Wednesday, April 20, 2011

Is China the future or the end of the US auto industry?

Is China the future or the end of the US auto industry?: "
chinese trains bad model for electrification for us automakers Is China the future or the end of the US auto industry?

First high speed trains, now electrification

Technology transfers plus supply chains advantage Chinese auto industry

When it comes to the future of the auto industry, it’s all about Asia and no country looms larger than China. Yet, is China’s growing auto market really just fool’s gold?

For instance, soon new Chinese rules could force foreign automakers to give major ownership rights of any Chinese venture to Chinese partners, enabling full technology transfers to these Chinese companies. But that’s only one half of this scary story.

According to the AP story China’s electric car tactics rattle automakers, automakers aren’t just worried that China will use these technology transfers to support its own auto industry for domestic needs, reducing the need for foreign automakers, but also for exports. Not long ago, for example, China required similar technology transfers from European and Japanese companies developing high speed trains in China. Today, those Chinese companies are now offering that technology throughout the world.

Couple that latest and greatest electrification know-how with China’s well established lithium-ion industry and their rare earth resources and a recent World Bank/PRTM study suggests that a “significant shift in the overall value chain in the automotive industry” favoring the Chinese auto industry could be inevitable.

Ironically, despite this writing on the walls, many US automakers can’t get into the Chinese auto market fast enough. The sale’s opportunities are just too sweet to pass up. However, the more dependent automakers become on those sales, the less negotiating power they will have to secure their R&D secrets.

It has been said that the planning of US auto makers is too often driven by quarterly financial statements. Thus, profits are often maximized today, even at the expense of future profits. This kind of boardroom-based corporate thinking could play into China’s hands perfectly and turn those short term profits into long term fool’s gold.


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