China and the North American Auto Industry Preliminary Thoughts for the Woodrow Wilson Center Hudson...

China and the North American Auto IndustryPreliminary Thoughts for the Woodrow Wilson Center

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Thinking About Cars and the Continent

What makes up the North American Auto Industry?

What has been the experience of non-North American firms entering this market so far?

What makes up the Chinese Auto Industry?

What are the problems and opportunities for China in the North American vehicle market?

What does this mean for the United States and Canada?

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The North American Auto Industry

The Detroit Assemblers US, Canadian

investment in GM, Chrysler

New Entrant Assemblers

Vertical Integration to Horizontal Supply Chains

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New Entrant Assemblers

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New Entrant Assemblers: Group 1

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New Entrant Assemblers: Group 2

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New Entrant Assemblers: Group 3

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Suppliers

Tier 1, 2, 3 Sub-assemblies Components

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The Chinese Auto Industry: Part 1

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The Chinese Auto Industry: Part 2

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The Road to North America

Import (components, vehicles)

Joint Venture Acquisition Assembly

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The China Challenges

Trade Policy Labor Unions Supply Chain Regulatory Compliance Quality Intellectual property Investment Incentives Retail network Canada & Mexico

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WTO membership reduces potential trade barriers

NAFTA Rule of Origin North American border-crossing? Target for retaliation (cf. auto parts)

Trade Policy

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China labor record problematic Advantage to capital, not labor in North

America – how competitive is China? Bad History of Unionization of New Entrants Imports a large target for US labor

Labor Union

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North American suppliers provide local content, access to technology

Many connected to China already, will want reciprocity

Defend local content rules Promiscuous? Higher cost, higher tech – labor cost

advantage?

Supply Chain

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Need to know regulators, process Can acquire compliant technology Regulation as a non-tariff barrier Public R&D Tech Transfer – USCAR and ITAR

Regulatory Compliance

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Hyundai Problem Imports face quality challenge Recalls costly, including to reputation Collective Guilt

Quality

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Chery v. General Motors (on behalf of Daewoo)

Siemens high-speed rail Litigation

Intellectual Property

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Can the governments afford them? Backlash potential

The Volkswagen Problem Workforce training Infrastructure (esp. in green-field, non-union

areas)

Investment Incentives

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Dealership consolidation underway State regulated, internet not (yet) an option After sale service, warranty Aftermarket parts US & Canadian Consumers = demanding

Retail Network

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Treat as separate markets? Local production justified? With local content, a NAFTA end-run? Border risk Canada friendlier than Mexico, Mexico more

familiar than Canada

Canada and Mexico

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China and the North American Auto Industry

Import (components, vehicles) Joint Venture Acquisition Assembly

Or…

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China and the North American Auto Industry Comparative

Advantages in capital/technology versus labor, cost

Divide and conquer world markets?

Collaborate and conquer world markets?

Avoid mutual conflict

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Canada and the Auto Industry Incentives for Japanese

in Ontario Volvo duty drawback in

Nova Scotia Hyundai in Bromont Auto Pact manipulation

not possible; Zero Tariff for Japan?

Green Industrial Policy? GM-Chrysler precedent

– one industry?

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The Panda Game

The Chinese market China likely to play one

off the other Canada First Canada’s future role in

the North American auto industry?

US reaction?

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China and the North American Auto IndustryPreliminary Thoughts for the Woodrow Wilson Center