SHANGHAI -- A slew of foreign automakers downsized their China operations in recent years.
And next year, international players will be allowed to operate wholly owned subsidies in China’s auto industry.
But let us be clear: This does not mean the Chinese auto industry is on the verge of an imminent shakeup – even as the government this week began to signal interest in seeing consolidation, particularly in the electric-vehicle market.
The primary factor that has pushed several global automakers to pare local production is competition.
The world’s largest auto market is also the world’s most crowded market, where many foreign and domestic Chinese brands have long been competing neck-and-neck for market share.
Unable to fend off the competition, several global players have found themselves operating well under production capacity in China since the mid-2010s.
In the past few years, Hyundai Motor Group has closed two of its seven plants in China, while PSA Peugeot Citroen, now part of Stellantis, has wound up its JV with Changan and slashed production at its partnership with Dongfeng Motor Group.
Last year, Renault also closed its gasoline car JV with Dongfeng.
But one thing worth noting is that except for Suzuki, which closed its only JV in 2018, none of the other international auto manufacturers plan to exit the Chinese market despite the troubles they face.
These companies are striving to turn around their China businesses. Stellantis said it has made some progress on that front: in the first half of this year, its JV with Dongfeng generated a positive cash flow.