Different Strategies of Localization in the Chinese Auto Industry

Along with the process of economic reform and policy of opening to the outside world, China's auto industry has come to a point of new development. Since the manufacturing technology of cars is much more complicated than that of commercial vehicles, China has adopted a different strategy to develop its car industry --- incremental localization by introducing foreign capital and technology, deviating from the "self-reliance" approach in its commercial vehicle production. This paper will focus on the character of China's car market, system of car manufacturing, and outline of localization policies, based on the field surveys conducted on Shanghai-VW, Tianjin Daihatsu, relevant parts makers, administrative organizations in August 1995 and March, April 1996, the authors will compare and examine the differences in the localization strategies and production systems between Shanghai-VW and Tianjin Daihatsu. By doing so, we intend to establish a base for further research and survey on the future Chinese auto industry. The authors focus on these different cases of Shanghai-VW and Tianjin Daihatsu, since they are the two largest passenger car production enterprises in China representing quite different patterns of China's enterprises respectively.