For the car industry, less is more

The symbolic value of Chinese supremacy in the auto industry is intact. Despite ups and downs, the top position reached in 2009 is indeed a symbol of a modern and powerful country. China ranks first worldwide in both manufacturing and consumption of vehicles. The economic downturn makes players in the affluent markets turn their eyes to China, where all the big companies invested heavily. Now, the question is: Are there too many plants in China? According to J.D. Power & Associates, a reputed global consulting company, by 2013, China will have a manufacturing capacity of 31 million vehicles, astonishingly more than the current 18 million. Theoretically, this massive increase is possible, since the country has a low ratio of cars/population (approximately 1:70, much lower than the level of some industrialized countries, for example Italy, with a ratio of 1:2).
This has caused intensifying concern, with some demanding a radical shift on the industrial policy, while others denouncing the uncontrolled car registrations, endless new highways construction and demolition of old urban fabrics. It calls for a solution to tackle this “quantitative mania” that can lead to an unprecedented level of oil consumption and pollution. Curiously enough, these voices do not come from pure environmentalists or people being nostalgic for traditional life, but signals of a fierce battle among the Chinese establishments. The Energy Research Institute under the powerful National Development and Reform Commission (NDRC) stated: “The government must take the leading role in controlling unrealistic growth”. The Ministry of Environmental Protection echoed the concept: “For the auto industry to develop, we should not try to sell more, but to improve the units sold.”
Obviously, they encourage what Beijing has recently done to rein in car sales. But, for them, terminating the incentives for car buyers and restrictions on registering are not enough. More innovative models with better fuel efficiency (to reduce the carbon-dioxide emissions) and low-consumption engines should be manufactured, such as hybrids and all-electric. These requests are in sharp contrast with the mindsets of existing manufacturers, often supported by local governments.
They are quite stubborn in keeping the current situation, because they are often not responsible for generating income and employment for the local population. Behind the current dispute, two untied knots are visible. The first one has a social aspect: Traffic in big cities has become unbearable, pollution is on the rise, and the energy consumption requires growing purchases of oil from abroad. In addition, Beijing is concerned about building a national identity for Chinese cars to be exported. The move should start in 2015, when supposedly the efficiency, the design and the cost will have been accepted the world over. South Korea’s experience was a nightmare, from which China could draw some lessons. It took years for Seoul’s car to smooth away the image of being cheap, unworthy, old in concept and poor in performances. To avoid the same trap, China has to quickly turn to innovation, although it means an increase in costs. Quality should prevail, even if at the expense of quantitative record.