Multinational Firms Triumph in China’s Auto Market

China Auto Market

China is currently the world’s largest auto market with nearly every major automotive company courting the Chinese consumer. Given that 70% of Chinese car purchases are by first-time car buyers, car companies are aggressively marketing to these individuals to shape their preferences and create life-time customers. Surprisingly, western multinational firms have had tremendous success in China’s auto market.

Strong Chinese Partner

  • Every leading multinational car maker has partnered with a strong local Chinese company to form a joint venture
  • Many of these Chinese partners are state-owned enterprises with strong backing from local if not central government
  • Most of these Chinese partners are more committed to the JV than their own brands

Early Mover Advantage

  • Volkswagen was the first foreign car maker entering China in 1984 and it has formed JVs with the two strongest local companies, Shanghai Automotive Industry Corporation (SAIC) and First Automotive Works (FAW)
  • Volkswagen has very high brand awareness in China
  • Sales through its two JVs make Volkswagen the largest car maker in China

Local Government Support

  • Through JV partners, Volkswagen has obtained preferential treatment from local governments in Shanghai and Jilin
  • Choice of a given car maker for taxi designation is a good indication of local government’s support
  • Volkswagen has almost 100% market share in the taxi market in Shanghai, while Hyundai enjoys similar status in Beijing

One thought on “Multinational Firms Triumph in China’s Auto Market

  1. hgui

    You pain a rosy picture…but I tend to disagree with the way you paint this story as some kind of success. The state of the auto industry in China is a success for the Chinese and the Chinese automotive industry more than it is a success for foreign companies.

    You also fail to mention that foreign companies are forced to work with JV partners. They would much rather go it alone! If they could….

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