Analysis of Chinese Auto Industry

Government Policy
Technical challenges arise as some new policies have been proposed considering energy saving and environment protection. The experts forecast that, from 2006 to 2020, the vehicle stock will be increased by 8% every year, which far exceeds china’s domestic oil supply (Fedcars, 2006). It is estimated that 60% of the oil use will rely on imports till 2020. To relieve this prominent energy crisis, China’s government has already published a series of new policies such as ‘Limit standard for automobile fuel consumption’ ,’Fuel oil tax’ and ‘Revenue rewards on acquisition of energy saving autos’ (ibid). Meanwhile, the central government published 'Automotive Industry Promotion Planning' to promote fuel saving automobiles by stating ‘halved the purchase tax on passenger cars to 5 percent for models with engine displacements of less than 1.6 liters’ (CHINA Daily, 2009). For this reason, local auto manufactures will suffer a great deal due to the lag in technology to design energy-saving and eco-friendly vehicles compared with joint-venture corporations (Yu and Yang, 2010). At the same time, Chinese government encourages people to utilize the public transportation and makes more efforts to build new subways. Beijing bans even-and-odd license plates on alternate days and Shanghai charges heavy license fee as well. Owning to these environmental protection policies, private car market is under serious threat (Huang, 2010).
To protect local domestic enterprises, China’s local governments also announce some effective policies to offer all kinds of facility and assistance, such as a large amount of government procurement and preferential loans (Sasuga, 2008). Take Geely as an example, Geely Vision was selected as the specific vehicle of Zhejiang Provincial Intellectual Property Office and became the brand image on behalf of Zhejiang automobiles (Sohu, 2008). However, excessive narrow regional protectionism...