China’s Auto Market – Key for Global Success

January 25, 2007

Anyone who has walked the streets of any major Chinese city knows that the automobile has changed things.  The inability to see the sun on a cloudless day is testament to the fact that China has the second largest market for cars in the world, lagging only the United States .  And yet, this is only the beginning of what will become the world’s largest auto market soon.

Toyota passed Ford in 2006 to become the world’s second largest auto producer.  GM is struggling to retain its top spot.  Traditionally, the contest has been fought in the USA .  No longer.  Today it is truly a global market and so a global struggle for dominance and even survival.  China is the current battleground that will determine who emerges as the world’s largest car maker.  As a January 10, 2007 International Herald Tribune article headlined, “GM banks on China in showdown with Toyota .”  (Keith Bradsher, p. 10). 

GM’s Chinese strategy is about ten years old, with its first factory opened in 1998.  It depends on joint ventures required by Chinese regulations for foreign entry.  Under the legendary Phil Murtaugh (now working for SAIC, a company with which GM has a major joint venture), GM’s Chinese division was known for its independence from Detroit and droit ability to design vehicles for the Chinese market.  GM over time surpassed many other foreign JV competitors in China , and made a run at VW, long the market leader in China , and still the vehicle most recognized among taxis.

GM changed its plans in 2005, when it decided to increase global integration and require its Chinese operations to coordinate more closely with Detroit .  It has maintained its substantial stake in China and is expanding its efforts.  While losing large sums in the US , GM has made continuing large profits in China .

Toyota is a player as well in China , and in the views of some may emerge as China ’s major producer.  While the Toyota/GM struggle plays itself out in China , astute observers will give greater attention to the domestic Chinese auto producers, who are rapidly expanding their production (through significant double-digit increase targets).  In ten years, the battle for market share will be a far more complicated picture than Japanese and American names.  The global car market is a fact, and China is one of the reasons.