tag:blogger.com,1999:blog-2755700415043205247.post3098565098962298306..comments2023-03-28T08:18:07.711-07:00Comments on ChinaBizGov: Guess What's NOT in China's Auto PolicyG. E. Anderson ---http://www.blogger.com/profile/11194863913108812712noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2755700415043205247.post-40518628932435809752009-04-08T14:54:00.000-07:002009-04-08T14:54:00.000-07:00Thanks for your excellent points, Bill. I am happ...Thanks for your excellent points, Bill. I am happy to have your insider's perspective here.<BR/><BR/>I did not intend to imply that foreigners are immediately on their way out. Since the policy intends for domestic brands to account for 40% of the market in three years, that means that foreign brands will still occupy the other 60%.<BR/><BR/>Also, if China's market grows at 10% per year according to their plans, then, even if the foreign brands lose 15% of market share over the next three years, they would still be selling about the same number of vehicles every year as they do now.<BR/><BR/>What I think is interesting here is that, whereas the foreign contribution has been a part of auto policies in the past, the fact that it doesn't even get a mention in this most comprehensive of policies is quite significant.<BR/><BR/>What I don't think, however, is that this means foreigners will have no role whatsoever going forward -- just that it will diminish over time. The JVs will cease to be the centerpieces of auto production as the domestic brands improve. And they will improve because that is basically what the policy is ordering all Chinese auto companies to do. (If anything, there is a lot of wasteful spending on incremental improvement at the moment.)<BR/><BR/>However, I agree with you 100% that most of the breakthrough innovations in this space will, for the time being, continue to come out of the US. (See my response to Aimee's comments to my previous post.)G. E. Anderson ---https://www.blogger.com/profile/11194863913108812712noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-55054409718282501792009-04-08T04:36:00.000-07:002009-04-08T04:36:00.000-07:00Greg,The role of the foreign auto makers does not ...Greg,<BR/><BR/>The role of the foreign auto makers does not have to be written in he policy documents. The foreign OEMs will continue to be the source of technological innovations for the Chinese car companies until the capabilities in the critical areas of development have been localized. China has given a lot of careful thought to the critical capabilities that are required of an automotive enterprise and have relied on foreign OEMs - prodded by localization policies - to provide access to those technologies in their JVs or through their supply base. A couple of forces run counter to the plan to wean China from their dependence on foreign auto technology:<BR/><BR/>1. The simple fact that Chinese consumers reward foreign brands with premium pricing and thereby higher margins. Chinese consumers who can afford it buy foreign brands and even imported brands. China can try to tip the playing field toward the domestic brands - but Chinese consumers are pretty savvy - they know the Chinese brands are technology followers have not delivered a clear value proposition beyond "low price".<BR/><BR/>2. The lack of maturity of the industry places Chinese OEMs at least 1 -2 generations behind the competition in terms of learning how to engineer cars to market requirements. Sure China can buy assets to try to close the gap...but it takes time and experience to close the innovation gap and until then, there is a critical role for "foreign experts" to provide the "software" to run the "hardware".<BR/><BR/>So independent of what is written, there is a clear role for the foreign automakers. Until affluent Chinese shop for Chinese premium brands, I doubt they can get rid of the wai guo ren from the China auto industry.<BR/><BR/>Bill RussoBill Russohttps://www.blogger.com/profile/15635579814615236932noreply@blogger.com