(When) Will China Boot Foreign Car Manufacturers?

When I came to China for the first time in 2004, after-work congregations of foreign executives who worked for Chinese auto joint ventures usually went like this: Someone muttered into his Tsingtao beer, or something stronger: “The Chinese will want us out within eight years.” Upon hearing this, all others around him nodded gravely, and another round was ordered. Over the years, more and more expats were sent home to Detroit, Wolfsburg, and Aichi. The silly “twin” system (a foreigner and a Chinese on the same job) stopped. Of course, the open secret was never officially discussed, but the outcome appeared to be inevitable: The days of the foreigners are numbered.

It will be 2010 within a few weeks, and the foreign (U.S., European; Japanese) joint ventures are still seemingly safely ensconced in China. As reported umpteen times at TTAC, China has become a strategically important market for most auto manufacturers. Nobody thinks anymore that come 2012, China will kick all joint venture partners out.

Yet, here is the first step in that general direction:

50 percent homegrown by 2015 is no ambitious goal. Currently, 44 percent of all passenger cars sold in China don’t carry a foreign badge. Six percent more in 5 years, big deal.

With sedans, the matter becomes more interesting. Indigenous sedans hold a 29 percent share of the Chinese market, according to official data cited in the report. The Chinese government wants to see that share grow to 40 percent of the market by 2015.

In the first half of 2010, the Chinese government is expected to publish guidelines to the above effect. The guidelines are also expected to demand that Chinese companies hold at least 50 percent of any newly-formed joint ventures that make alternative energy cars, batteries and key components. This pours water on the hopes of foreign automakers that they could some day be the sole owner of a Chinese car manufacturer. It’s going in the opposite direction.

The bottom line is that the car executives who were crying in their beers were wrong (again…) and that the status quo will continue in the foreseeable future, albeit with a gradual, step-by-step Sinofication..

Anyway, many supposedly “domestic” cars rely heavily on foreign platforms, foreign technology, and sometimes heavy foreign design inspirations. Witness the parts of Saab being carted off to Beijing, where they will emerge as allegedly domestic cars. The total domestication of the Chinese car industry will take much, much longer. But one thing becomes clear: In the long run, China wants to stand on its own four wheels when it comes to cars. The guidelines (if they will be as reported …) will be the first official step in that direction.

Will China Boot Foreign Car Manufacturers?

When I came to China for the first time in 2004, after-work congregations of foreign executives who worked for Chinese auto joint ventures usually went like this: Someone muttered into his Tsingtao beer, or something stronger: “The Chinese will want us out within eight years.” Upon hearing this, all others around him nodded gravely, and another round was ordered. Over the years, more and more expats were sent home to Detroit, Wolfsburg, and Aichi. The silly “twin” system (a foreigner and a Chinese on the same job) stopped. Of course, the open secret was never officially discussed, but the outcome appeared to be inevitable: The days of the foreigners are numbered.

It will be 2010 within a few weeks, and the foreign (U.S., European; Japanese) joint ventures are still seemingly safely ensconced in China. As reported umpteen times at TTAC, China has become a strategically important market for most auto manufacturers. Nobody thinks anymore that come 2012, China will kick all joint venture partners out.

Yet, here is the first small step in that general direction:

By 2015, China wants half of passenger cars, including sport utility vehicles, sold in China to be self-developed by Chinese automakers, the Shanghai Securities News says (via Gasgoo.) No sources are named, but the paper is owned by the Chinese government.

50 percent homegrown by 2015 is no ambitious goal. Currently, 44 percent of all passenger cars sold in China don’t carry a foreign badge. Six percent more in 5 years, big deal.

With sedans, the matter becomes more interesting. Indigenous sedans hold a 29 percent share of the Chinese market, according to official data cited in the report. The Chinese government wants to see that share grow to 40 percent of the market by 2015.

In the first half of 2010, the Chinese government is expected to publish guidelines to the above effect. The guidelines are also expected to demand that Chinese companies hold at least 50 percent of any newly-formed joint ventures that make alternative energy cars, batteries and key components. This pours water on the hopes of foreign automakers that they could some day be the sole owner of a Chinese car manufacturer. It’s going in the opposite direction.

The bottom line is that the car executives who were crying in their beers were wrong (again…) and that the status quo will continue in the foreseeable future, albeit with a gradual, step-by-step Chinesification..

Anyway, many supposedly “domestic” cars rely heavily on foreign platforms, foreign technology, and sometimes heavy foreign design inspirations. Witness the parts of Saab being carted off to Beijing, where they will emerge as allegedly domestic cars. The total domestication of the Chinese car industry will take much, much longer. But one thing becomes clear: In the long run, China wants to stand on its own four wheels when it comes to cars. The guidelines (if they will be as reported …) will be the first official step in that direction.

NOFORN in Chinese. Picture courtesy angelgracia.com