An infographic showing the key players in the Chinese auto joint venture market. (Reuters)
Foreign carmakers have dominated the Chinese auto market in recent years, but their rosy days may be limited.
To operate in China, the Chinese government requires foreign carmakers to enter into joint ventures with local manufacturers in order to keep Chinese brands from sinking. However, this system hasn't been working as planned, since foreign automakers still dominate the market and take up a huge share of their Chinese partners’ total business. According to a new Reuters op-ed by columnist Ethan Bilby, this may prompt the government to change its policy in the future toward one of two extremes: letting foreign automakers operate freely, or kicking them out of the country altogether. Bilby predicts that the government will take a moderate approach that falls between these options:
A more plausible outcome is that Chinese officials will find more subtle ways to help domestic brands. For example, they could impose extra taxes on higher-priced cars, which are mostly foreign models. They could insist that government officials and executives at state-owned enterprises trade their favored Audi saloons for Chinese alternatives. And they could make it harder for foreign companies to open new factories in China.
The related Reuters infographic above shows the many partnerships that have been created between foreign and Chinese auto companies (an interactive version is available at Reuters).