The Path to Globalization of China’s Automotive Industry

3714 WordsSep 21, 201315 Pages
Perspective Bill Russo Edward Tse Tao Ke The Path to Globalization of China’s Automotive Industry Contact Information Beijing Bill Russo Senior Advisor +86-10-6563-8300 bill.russo@booz.com Shanghai/Beijing Edward Tse Senior Partner +86-10-6563-8300 +852-3650-6100 +86-21-2327-9800 edward.tse@booz.com Tao Ke Principal +86-21-2327-9800 tao.ke@booz.com Booz & Company EXECUTIVE SUMMARY China is the world’s factory for “everyday low price” merchandise. Sara Bongiorni’s amusing yet engaging book titled A Year Without ‘Made In China’ chronicles an American family’s futile attempt to boycott purchases of Chinese products for one year. The unexpected challenges of fulfilling such a resolution were felt when attempting to purchase…show more content…
However, the highly fragmented industry that results from this creates enormous inefficiencies in the area of capital investment. This fragmentation also makes it very difficult to focus and allocate resources to the development of critical technologies related to safety and fuel economy. This is 2 Booz & Company an area of particular weakness for Chinese OEMs who have relied on their foreign partners to lead the development of key component technologies. The determining factor in whether a car company can compete in the international markets is whether they have the capacity to meet local consumer as well as regulatory requirements. While Chinese firms have learned very quickly how to assemble cars and develop supply chains, they are very inexperienced at the vehicle development and synthesis process. An automobile is a complex engineered system requiring advanced technology and know-how in order to test and validate the achievement of benchmark targets in the areas of performance, fuel economy, safety and quality. It is in this area that Chinese firms are weakest. Chinese vehicles, while improving rapidly, are still not up to the world-class standards required to compete in the mature markets of the world. ThE BRAnd ChAllEnGE: ThE ChInESE VAlUE PRoPoSITIon Savvy and pragmatic as they are, Chinese consumers understand this quite well—which is the main reason why
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