Porter Diamond Automotive Market China

Automotive market in CHINA China’s domestic car sales, growing at more than 10% annually, these growing sales were in the domestic market and did not improve China’s competitiveness in the global auto industry. The rise of China as a Automotive car producer has lead to better roads, new distribution channels, the deregulation of the auto market, and China’s WTO entry. The multinational automotive companies invest in China for several reasons they try to find lower production costs, increase their market share in that specific areas while increasing their efficiency while operating and producing.

In the early stages of China’s economic development, many foreign firms invested in China for cheap material and labor costs, as well as low worker unionization rate and environmental standards. Thus, most of China’s exports come out of miscellaneous manufacturing and labor-intensive industries. The central government has increased investment in basic infrastructure development in order to remove the bottleneck effect caused by low infrastructure conditions and to increase energy productivity, transportation quality and communication ability.

Although China’s auto firms have few competitive advantages comparing to leading global companies in terms of technological and managerial skills, China is still the largest potential demand market in the world. predicted that China’s average income will increase at an annual rate of 6% by 2011. Currently, for every 100 families in Beijing, 12 own private vehicles. While this number is insignificant compared with developed nations. Currently the country’s per capita GDP is low by international standards, and the majority of Chinese families are preoccupied with issues such as housing, medical care, and education.

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Many auto firms is the asymmetric distribution of China’s population and income. Competition in major cities has been accelerated in almost all market segments. During that period, in China, the supply chain underwent a major transformation. Multinational part suppliers began to work closely with local suppliers, in response to growing pressure from global auto assemblers. Meanwhile, Chinese domestic carmakers tried to improve their research capacity and economy of scale by standardizing local supply network. The first and most obvious strength is low production costs.

Secondly, available production facilities build a solid infrastructure for parts manufacture and technological upgrading. Major auto assemblers invested heavily in the emerging markets, increasing production capacity and modernizing existing plants. They are attracted not only by the sales growth prospects offered by low motorization rates in developing nations, but also by the potential cost reduction that may be obtained through integrating low cost manufacturing locations and spreading the vehicle development costs across a greater number of markets.

In China, the government promotes the development of large business groups in the auto sector so as to concentrate foreign investment and help build up competitive Chinese automakers. Finally a shared supplier network can help improve the suppliers’ economy of scale while promoting global quality standards and reducing the cost of vehicle manufacturing.

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