The Ascent of China's Private Car Firms
...and the collapse of its national champion State Owned Enterprises
I hope to attend the GERPISA conference of auto industry researches next month in Shanghai, so am starting to thing about a planned presentation on the failure of China’s national champions in the industry. A nod to Alysha Webb’s China EV blog, she posted related thoughts the day before I finished this.
I’ve not tried to extend my data before January 2020, and I don’t have firm-level data on exports. Basically, 5 years ago there was only one significant private domestic car company, Geely.1 BYD had a very small presence. While Chery is technically a state-owned enterprise (SOE), nothing I’ve seen suggests a heavy government role, plus it has no joint ventures, so I count it as “private” in behavior.
So, from a tad over 10% of the market at the start of 2020, to 45% today. I include Tesla, but they are a fading presence. I have not added VW and BMW, which now control some of their local operations. Still, the picture is pretty clear.
So how have China’s national champions done in the emerging New Energy Vehicle market? Now the industry has long been politically salient. First Auto Works (FAW) was one of the 156 foreign aid projects of the Soviet Union in the 1950s; the Second Auto Works morphed into today’s Dongfeng. Two premiers, Jiang Zemin and Zhu Rongji, were engineers with automotive experience, who came to power after serving as mayors of Shanghai. So Shanghai Auto Industry Co (SAIC) looms large, particularly as it was the partner for VW and GM, and long dominated the overall market. Guangzhou, Chongqing and Beijing had their car companies, too – GAC, Changan and BAIC. Those are the big six.
But have they led electrification? Clearly not, as per the following graph. The failure of SAIC to capitalize on its strengths must be particularly galling.
Nor have their “house” brands done anything. [I have an article on GAC on SeekingAlpha, behind a paywall.]
But they have their joint venture cash cows! SAIC has JVs with GM and VW, GAC has Toyota and Honda, Dongfeng has Nissan and Honda, and so on. Only the latest foreign entrant, Tesla, escaped the mandate to enter the market via joint ventures, and BMW subsequently bought majority control of their local partner. But JVs are huge.
Were huge. And the share loss has continued this year, though I’ve not updated the numbers in the chart since 2024Q4.
Now I don’t believe it’s state ownership per se that is the problem. It’s the combination of meddling2 and the cushion of joint venture profits.3 Politically, they needed to develop their “house” brands. Thanks to their joint ventures, they didn’t have to make money doing so.4
There is one very good, though now old, book on Geely in English: Wang, Hua, G. Balcet, and Wenxian Zhang. 2021. Geely Drives out: The Rise of the New Chinese Automaker in the Global Landscape. Singapore ; Hackensack, NJ: World Scientific Publishing Co. Pte. Ltd.
William (Hua) Wang is the core organizer of this year’s GERPISA conference.
See Thun, Eric. 2006. Changing Lanes in China: Foreign Direct Investment, Local Governments, and Auto Sector Development. Cambridge ; New York: Cambridge University Press:
Howell, Sabrina T. 2018. “Joint Ventures and Technology Adoption: A Chinese Industrial Policy That Backfired.” Research Policy 47 (8): 1448–62. https://doi.org/10.1016/j.respol.2018.04.021
and Gallagher, Kelly Sims. 2006. China Shifts Gears: Automakers, Oil, Pollution, and Development. Urban and Industrial Environments. Cambridge, Mass: MIT Press.
There are other good monographs, but my bibliographic database is corrupted and with it the notes I kept therein…
In it’s heyday VW made more money from its Shanghai operations than from Europe, even though they had to share those profits with SAIC.
I also have a chapter on China that uses it as an example of the challenges developing countries faced in developing a domesti industry. See Chapter 5 in Smitka, Michael, and Peter Warrian. 2017. A Profile of the Global Auto Industry: Innovation and Dynamics. New York: Business Expert Press. http://proquest.safaribooksonline.com/?fpi=9781631572975