China : Auto Anarchy..Not Quite So

It is very evident that the immediate future of the automobile industry lies in the hands of young buyers across Asia. Similar to mass demand for the mass produced Ford Model T in 1914, auto enthusiasts in China are demanding cars, but at a complete different level.

According to AlixPartners, a consultancy, worldwide market for cars will grow to 107 million units a year in 2020. China, the current market leader for cars will remain a leader way past 2020. Projections of annual car sales are set to be at 31 million units by 2020. This figure is six times more than the combined car sales of Japan and South Korea, double the size of Western Europe car sales and 11 million more units of sales seen in North America. Even with such numbers the Chinese government has its nose up in the air.

The PRC is bothered with the fact that it still does not have a single automobile company that can provide stiff competition to Western counterparts. In a bid to improve this situation, the Chinese government has put conditions on foreign automobile companies, a cost to enter the Chinese market. Foreign car companies are required to form joint ventures with domestic car players.

According to Bernstein, this policy measure has proved futile. While the Chinese government hoped that Chinese car companies would learn from foreign experience, a situation of dependence has occurred. Chinese car companies are highly dependent on foreign technology and pay heavy royalties for use of foreign brands. Even the Chinese consumer has large preference for foreign brands.

The question of interest is - which are these new technologies over which China is being arm wrestled. We can broadly divide the technology initiatives under three classifications –
1)      Electric powertain advancements
2)      Tech based policy adjustments
3)      The Driverless car ambition

In the next upload we shall look at each of the three solutions which have already gained momentum in the second decade of the 21^st century.