La Industria Automovilística En China

Integrative Case 11. Competing in the Chinese Automobile Industry. Qingjiu (Tom) Tao. Lehigh University. (From Global Business 2009 Update. Dr. Mike W. Peng)
This case describes the evolution in China's auto industry, from the late 70's when the country began opening up to the market economy, allowing the inflow of foreign investments made ​​by major car manufacturers. With reference to examplesof Volkswagen, General Motors, Peugeot and Honda, outline the different strategies followed by these groups.
The importance of the automobile industry in China is shown by the fact that exceeds the U.S. in car sales in the first quarter of 2009. Although it only represents about 3% of the country's industrial production in the 90's, it is regarded as a key sector because of the many industriesrelated to vehicle production, and its importance in creating employment (one in eight jobs is related to the automotive industry)
China's auto industry has its origin in the 20’s of 20th century (there is a detailed description of his beginnings in “The Chinese Automobile Industry” by Li Gang), although its greatest development has occurred since the economic reform of 1978, which startsmanagement model followed by China, which is inspired by the one followed by Japan and Korea, with strong government intervention. While in the case of these countries the industry was geared to promoting exports, China's intervention is aimed more towards the protection of the industry (infant industry argument).
In particular, with regard to foreign investment, the Chinese government has pursued astrategy of carrots and sticks, pulling it but putting at the same time strict limits on its shape and volume. As a result, China is the world's second largest recipient of foreign direct investment (FID) since 1993, and in 1997, over 200 of the 500 largest multinationals are operating in China.
Despite the liberalization measures in the 80's, there was no massive foreing direct investment inChina's auto industry. The initial reluctance of multinational companies to enter the automotive sector in China, should be motivated by uncertainty about the policy, legal and affordable place to develop their investments.
The Chinese government didn’t approve the establishment of wholly foreign-owned companies in the automotive sector, even after its entry into the World Trade Organization.Therefore, the formula used by foreign capital, has been the joint-ventures. According to data from China Statistical Yearbook, 87% of automotive sector projects between 1981 and 1998, had the form of equity joint venture (EJV), compared with 51% in other sectors less operated or regulated.
All companies have chosen this mean of entry, rather than exporting or licensing, which seems quite reasonable.Exports are charged with entry barriers through tariffs that would have limited the desired expansion, and multinational automakers would miss to take advantages such as lower labor costs and transportation. On the other hand, the Chinese market seems to rely more on domestic products, once you have enough buying power. Nor should we forget China's interest in the modernization that has resulted inthe transfer of technology from multinational companies established in the country.
In the 90's, most of the major international automobile companies had a presence in China, under the formula of EJV. The first was Volkswagen in 1984. However, not all entries were successful. Peugeot came in 1985, but ended up retiring in 1997, leaving a void that was filled by Honda. Japanese companies likeToyota, have led finally to China once consolidated its position in the American market.
The question is whether early entry into the automobile market in China, meant actually a comparative advantage for companies that invested first. The author of this case, Qingjiu (Tom) Tao, includes in his study "The road to success" as well as the full version of this case, a mathematical model to try to...