Blog: Dave LeggettGiant panda gearing up, slowly but surely

Dave Leggett | 22 March 2006

It has been another week in which emerging markets have been in the news. The rise of the domestic carmakers in China is proceeding apace now. In terms of the big picture, that was always part of the Chinese game plan.

Stage one, knowledge acquisition: invite Western makers in for manufacturing joint ventures and acquire technology, learn how to design and build vehicles from them. Avoid Japanese JV partners initially, as they are poor on technology transfer (ie, they are smart). This was 1985-2000.

Stage two, parallel lines: introduce own models, independently developed, to the Chinese market. Still a big role for joint ventures as the industry needs to develop further and improve to international benchmarks. Limited exports to test the water, identify possible distribution partners. 2000-2010.

Stage three, reduced dependence: role of joint ventures declines as cheaper domestically developed products take more share. Local products are available in every segment of the market nation-wide. Exports growing, but not dramatically; mainly small cars. 2010-2014.

Stage four, panda is go: domestics dominate local market in volume segments, with foreign brands concentrated in smaller volume, higher value niches where the foreign brand values still count. Share of world auto market increases as Chinese products better meet international standards, cover more segments and are now extremely price competitive on the back of higher Chinese domestic market volume and low unit-costs. 2015 onwards.

Okay, the above is a little simplistic and the picture is maybe not quite as linearly sequential as I have suggested, but I think the main tenets of the game plan are there. The Chinese want their own auto industry and have had a strategy for getting it. Thus far, it’s going to plan. I think we’re well and truly in stage two now.

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