By Yang Zhongyang
Against the background of the slowdown of the growth of the global economy, China's new record highs of auto production and auto sales are gratifying, indicating that the auto industry's role in promoting the development of economy and society has been further enhanced. However, the market shares of Chinese auto brands have gone down, and the foundation of China's auto parts industry is particularly weak, indicating that there is still a long way to go before China can become a competitive automobile country.
According to statistics published by China Association of Automobile Manufacturers recently, in 2012, China's auto production and sales were 19.2718 million units and 19.3064 units respectively, increasing by 4.6 percent and 4.3 percent year on year, ranking first in the world for the fourth consecutive year and refreshing world record once again.
New records of production and sales of more than 19 million units, these numbers are indeed gratifying, and these are achieved in a time when global economic recovery was weak, growth of emerging economies was slowing down, preferential industrial policies had all expired, infrastructure construction slowed down, and some cities adopted purchase restriction measures. As one of the pillar industries of the national economy, the auto industry has a large volume, long industrial chain, high connectivity, and great consumption-boosting traction, and is an important jobs creator, its traction in boosting related industries being highly prominent. More than 19 million units of production and sales is an indication that China's auto industry is playing an increasingly important role in boosting the development of economy and society.
Besides the joy, there are some concerns. In spite of the apparent growth of production and sales of passenger cars, the market shares of Chinese auto brands have gone down. According to statistics, production and sales of passenger cars exceeded 15 million units for the first time in 2012, reaching 15.5237 million units and 15.4952 million units respectively, up 7.2 percent and 7.1 percent respectively from those of last year; among these, sales of Chinese brands passenger cars were merely 6.485 million units, accounting for 41.9 percent of total passenger car sales, their total market share dropping 0.4 percentage points compared with that of the previous year.
How come? On one hand, joint-venture brands are overwhelming while home brands are not competitive enough. Since last year, joint-venture brands have been nibbling away at the mid- and low-end market by reducing the price of their products; although the quality of home brands' products has improved, their brand influence is not strong enough to confront joint-venture brands. On the other hand, some large enterprises have not been doing their best in developing their own businesses. Take the leading SAIC Group as an example, according to CAAM's statistics, the group sold 4.4614 million vehicles in 2012; of these sales, Shanghai Volkswagen accounted for 1.28 million units, Shanghai GM accounted for 1.3635 million units, and SGMW accounted for 1.3226 million units; apart from the approximately 4 million units sales by these three joint-venture companies, sales of the group's self-owned brands are just insignificant.
Excessive reliance on "foreign aid" will inevitably lead to the gradual loss of control over the rules of the game and influence. This has become an agony of China's auto industry. What's more worrying is that, as production and sales of cars continue to climb and competition intensifies, the relationships between the upstream and downstream of the industry have become more stressed rather than more harmonious.
As we all know, components and parts are the foundation of a powerful auto industry, and they are the short slab in China's aspiration to building a powerful auto industry. Due to lack of protection and guidance, China's domestic auto parts industry is a mess. The parts and accessories system that was established in the process of the domestic production of Santana has not been able to become any bigger nor more competitive; what's worse, many of the enterprises have been annexed by multi-national corporations and are now nowhere to be seen after China's WTO membership. According to the Report of Foreign Capital's Control of China's Industry published by China Center for Industrial Security Research recently, at present, foreign capital not only controls the core technologies of China's key auto parts, but also monopolizes the parts market that supplies to the whole-vehicle sector. Now, foreign-capital auto parts companies, the number of who is not very big, take up more than 75 percent of the Chinese markets. Of China's more than 20,000 auto parts companies, the 8,000 companies that are above designated size account for only 20 percent of China's auto parts market, and 90 percent of this share concentrates on low-end products.
A powerful parts sector leads to a powerful auto industry, and a weak parts sector results in a weak auto industry. In recent years, some Chinese whole-vehicle auto brands have partnered with foreign-funded parts companies, which have undoubtedly created a new predicament for China's domestic auto parts companies. Joint-venture companies produce fixed products that are designed and developed abroad; accessory parts are mostly provided by original suppliers and have their own complete supply system. R&D capability of domestic parts companies is not strong enough, which makes it more difficult for them to participate in the original design of products. It is highly unrealistic to hope that joint-venture companies would drive the development of China's domestic auto parts industry. If even domestic whole-vehicle brands would give up Chinese parts enterprises, the consequence would be disastrous.
