**Events in the Automotive Industry (2005-2006):**
1. **High Oil Prices and Fuel Shortages**
Every time oil prices spike, the automotive industry feels the ripple effect. From the formation of OPEC in 1960 to the Iranian crisis and the Gulf War, these events have shaped the global car market. The decline of U.S. automakers and the rise of Japanese brands were clear examples. Since 2004, oil prices continued to climb, with Beijing's 93# gasoline rising from 1.95 yuan in 2002 to 4.26 yuan today. Consumers are increasingly affected, and some cities even faced fuel shortages. This has led to a shift in the industry, with commercial vehicle manufacturers struggling and economical SUVs losing their appeal. Energy efficiency and alternative fuels are now more important than ever.
2. **The North American Auto Crisis**
General Motors (GM) was once synonymous with the American auto industry, but it also became a symbol of the broader North American crisis. High labor costs, especially for healthcare, have weighed heavily on GM and Ford. Delphi’s bankruptcy filing signaled a turning point, while the Ford family tried to steer the company through tough times. Despite past challenges, these companies remain central to millions of jobs. With the Chinese market becoming a key asset, GM is now focusing more on its Asian operations.
3. **SAIC and Nanjing Auto Acquiring Rover**
The British brand Rover had a long history of struggles. Honda’s failed attempt to revive it and BMW’s acquisition that nearly sank the company were both cautionary tales. Eventually, two Chinese firms—SAIC and Nanjing Auto—took over parts of the brand. SAIC acquired intellectual property, while Nanjing got the production equipment. This "divide and conquer" strategy raised questions about the future of the brand. While it may not bring much value to China’s own brands, it highlights the risks of cross-border acquisitions.
4. **GM and Chery Reconciliation**
A dispute between GM and Chery over the Chery QQ model was finally resolved in November. Although details were scarce, the move was likely driven by GM’s growing interest in the Chinese market amid its struggles in North America. Chery’s affordable models have made them a competitor, and GM needed to maintain a strong presence in the region. This reconciliation shows how global players must adapt to local markets.
5. **Dongfeng Yueda KIA Dispute**
Dongfeng Yueda Kia initially gained attention with its "Thousands of Limax" models. However, after sales of the Yuanjia and Jiahua models slowed, tensions arose between Kia and Jiangsu Yueda. After mediation, the shares were adjusted to 25% for each Chinese shareholder and 50% for foreign investors. However, this structure doesn’t guarantee balanced decision-making. The question remains: can Chinese and foreign partners truly work together?
6. **Banning Small Displacement and Diesel Cars**
The debate over lifting bans on small-displacement and diesel cars has been ongoing. Beijing was considering removing restrictions on diesel vehicles, and a proposal for diesel sedans was circulating. However, no final decision was made. The issue involves more than just the auto industry—it reflects broader policy considerations. Both domestically and internationally, such decisions are influenced by factors beyond the industry itself.
7. **Chery and Geely’s Struggles Overseas**
Chery and Geely saw overseas expansion as a path to growth. However, they faced challenges, such as Geely’s uncertain plans in Malaysia. Exporting is not just about sending products; it requires understanding local markets and regulations. Despite setbacks, these companies continue to learn and grow, gaining valuable experience along the way.
8. **Oakes’ Delisting**
Louis XV’s famous quote, “After I die, let them have floods,†fits Oakes well. He entered the auto industry with confidence but struggled to keep up. Consumers criticized the industry for being speculative, and the need for better exit mechanisms became clear. Oakes’ story highlights the importance of sound business practices and policies in the sector.
9. **Beijing Benz – Daimler Chrysler Joint Venture**
DaimlerChrysler was one of the first multinational automakers to enter China. However, compared to Volkswagen, GM, Toyota, and BMW, it lagged behind. Beijing’s efforts to revitalize the auto industry included the successful modern project, but Mercedes-Benz’s delayed entry brought uncertainty. With new leadership and changing policies, 2006 promised many changes for Beijing Benz.
10. **Dongfeng Motor Listed Overseas**
Dongfeng became the first state-owned auto group to list overseas. While there were concerns about its corporate governance, the listing allowed it to raise capital and reduce debt. It also introduced more shareholders, which could improve transparency. However, increased scrutiny from competitors is expected in the future.
**Policies Affecting the Auto Industry:**
1. **Tariff Reduction**
Implemented on January 1, this policy reduced tariffs to 30%, continuing China’s WTO commitments. However, it didn’t significantly lower import car prices. Non-tariff barriers still play a major role in the market.
2. **Automatic Import License System**
This system replaced the quota system, making imports more market-driven. However, other regulations like the "Brand Sales Management Measures" increased the threshold for dealers, leading to fewer imported cars.
3. **Imported Parts Policy**
If the cost of imported parts exceeds 60% of the vehicle’s total price, they are considered part of the "vehicle characteristics." This policy discourages CKD/SKD assembly and encourages domestic production.
4. **Automobile Brand Sales Management Measures**
This policy required brand-based sales, pushing dealers to become more professional. It aimed to create a more rational consumer environment and regulate the industry better.
5. **Passenger Fuel Consumption Limit**
Implemented in July, this standard set fuel efficiency targets for passenger vehicles. It aims to reduce energy waste and encourage the adoption of advanced technology.
6. **Motor Vehicle Maintenance Regulations**
These rules improved consumer protection and made the maintenance industry more transparent. However, enforcement remained an issue.
7. **Auto Trade Policy**
This comprehensive policy aimed to develop the auto trade sector, encouraging used car circulation and international expansion. It opened the market to foreign investment and boosted competitiveness.
8. **Imported Car Landing Tax Policy**
This policy increased the cost of importing cars, putting pressure on importers and limiting the number of imported vehicles. It was seen as a measure to protect the domestic industry.
9. **Second-hand Car Circulation Measures**
This policy aimed to modernize the used car market by promoting competition and standardized practices. While promising, implementation varied by region.
These events and policies reflect the dynamic nature of the global and Chinese auto industries, showing both challenges and opportunities in a rapidly evolving market.
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