The Chinese government has begun removing incentives that used to be given to the three American auto-akers, General Motors, Ford and Chrysler when the auto-industry was on the rise. Now that the industry is decreasing, China wants to put limitations on these companies. For example, the government is making it much more difficult to receive construction permits, which in turn is making it much more difficult for these american auto companies to build their factories. After a 23% fall in auto sales in January the future of the American auto industry in China looks like it will only continue to shrink in the near future. This current decline in China's auto-industry is sending a message to the foreign automakers. According to Alex Taylor III the message that China is sending is, "We still want you here, but we don't need you as much as we used to". As long as auto sales continue to drop in China, foreign auto-makers such as GM, Ford and Chrysler will continue to struggle there.
6 comments:
This is similar to what happened in America during the 20s when Ford first started to mass produce the Model T. Everyone who could afford a car bought them right away but very shortly after the market died. As China's economy continues to grow/mature and more people have the ability to buy cars, the car market will return but it could take sometime.
This is unfortunate to hear for the U.S. automotive industry. China has played a large role in this industry and we can only hope that we see improvements in China to help better our automotive economy situation.
It is unfortunate to hear sales down that much even if it is temporary. The cost of oil rising and a different type of demand for products is also likely to have contributed to this drop in sales.
As we discussed in class, as the cost of using gas increases, the shift to using a cleaner energy is trend. The only reason that green energy firms are not doing well enough here in US is that the gas price is still low. In China, however, the demands for gas are so strong that drives gas price very high. So China must have a higher incentives to adapt to cleaner energy.
This is an interesting article. It seems like China will be using more protectionist policies, perhaps for their car industry, in the near future. How will this impact the prices of cars in the United States and will GM, Chrysler, and Ford relocate to another developing country?
Companies in overcapacity industries suffer from low profits and lack cash for R&D. Overacapacity in China is leading to extremely low utilization rates in the auto industry that is producing at overcapacity. Hence, competition among domestic automakers in further intensifying the incentives to deter foreign investments.
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