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China’s Ministry of Commerce and the National Reform and Development Commission (NDRC) issued a cryptic statement today stating that support for foreign capital in the auto industry will be with drawn in 2012. What does this mean? We are not quit sure yet, but looking over the market condition it is obvious that China’s Auto Policy has become a double edged sword, on one hand the Chinese auto industry has become a hundred billion dollar industry within a mere decade and of course the world’s biggest auto market, on the other hand the Chinese auto market is dominated by foreign manufacturers who are locked into joint venture deals with local manufacturers that are largely state owned.

Originally the Chinese mandate for the auto market was based on developing the market by swapping technology for market access, in the late 90′s the Chinese auto market was very small but obviously had enormous potential, the government allowed foreign manufacturers entry into China on account they pair up with a local manufacturer, which were mostly truck manufacturers that were on the verge of bankruptcy. Foreign manufacturers got access to potentially huge market, and Chinese manufacturers got their hands on what they believed to be cutting edge technology.

The NDRC is not just a national level body, it is also a provincial level body with offices in each provincial capital, in the early days provincial NDRC’s were all to eager to welcome foreign car manufacturers into their local markets to boost GDP, as a car manufacturer arrived a thousand suppliers would pop up in the neighborhood bringing untold investment to areas. Take for example VAG in Changchun, the cold hinterlands of Jilin Province are hardly ideal car making conditions, the rust belt city was long forgotten by national level bodies but with the introduction of VW and Audi into the surrounding area the city took off as “China’s Detroit”, later Mazda and Toyota would also call Changchun home. Eventually, fast forwarding to 2011, foreign automakers would come to dominate the Chinese auto market with a more than 60% share of the market.

In 2010 the National Government felt that the Market Access for Technology route was not quite working as planned, local joint venture partners were not getting access to the technology required to push forward their own car developing skills so they allowed joint venture companies to give birth to their own sub brands such as BaoJun (GM), Li Nian (Honda) and Venucia (Nissan), again this seems to have had a negative effect on the local car industry with only small amounts of out dated technology being transferred to local partners.

The cryptic ‘withdrawing of support‘ message is actually quite clear – its saying that China is closed to foreign auto companies for the time being, so if you’re not already in China you maybe locked out for the time being. Unless of course substantial contributions will be made to the furthering of the Chinese auto industry in terms of technology transfers or the establishment of joint R&D centers in China. Who will be affected the most by this turn of events? Renault, Subaru and JLR are all eager to enter into the Chinese market but haven’t yet done so. Subaru’s deal with Chery was scuppered by a lack of tech transfer and the NDRC pointing out that Toyota’s 16% share of Surbaru’s parent company, Fujitsu Heavy Industries, was somehow unacceptable in the face of Chinese rules that state foreign auto companies can only have two partners in China  (The Subaru JV with Chery would have made this Toyota’s third JV), an alteration to the agreement may see Subaru’s being produced as Chery’s in the Chinese market to get around rules and regulations. Chang’an-PSA’s Joint Venture only made it past governmental approval in time before the new edict came into place, but the joint venture came at a price – PSA will have to invest healthily in the R&D side of things, thus showing that new ’2012 rule’ has already been in effect for a number of months already. The Chinese government is making a statement, China is no longer the place to assemble and sell cars, if you come here you have to invest at every level, from R&D and to HR and also be ready to carry out technology transfers, whether you like it or not – everyone who is not already here will have to pay the new toll.

The Chinese auto market grew at its slowest pace for a decade in 2011, this slow growth rate has made Chinese manufacturers look closer at exporting their cars to foreign markets in 2012 and will force Chinese manufacturers to focus more on the after sales side of the market and also improving technology at all levels, from energy efficiency to passenger safety.

From BBC via Xinhua:

China has said it will withdraw support for foreign investment in the country’s car industry to encourage domestic carmakers, according to state media.

The Xinhua news agency cited a joint announcement from the Ministry of Commerce and the National Reform and Development Commission.

The report did not provide details of what support was being withdrawn.

Some of the world’s largest carmakers, including America’s General Motors and Germany’s Volkswagen, operate in China.

The country is the world’s largest car market.

According to Xinhua, Beijing will “withdraw support for foreign capital in auto manufacturing… because of the need of the healthy development of domestic auto making”.

A number of the world’s leading carmakers, particularly luxury brands, are focusing on boosting sales in China to compensate for weak demand caused by slow economic growth and the eurozone debt crisis.

Earlier this month, China said it would levy duties on some cars made in the US.

