On February 25, Dongan Power, a subsidiary of China Aviation Industry Corporation, announced that AviChina is planning to establish a joint venture with Dongfeng Motor. This move comes shortly after SAIC successfully merged with Nanjing Automobile and started to gain momentum. Before the 2008 auto conferences, Hafei Auto, a subsidiary of Hafei Automobile, also revealed plans to relocate its automotive business to Dongfeng, marking another significant development in the domestic automobile industry.
Behind the "heat" of production and marketing lies some cold thoughts. At the beginning of 2008, while many in the industry celebrated the prediction that China's auto production and sales would surpass 10 million units and overtake the U.S. to become the world’s largest market, some analysts remained cautious. They pointed out that even a year’s total output in China was still lower than that of major global automakers like General Motors or Toyota, which both exceeded 9 million units in 2007.
If Chinese automakers aim to produce and sell joint-venture brands, their own brand performance will likely lag behind international giants. Even the acquisition of South Korea’s Ssangyong Motors and the reorganization of Nanjing Auto—key steps taken by SAIC—may not be enough to position them as global players, especially with a target of 2 million units in 2008.
Looking at the current global auto landscape, the structure has evolved from the traditional “6+3†model to a more complex “4+X†format, where companies are interwoven across Europe, the U.S., and Asia. As a rising force in the Asian market, China still maintains a “3+X†pattern, but multinational corporations are increasingly entering the country, aiming to secure a foothold in what is expected to be the world’s largest auto market.
Many foreign automakers are implementing a “China + 1†strategy, expanding operations into neighboring countries like Russia, India, and Southeast Asia. This creates a complex web of partnerships and investments, making it harder for Chinese automakers to compete on an equal footing.
Meanwhile, international auto giants continue to restructure and form alliances. For example, GM, Ford, and Renault-Nissan have formed strategic relationships, while GM has sold stakes in Fiat and Suzuki, and Ford has divested assets such as Aston Martin. These moves highlight the dynamic and competitive nature of the global auto industry.
In China, the top three state-owned automakers—SAIC, FAW, and Dongfeng—are pushing forward with ambitious goals. SAIC aims to reach 2 million units, FAW targets 1.7 million, and Dongfeng is set at 1.35 million. Meanwhile, second-tier companies like Chery, GAC, and BAIC are vying for the remaining market share, setting their targets between 900,000 and 1.05 million units.
Despite these lofty goals, the Chinese auto industry remains in a precarious position. With fierce competition and growing pressure from global players, the need for consolidation and restructuring has never been greater.
Historically, during the Warring States period, strategies like “Lian Heng†(horizontal alliances) and “Zongheng†(vertical integration) shaped the balance of power. Today, Chinese automakers must avoid being outmaneuvered by both foreign giants and domestic competitors.
Experts predict that 2008 will see a surge in mergers and acquisitions within the Chinese auto sector. Beyond state-owned enterprises, private companies are also looking to consolidate, merge, and integrate resources to strengthen their positions.
Some bold predictions suggest that if Zhejiang-based private automakers can unite, or if FAW-Joint Changan and Hebei’s Great Wall, ZTE, and Shuanghuan join forces, the Chinese auto industry could transform significantly. Similarly, if GAC merges with BYD or Jianghuai Automobile joins forces with Chery and Ankai, the industry could take a major leap forward.
The government must play a key role in this process. It should act as a “business incubator,†offering policy and tax support, while helping companies build strong R&D centers, procurement systems, and service hubs. In an era of rising material costs and resource scarcity, creating affordable, energy-efficient, and eco-friendly vehicles is crucial.
Only through smart restructuring, innovation, and strategic alliances can the Chinese auto industry survive and thrive in the global market. By doing so, it can truly live up to the title of the world’s largest auto market.
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