Recommendation

  • To pursue the goals of energy conservation and environmental quality, the Chinese government should employ vehicle performance standards on emissions, fuel economy, durability, and safety. Such a move is likely to restrict the field to those manufacturers that have the level of technology to meet the performance standards and are capable of producing vehicles of the required quality. The overall effect will likely be consolidation of the industry, as suggested in the five-year plan for the development of the automotive industry.

The growing market for automobiles in China will require expansion of related services such as fuel distribution and sales, credit systems, automobile maintenance facilities, vehicle inspection, parking facilities, and liability insurance. Because most of these services are in the public sector in China, the government will have to ensure that services and facilities keep pace with market growth and do not unintentionally limit the acceptance of personal automobiles among the Chinese people.

THE FUTURE OF THE CHINESE AUTOMOTIVE INDUSTRY

After many years of effort, China has developed a strong domestic motor vehicle industry, but one that is heavily dependent on overseas manufacturers for technology. At present, China is the ninth largest car and truck producer in the world and the largest motorcycle manufacturer. Although its largest producers are partnered in joint ventures with several major world manufacturers, most of the technologies currently used in Chinese-manufactured vehicles are incorporated into the vehicle designs by the joint venture partners.

In its five-year plan for the automotive industry the Chinese government has laid out an ambitious program of industry consolidation in order to produce cars that will be competitive in international markets and will not depend on joint venture partners for key technologies. The plan sets clear targets for emissions control, safety, and fuel efficiency. And it endorses research efforts on advanced technologies such as electric, hybrid, and fuel cell power sources. But China faces many challenges in its effort to produce an indigenous vehicle that is clean, efficient, affordable, and internationally competitive. The major barriers are:

  • The investment by domestic manufacturers in research and development (R&D) is far below that of foreign competitors.

  • Even though China’s car market has grown rapidly, it is still many



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