The new automotive landscape in China: local players get in the game.The Chinese government's revised automotive policy, which aims to catapult catapult (kăt`əpŭlt'), mechanism used to throw missiles in ancient and medieval warfare. At first, catapults were specifically designed to shoot spears or other missiles at a low trajectory (see bow and arrow). local players into the global OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and league, encourages consolidation within this fragmented industry. It also makes things more challenging for traditional global OEMs. Under the revised policy, which was published in April 2005, an OEM has the right to decide upon joint ventures and new product plans if it gains control of 15 percent of the market. Local automotive OEMs have been given a strong incentive to build up scale fast. And they have reacted quickly. Not surprisingly, it was well-positioned, top-tier companies that spearheaded merger and acquisition (M & A) activity. China's top five automotive companies, which between them control 67 percent of the market, have either already completed M & As or are in merger talks. Recent M & A activity includes Shanghai Automotive Industry The automotive industry is the industry involved in the design, development, manufacture, marketing, and sale of motor vehicles. In 2006, more than 69 million motor vehicles, including cars and commercial vehicles were produced worldwide. Corporation's acquisition of China National Automotive Industry Corporation; Changan's purchase of Jiangling, and potential merger with Zhongxing. Ongoing merger discussions are taking place between Hafei and Changhe, SAIC SAIC - http://saic.com. and Hongyan; Chery and First Automotive Works-Yangzi are in serious talks. [ILLUSTRATION OMITTED] The revised policy marks a radical about-turn for the Chinese government Ever since Republic of China founded in January 1st, 1912, China has had several regional and national governments. List
Companies that depend on local protection and local political struggles for their existence continue to be commonplace in almost every province. Their small scale, low efficiency and lack of experience make them inferior competitors to international OEMs, which have the upper hand in product development, branding, cost control as well as sales and distribution management. These companies will become fodder fodder feed for herbivorous animals, usually used to describe dried leafy material such as hay. See also forage. fodder beet a root crop grown solely as a source of feed for cattle, possibly sheep. for competitive local OEMs trying to build up their market share. Further M & A activity among local Chinese OEMs is inevitable. This consolidation process will likely leave only four or five automotive giants in China. Yet it will also mean the end of the road for hundreds of small companies. Global OEMs should be concerned about the Chinese government's revised policy. They need to consider three aspects. 1. Global OEMs should carefully reconsider re·con·sid·er v. re·con·sid·ered, re·con·sid·er·ing, re·con·sid·ers v.tr. 1. To consider again, especially with intent to alter or modify a previous decision. 2. their overall China strategy and honestly answer the following questions. What are our overall objectives for China? Where do we want to compete? Do we want to treat China as a market only, or are we trying to leverage China as a local cost production For global business? 2. Global OEMs need to reevaluate their partnerships in China. Companies need to determine whether the partner and partnership can survive and thrive under the new policy. OEMs need to decide whether they need to invest in new partnerships or smoothly phase out existing ones. 3. Global OEMs need to act quickly. In coming years, room to maneuver will decrease as Chinese companies Chinese owned companies can be defined as enterprises within mainland China, Hong Kong, Macau and the Republic of China (Taiwan):
By Vivian Zheng, partner, Roland Berger Strategy Consultants Roland Berger Strategy Consultants is a strategy consultancy firm based in Europe and founded in 1967 in Munich. In 2005, their sales were approximately EUR 550 million. With 33 offices in 23 countries, the independent partnership is solely owned by its more than 130 partners. , Shanghai, vivian_zheng@de.rolandberger.com |
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