**Events in the Automotive Industry (2005–2006)**
1. **High Oil Prices and Fuel Shortages**
Every time oil prices rise, the automotive industry is hit hard. From OPEC's formation in 1960 to the Iranian crisis and the Gulf War, these events have shaped the industry. The decline of U.S. automakers and the rise of Japanese brands were clear examples. Since 2004, oil prices continued to climb. In 2002, Beijing’s 93# gasoline was 1.95 yuan per liter, but by now it had reached 4.26 yuan. Consumers’ resistance weakened, and some cities even faced fuel shortages. As diesel prices rose, commercial vehicle manufacturers struggled. SUVs that once dominated the market are now fading. Energy efficiency and alternative energy sources have gained more attention than ever.
2. **The North American Auto Crisis**
General Motors (GM) used to symbolize the U.S. auto industry, but now it represents its struggles. High healthcare costs for employees have burdened the company, as seen with Ford. Delphi’s bankruptcy filing signaled deeper issues. While figures like William Ford tried to save the company, the challenges remain severe. GM’s future is uncertain, but China has become a critical market for them.
3. **SAIC and Nanjing Auto Acquiring Rover**
Rover, a British brand, faced constant difficulties. Honda’s attempt to revive it failed, and BMW’s acquisition nearly ruined it. Now, SAIC and Nanjing Auto have taken over. SAIC acquired intellectual property, while Nanjing got production equipment. This “divide and conquer†strategy has raised questions about whether it will bring real value to Chinese brands. Meanwhile, British investors still hope to see Rover revived.
4. **GM and Chery Reconciliation**
A long-standing dispute between GM and Chery over the QQ model was resolved in November. Details were not disclosed, but it’s likely due to GM’s focus on the Chinese market amid its own struggles. This move shows how important China has become for global automakers.
5. **Dongfeng Yueda KIA Dispute**
Dongfeng Yueda KIA initially gained attention with its “Thousands of Limax†models. However, sales of the Yuanjia and Jiahua models dropped, leading to internal conflicts. After mediation, the shares were restructured, but concerns remain about the balance of power. The joint venture model still faces challenges.
6. **Ban on Small-Displacement and Diesel Cars**
There were rumors that Beijing would lift the ban on diesel vehicles. A proposal called for a shift in policy, but no official decision was made. The debate continues over whether such bans are reasonable, and it’s clear that the auto industry isn’t the only factor at play.
7. **Chery and Geely’s Overseas Struggles**
Chinese automakers like Chery and Geely aimed to expand globally. However, they encountered many obstacles, including regulatory hurdles and cultural differences. Despite setbacks, these companies continue to gain experience and improve their strategies.
8. **Oaks Delisting**
Oaks, a struggling automaker, eventually went public. Its story mirrors that of Louis XIV, who famously said, “After me, the deluge.†Oaks faced challenges from the start, and its exit from the market highlights the need for better industry exit mechanisms.
9. **Beijing Benz – Daimler Chrysler Joint Venture**
Daimler Chrysler entered the Chinese market early, but it lagged behind competitors like Volkswagen and BMW. After years of delays, Mercedes-Benz finally listed in China. The new joint venture brought both opportunities and uncertainties.
10. **Dongfeng Motor Listed Overseas**
Dongfeng became the first state-owned auto group to list overseas. This move helped raise capital and improve governance. However, it also brought increased scrutiny from other players in the industry.
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**Policies Affecting the Automotive Industry**
1. **Tariff Reduction**
China reduced tariffs again, continuing its WTO commitments. However, this didn’t significantly lower imported car prices. Non-tariff barriers still played a major role in the market.
2. **Automatic Import License System**
This policy replaced the quota system, making the import process more market-oriented. But stricter regulations for dealers limited the number of imports.
3. **Import of Vehicle Parts Policy**
This rule aimed to curb CKD and SKD assembly. It forced domestic manufacturers to produce more parts locally, improving the industry’s overall level.
4. **Brand Sales Management Measures**
From 2005, car sales had to follow brand guidelines. This promoted professionalism among dealers and improved consumer confidence.
5. **Passenger Fuel Consumption Limit**
New standards were introduced to reduce fuel waste. This encouraged the adoption of more efficient technologies.
6. **Motor Vehicle Maintenance Regulations**
These rules protected consumers by ensuring quality maintenance and transparency. However, enforcement remained a challenge.
7. **Automobile Trade Policy**
This comprehensive policy aimed to open up the auto trade sector, encouraging used car circulation and foreign investment.
8. **Imported Cars Landing Tax Policy**
This policy increased the cost of importing cars, potentially protecting domestic manufacturers.
9. **Second-Hand Car Circulation Measures**
This initiative aimed to modernize the used car market, promoting fairer practices and expanding distribution channels.
Overall, 2005–2006 was a transformative year for the Chinese auto industry, marked by challenges, strategic moves, and policy reforms.
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