Investigate of Chinese Auto Mobile Industry -- a Study of Shanghai Volkswagen Case

In the contemporary China’s economy, it is no doubt that Auto parts Industry has become one of the fastest growing industries which plays a major role in the development of the domestic manufacture as well as the GDP Growth.

Much like any manufacturing, the American auto industry is directed to global competition. As declared beginning, the car was first developed in Germany and France. In 1995, the United States and Japan made a business contract that supplied more seller outlets and provided natural replacement part is selling in each other’s countries, (Nauss 1995). This makes auto components and replacement auto pieces for Japanese cars manageable to reach in the United States and vice versa. Not only does this supply for more USA works, but it more supplies for more Japanese operates in the car industry,(Nauss

(Garrett, 398) These statistics indicate both that China is seen as an economically stable, profitable country and that China’s economic growth must be noticeably boosted by all that foreign investment. Increasing economic ties between China and other countries has resulted in a few other economic boons for the country. One of these benefits is the ‘hundreds of thousands’ of students that China exports to reap the economic rewards of having an increasing number of educated workers and possible technological innovations learned abroad. (Economy, 12) As appealing as these gains may be, China has had to balance the ups of globalization with the increasing risks brought on by interconnected trade and finance. As its productive capacity and investment opportunities increased, the country became increasingly dependant on exports and foreign run enterprises. In fact, “Nearly 40% of China's gross domestic product (GDP) is based on exports and more than 50% of those exports are generated by foreign companies operating in China.” (Garrett, 398) Garrett furthers that any reversal of China’s current state, either through decreased demand for Chinese exports or through Chinese crackdowns on foreign owned businesses, would devastate the national economy and destabilize the government. China has become dependant on foreign trade and continued investment in Chinese industries. It comes as no surprise that it has adjusted its governmental policies to be more appealing for investors

The current business model for auto manufacturers is to locate their assembly plants as close to the market as possible. As such, most manufacturers have plants located regionally near the countries they are selling and marketing their vehicles. The hard and soft costs associated with transporting large shipments of vehicles around the globe (time in transit as well as the cost of moving the goods) means foreign automotive manufacturers must build their vehicles in the U.S. if they are to be competitive. (Coffin, 2013)

Lower per-car costs have allowed foreign manufacturers to gain larger portions of the U.S. market. Decades of market control by U.S. manufacturers caused the major automakers

Global COMPETITION in the industry: Global competition has expended in the auto industry because of an increase in global trade. This has resulted in the decline of sales in the American auto industry whilst sales in the Asian industry especially China has increased. In 2009 sales in the U.S. hit their lowest point meanwhile, it doubled in Asia generally, especially in China. (loc.gov. 2014). One of the reason for this decline in the American Auto sales is because the Japanese automakers have altered the U.S. manufacturing models and are selling it in the global market at a less expensive rate. The price and innovation is attracting a lot of customers’ to this part of the world leaving the American industry to suffer.

China’s recent rapid economic growth has astounded countries around the world, including the U.S. Domestic policies that improved incentives for economic competitiveness were one of the main reasons that China was so successful in increasing its Gross Domestic Product (GDP). “The combination of Chinese land and labor with the capital and expertise of Taiwan and Hong Kong industrialists provided a particularly important boost to exports and employment during the first decade of reform.” China attracted investments from multi-national corporations, which further contributed to China’s revival as a great trading nation.

The government of china is very keen to encourage foreign investors, because foreign companies are regarded as relatively good corporate

In today’s world, economic power is the prime moving force in determining how much a country can produce, buy, or sell their products or services. One notable economic powerhouse is China. Over the years, the Chinese business climate has grown from a centrally planned economy to a socialist market economic system. Having this new economic system gives foreign investors many market opportunities. However, one must not forget the differences in political and cultural environment that can create risk and uncertainty for foreign investors. According to a 2010 survey by the US-China Business council, companies are reporting strong growth and profitability despite the economic downturn. China has a large market and their purchasing power is ranked second in the world. Although companies are profiting, there are fourteen business issues in China. They are: administrative licensing barriers, competition with PRC state-owned enterprises or national champions, intellectual property rights enforcement, cost increases for labor and raw materials, restrictions on foreign investments, restrictions on market access in services companies, transparency, government procurement standards and conformity assessment, protectionism risks in China, lack of equal treatment from domestic companies, lack of consumer awareness/understanding about products, miscommunications due to language barriers and ethical issues, and the difference in human resource practices. In the United States, managers tend

2016 is said to be “Record Breaking Year” for Chinese Investors. According to Forbes News, five major acquisitions of U.S companies and stakes totaled up to 28.16 Billion dollars. Yet, this was only a quarter of China’s entire outward investments in 2016. Many foreign firms suppose that China’s oversea merging and investing in next decade will reach tremendous amount, but it will not occur as they expected depending on Emma Johanningsmeier’s current event reports on Wall Street Journal about “New Chinese Regulations and wary foreign governments hamper M&A investors” in august 2017.

Although the raise of China as a super economy was done by creating a market economy with socialist characteristics aimed at making profit and its maximization, the country has maintained state ownership of the means of production and remained a closed economy. In order to accept foreign investors to operate in China, the government imposes that they must hold majority ownership. Easing inbound investment into China’s economy would bring a multitude of benefits to China including the international recognition as an open market which would broaden international business opportunities; increase the chances to small business to receive foreign capital and expand businesses, creating more jobs; and third, the inbound of capital into the

Firstly, the automobile industry of USA is facing an intense global competition. Beside some American brands of automobiles such as Ford, General Motors (GM), there are other foreign brands which are proving their positions in the automobile

Tremendous amount of competition fighting for market share. In the United States (GM, Ford, Crysler), Japan (Toyota, Honda, Nissan), Korea (Hyundai, Kia), Germany (BMW, Volkswagen).

China is the most populous country in this world with more than 1.35 billion residents. People’s Republic of China is established in 1949 and its economy started to develop from 1978 onwards. Mr.Deng XiaoPing was the president at that time. He and China government implemented the ‘Reform and Opening-up’ or ‘Chinese Economic Reform’ policy to make the trade freedom with foreign countries. This policy ensures the opening of the country to foreign investments and allows entrepreneurs to start their own businesses. The successful of the policy resulted in the immense changes in China’s society and economy. This ensured the reduction of poverty and balance the income among residents. Nowadays, China is a powerful and the fastest developing country in this competitive world. There are large amount of well-build industries and factories. The low price of the workforces and trade freedom also attract many foreign investors. China is an ideal country to develop a business and there are more opportunities for entrepreneurs. The largest population also prove that there are many customers. In addition, their high affordability and purchasing power give more foreign investors confidents to operate businesses in

The threat of new entrants to the automobile manufacturing industry is low being that new players are hard to come by and entering the industry is highly difficult. Entry barriers include, but are not limited to: (1) safety and quality standards, (2) design and comfort, (3) servicing network, (4) research and development, (5) brand loyalty, (6) economies of scale, (7) sales and distribution channels, (8) access to raw materials, (9) technology and patent barriers, and (10) skilled human resource availability.