrial development of the country. Many countries What is pursued is the international division of labor in the automotive industry chain.
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