Innovation: Critical to Development of China’s Auto Industry

 

Marvin Zhu

After two years of strong growth, the car market in China has begun to slow. Chinese brands, which have grown considerably over the past few years, seem to have lostmomentum faster than their joint-venture counterparts. According to the J.D. Power Asia Pacific 2011 China New Vehicle Intender Study,SM the purchase intent toward local brands has fallen from 26% in 2009 to just 20% this year.

Although the local OEMs have continued launching new products, more and more car buyers are voting with their feet, as they find most of those “new models” are facelifts or copies of other popular models. Meanwhile, the joint ventures are offering cars of similar size at increasingly competitive prices. Continue reading ›

Risks Apparent as China Remains Preoccupied with Size and Speed

 

Marvin Zhu

China’s government has earmarked a previously unimaginable 2 trillion yuan (about $300 billion) to build the world’s largest national high-speed railway network. So far, only about half of the total planned route distance of 25,000 kilometers (16,000 miles) has been completed. One of the most recent additions to China’s high-speed railway marvel is an express train between Beijing and Shanghai, which opened in June 2011, some two years ahead of schedule.

China’s ambitious “great leap forward” in industrialization and modernization has been understandably making headlines around the globe. However, these glowing platitudes abruptly turned somber on July 23, 2011, when one of the celebrated Beijing-Shanghai high-speed railroad trains crashed, killing 40 people and injuring some 200 others.

While bad weather and a subsequent system failure were found to be the main causes of the crash, some people speculate that the haste with which the railway was built—driven by thought of generating fast profits and political goodwill—should not be overlooked as a mitigating factor. China has been operating for some time on a progressively “build bigger, go faster” agenda, one where safety and reliability are not always given top priority.

Automotive Industry Caught in Bigger, Faster Tailwind

For more than a decade now, the “build bigger, go faster” mantra has prevailed in China’s automotive industry as well. Ever since China supplanted the US as the world’s largest automotive market in 2009, industry players have been in a fierce race to expand. Over the past two years alone, trillions of yuan have been invested in the car-making business, as automakers race to ramp up production. This frenzied expansion is expected to raise China’s vehicle production capacity to 31 million units by 2013, nearly doubling total sales recorded in 2010. Continue reading ›