Tooth and nail- Why China is home to the world’s most fragmented auto industry.docVIP

Tooth and nail: Why China is home to the world?s most fragmented auto industry China?s car industry gives the impression of a badly tended garden, overgrown and sprawling. Instead of pruning, wayward car plants have received big doses of government support. as a result, China is home to the world?s most fragmented auto industry. according to LmC automotive, Chinese and foreign auto makers now offer 94 car brands and 476 models in China, compared with less than 40 brands and about 370 models in the US, the world?s second largest market. many Chinese brands cling to a tiny share of the market. The top 10 foreign and Chinese manufacturers account for about 80% of the Chinese market, while more than 100 other companies compete in China for the remaining 20%, said Bill Russo, an analyst at Booz Co. With so many players, the central government has been forced to split its subsidies many ways, and companies have had more difficulty capturing consumer attention. That has made it difficult for national champions to arise. Both Beijing and industry analysts insist that industry consolidation is an essential part of building strong Chinese car brands. But consolidation has been a long time coming. any effort to slim down the industry has to take on profitable car companies and powerful local interests. a history lesson The industry?s basic design dates back to deng xiaoping, who jump-started China?s economy in the 1980s by encouraging a wave of decentralization. Shanghai, Changchun, Wuhan and other cities were encouraged to build car companies that supplied local cadres and state-owned companies – a system that persists today. China?s sea of brands became even wider as Beijing gradually began allowing foreign companies to establish joint ventures in China. Unlike Japan or Korea, which built strong domestic industries by banning foreign companies altogether, China grudgingly began to accept foreign-local joint ventures beginning with volkswagen in 1984.