Foreign Investment Threatens Our Country's Automobile Industry Safety——Interview with China Automotive Technology Research Center


In March of this year, Postdoctoral Postdoc Guo Yan of China Automotive Technology and Research Center led five members and undertook the national post-doctoral fund research topic “Research on the Impact of Transnational Direct Investment on China's Automobile Industry Safety”. The project is scheduled to be completed by the end of this year. The research report completed by the research group shows that foreign investment has greatly threatened the safety of China's auto industry and the government urgently needs to issue relevant policies to protect it.

China Automotive News: What are the impacts of direct investment by multinational corporations on the safety of China's auto industry?

Guo Yan: The impact of direct investment by multinational corporations on the safety of China's auto industry must be viewed in terms of both positive and negative aspects. On the one hand, the greatest achievement of the use of foreign capital by China’s auto industry is that it has completely changed the situation in which China’s auto industry has been deprived of much weight, and has almost no car industry. On the other hand, the negative effect brought by foreign investment can not be ignored, that is foreign-funded enterprises on China's auto industry market, equity, technology, brand and integrated control.

China Automotive News: What are the manifestations of industrial security?

Guo Yan: Industrial security is specifically expressed as the independent sovereignty of industrial development, local enterprises have the dominant position in the market, the ability to independently defend against foreign competition, products and brands with independent intellectual property rights, and profitability. In general, industrial safety includes strategic industrial control and industrial development. Among them, the industrial control power is a static description, and it is a surface feature; the industrial development power is a dynamic description and is an essential feature.

“China Automotive News”: Industrial safety can be examined from both industrial control and development. Please introduce the research results of the research group in terms of industrial control.

Guo Jun: In terms of industrial control, we mainly do the following six aspects of research.

First, market control. At present, foreign-funded enterprises have absolute advantages in market share in China. From the perspective of cars, foreign-funded enterprises have a market share of 70% to 80% in China. From the perspective of the automotive industry's profit, foreign investment accounted for 59.7%.

Second, equity control. The control rate of foreign-invested equity in the automotive industry was 21.8%, of which the control rate of foreign-invested equity of parts and components enterprises was higher than that of foreign-invested enterprises.

Third, technical control. The total foreign capital and operating assets accounted for only 21.8% and 25.4% of the total assets of the industry. The amount of profits accounted for 59.7% of the total industry profits, and the profit rate was 15% (domestic capital is 8%). This set of data shows that foreign-invested companies’ input-output capabilities and profitability are much higher than domestic-funded enterprises.

Fourth, brand control. Last year, the ratio of sales of foreign brands and self-owned brand cars to total sales was 74% and 26% respectively.

Fifth, comprehensive control. Integrated control means that foreign companies consider the maximization of profits in the industrial chain, from procurement and supply to production and marketing, and the establishment of wholly-owned and controlled joint ventures in the after-sales market for comprehensive control. In particular, the involvement of foreign capital in markets with relatively high profits such as after-sales finance, credit and leasing can fully illustrate this point.

Sixth, foreign direct investment has aggravated the imbalance between the organizational structure and product structure of China's auto companies.

China Automotive News: Please analyze the impact of direct investment by multinational corporations on the development of China's auto industry.

Guo Song: The penetration of multinational automobile companies through various links in the industry chain and the support of multinational companies in China's policies have kept the market share high. At present, the development of China's auto industry has been affected by transnational corporations. Multinational corporations control all passenger car fields except for low-end economic vehicles, and their penetration in the commercial vehicle sector has also been significantly strengthened. Once transnational corporations fully control China's automobile industry, it will inevitably impair the mid- and long-term development of China's auto industry. Finally, China's auto industry will become a multinational company processing plant without core technology and complete industrial chain system. Specifically, it can be divided into four aspects.

First, the capital control capabilities of multinational corporations. In the course of the development of China's auto market, transnational auto companies have basically completed their strategic layout in China through joint ventures and capital increase methods, and are now moving toward controlling China's auto industry. In the field of passenger vehicles with the greatest development potential, the industry development pattern dominated by foreign multinationals has already formed. The commercial vehicle sector is also currently facing a strong infiltration of multinational companies.

Second, multinational corporations have technical control capabilities. Although multinational companies and Chinese enterprises have joint ventures, although the total vehicle size cannot exceed 50%, the products and technologies of joint ventures are often heavily dependent on the technology transfer of multinational companies. This allows multinational corporations to indirectly control the joint venture through control technologies. Direction of development.

Third, multinational corporations control the automobile industry chain. Multinational corporations have increased their control over the auto parts industry in order to strengthen their control over China’s auto industry, with a 50%-per-share limit of the entire vehicle. Key assemblies and components such as engines, transmissions, and automotive electronics have become the objects of multinational companies’ sole proprietorship and absolute control. This makes transnational corporations absolutely dominant in the upper reaches of the entire automotive industry chain. The profits of vehicle companies that cannot be further controlled by shareholding restrictions are also largely transferred to the parts and components manufacturers controlled by the upstream multinational corporations.

Fourth, the policy treatment of multinational corporations. The transnational car company's super-national treatment in China is also one of the important factors that affect the development of China's auto industry. At present, China's automobile industry policy makes it easy for multinational corporations to enter the automotive industry in China. However, domestic private capital has encountered difficulties in entering the automotive industry. Even if some of the larger private enterprises enter the automobile production field, it is difficult.

"China Automotive News": According to the investigation and analysis of the Task Force, which conclusions can be drawn?

Guo Tao: The direct investment of multinational automobile companies poses a great threat to the safety of China's auto industry. This threat transcends other industries and is an urgent problem that needs to be solved in front of our government and enterprises.

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