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