China's Auto Industry To Receive Long Overdue Pruning
Nobody knows for sure how many automakers China has. The guesses were somewhere between 60 and 120. Now we have it official: It’s “more than 130 big and small companies in 27 provinces,” writes China Daily. But it looks like a lot of them need to seek other employment. After having made consolidation noises for more than a year, the Chinese government is about to bring their car companies down to a manageable number.
According to China Daily, “Chinese authorities are pushing ahead with reforms for the country’s automobile industry to leverage its increasingly important position in the global market.” Meaning?
The Chinese auto industry will be told to merge and to acquire “strong capable players, and across different regions, even in overseas markets.”
Right now, 14 automakers are responsible for more than 90 percent of domestic production and sales. The government wants to bring that number down to 10 next year, and possibly down to 7 or 6 thereafter. Two or three firms will have annual production capacities in excess of 3 million units annually, while the second rung of four or five automakers is expected to produce more than 1.5 million vehicles every year.
“Purchasing of assets or brands outside the country” will be encouraged.
It won’t need much encouragement. The big makers are all state owned. The few privately owned ones (Chery, Geely, BYD) are dependent on government financing and support. Currently, the Chinese industry is busy competing with itself and filling a ravenous market. It looks like they are finally gearing up to make themselves felt globally.
Fewer automakers mean fewer models, and some of the smaller automakers are possibly producing low-cost models that are appropriate only for the "ravenous" domestic market. Isn't China getting ahead of itself by pushing for export market development?