The Chinese automotive industry is a prime illustration of the development of Chinese manufacturing both home and abroad. Shanghai Automative Industry Corporation (SAIC), a wholly state-owned enterprise, has grown exponentially in the past 30 years driven in part by a series of high profile joint ventures.
Their partners include Volkswagen and General Motors for automobiles and Iveco and Volvo in bus and truck technology. SAIC has been very systematic in moving employees around between joint ventures to ensure they gain maximum knowledge on best practices of vehicle production and technology. Because they can shift their people across different companies and different cultures that give them a learning curve, which is far steeper than all other ones.
The next stage of Chinese automotive development follows the before-seen route of Chinese manufacturing: partner with leading developed nation organizations to learn as much as possible, buy a brand to support that brand, and go to market in China first before tackling the rest of the world.
As such, Nanjing Automotive purchased the Rover car brand from BMW in 2005. Then, Nanjing, including the Roverbrand, was subsequently purchased by SAIC. With the Chinese government’s encouragement SAIC becomes the industry leader in China. Now with a brand that has recognition and prestige in China, SAIC tackles the domestic Chinese market in earnest.
It is this approach that propelled China onto the world automotive scene in record time. Japan took thirty years to become fully established in the development world, and South Korean automotive manufacturers took half of that time. China did it even faster.
The biggest issue for Western car manufacturers in China is not the competition from other car manufacturers, instead, the biggest threat is the point when the Chinese are saying that they don’t want to work in a joint venture anymore. And that time is when they are confident that they have learned all they need to know in order to go alone.