China’s commerce ministry said in a statement that vehicles were being dumped on the Chinese market, causing damage to the domestic industry.

Wulin Gaowa is making strides in the automotive design world, she is the first female design director to take the reigns at one of GM’s Global Design centers, she will be top man – or rather woman, at GM China Advanced Studio in Pudong, Shanghai. Gaowa is no newcomer to the automotive design world, she has held positions at DaimlerChrysler where she started her career and has also worked at ItalDesign in Italy and Mercedes-Benz Technology Center in Germany, in addition she also worked at Siemens Design Center in Beijing and also lectured students in transportation design at the Design College of the Central Academy of Fine Arts in Beijing.

The GM China Advanced Studio focuses on GM’s global design organization, with a strong focus on meeting domestic needs in terms of localizing GM’s products for Chinese tastes. The new center is a world-class facility which will include a digital visualization center and secure indoor and outdoor viewing/exhibition areas and will assist GM with gathering and analyzing information on automotive and other design trends in China to support GM’s vehicle development.

Gaowa recently explained the significance of hiring Chinese designers and tailor-making features for China, the world’s biggest auto market.

Q: Why did GM choose to locate its newest advanced design studio in China?

A: China is the biggest auto market in the world and also the biggest overseas market for General Motors. As local demand keeps increasing, there’s need for more variety in our product designs. After the design center is launched, our Chinese designers and engineers will be developing tailored vehicles here, following GM’s strategy of working in China, with China, and for China.

Q: How is it going with the hiring process? What kind of talents are you seeking to hire for the Advanced Design Studio? 

A: We have found some qualified candidates here in China.  We’re looking for people that have a passion and superior talent in the area of car design, and are willing to challenge the status quo.  Hiring locally is important for us as the designers’ Chinese cultural background will help us better understand how to design mobile products that meet the needs of our customers in China. Overseas experience will be a plus and good support to achieve global standard.

I’ve been visiting design universities and colleges all over China and the U.S. since I arrived in September, looking for designers who will fit into our organization.  I’ve been to Beijing, Guangzhou, Hong Kong, Detroit and Los Angeles so far.

Q: What influence will the new design center in China bring to GM’s future products for both China and other parts of the world?

A: China market is playing a dominant role both in Asia and global companies. As demand in China accounts for a bigger portion of GM’s global sales, our success in China is critical.  We need to closely monitor and predict Chinese customers’ mobility behaviors, needs and preferences to ensure we are bringing the right products to the market.  China’s vast geography means that many different mobility solutions are necessary, and it seems logical to think that inventions here could have appeal in other markets with similar customer needs and behaviors.

Q: Do you think cars designed in China will be accepted by overseas consumers?

A: Certainly, as long as the brand identity and brand promise is articulated correctly.  For instance, designers here in China were responsible for the award-winning Buick LaCrosse interior design, which also retails in the US as the same model.  The local designers can understand the brand and its “visual DNA”, and therefore can continue to offer solutions that meet the brand promise to compliment the international Buick showroom.

Q: How soon will the first car designed in the new studio here in Shanghai come out?

A: While we can’t provide details on future products, I can say that this studio will be focused on advanced design development and helping forecast the mobile needs and solutions of the consumer.  General Motors is keen to make mature products to fulfill its long-term commitment to customers globally. The advanced design center in China is following the principle and seeking to create a value in bringing to market promising vehicles. We need the right product, not any product.

North Korean car producers are few and far between, Reverend Moon of the Moonies did try to set up a car company in North Korea which assembled rebranded Chinese cars such as Brilliance’ and a few pick up trucks under a DPRK only Pyeonghwa Motors brand but it is unclear at what stage this car company is at. North Korea also cloned an older Mercedes 190E which they based on Yugo technology to slow down the expensive imports of German made cars. Previously The DPRK got its motoring fix from second hand Japanese cars, but Japan stopped the exportation of cars to North Korea after they tested their first nuclear bomb, Japan’s goal was to put pressure on the North Korean governmental system, instead the North Koreans turned to their friends over the border in China and asked for some cars, nicely.

BYD has been actively exporting cars to North Korea for a number of years now, North Korean’s likely approve of the Mitsubishi engines that larger Chinese cars such as the BYD F6 use as local mechanics are probably very familiar with them. Pyongyang police seemed to have developed a love for BYD vehicles, hence their use of the F6 at the funeral of former Chairman Kim Jung Il earlier this week where America hating Kim was taken on his final journey on the back of Lincoln hearse.

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