Auto industry needs time

Building an automotive industry requires at least three key success factors: investments, know-how, time. In China, savings to finance investments are not a problem; know-how can be bought, time cannot easily be compressed.
China’s auto domestic market is a prolific cash cow. Last year its world leadership has been confirmed. More than 18 million vehicles hit the road, outstripping a “mere” 11 million in the USA. The increase and its consequences have been so high (32,3% y-o-y) to induce the Government to take restrictive measures: end of tax incentives, two rises of gasoline price, limits to number of new vehicles in some big cities.
The first four Chinese manufacturers (Saic, Dfm. Chang’an, Faw) have a cumulative market share of 61%. Still, the industry is fragmented; it has catered to the needs of emerging customers, but has failed to impose a new model. “Fordism” and “toyotism”, the epoch making paradigms are still unchallenged. They have been (partially) imitated, not yet replaced.
Know-how can be bought, as Hawtai’s 30% of the prestigious Swedish brand Saab confirms. The investment will be a 150 million Euro injection for the cash-desperate European company, in exchange for access to modern technology and distribution network.
Times are really changing, as a young company like Hawtai, born in 2000, with a production capacity of only 350,000 vehicles/year, saves from bankruptcy a 60-year-old company, world leader for elegance and driving performances. Investments are a shortcut to technological progress, a vital necessity China auto industry. Its car models are not styled, key technologies are mainly bought from foreign players, components do not meet state of the art standards and fuel consumption is not top. Only 90,000 cars are were imported in China last year and just as many vehicles were sold abroad, despite their low comparative cost.
To catch-up with traditional auto manufacturing countries, product and process innovation at large are going to be crucial to China, but progress is not the simple combination of scientific discoveries and cheap labor cost. It also entails genuine inbred engineering tradition and the faceted aspects of mobility. Time will tell when the Chinese car industry will be the world leader.