Chinese Automotive Industry and Chery Automobiles

Case survey: Chinese Automotive Industry and Chery Automobiles

Introduction

With the rapid development of Chinese economic system in last 30 old ages, automotive industry in China has achieved great betterments.

Brief History of the industry and Chery Automotives

  1. China ‘s Auto Industry
  2. Chery Cars

Analysis on Automotive Industry in China

In this portion, Porter ‘s ( 1980 ) Five Forces Theory will be used as the major method to analyze China ‘s automotive industry. , which includes menaces of new entrants, menace of replacements merchandises and services, dickering power of purchasers, dickering power of providers, and competition among the bing houses. Porter argued that these five forces jointly capture the extent of competition prevailing in a peculiar industry and houses besides develop their schemes in the visible radiation of the strength of these forces.

  1. Menaces of new entrants — — semi-strong
  2. There normally are seven barriers for new entrants to entry, including economic systems of graduated table, capital demands of entry, cost advantages independent of size, statute law or authorities action and others ( Reading stuff on WebCT: hebdomad five ) . The bing houses ‘ economic systems of graduated table are a large barrier to new entrants. For illustration, some bing houses in the industry use the same development platform, which they invested a important figure of fund to construct, to bring forth similar types of autos. Through this manner, they can salvage cost and increase their end product at the same clip. Then, the capital demand of entry is another large job. Merely as Qiu ( 2005 ) suggested that motor vehicle industry is a capital-intensive concern necessitating great sums of money invested in machines, works, edifice platforms, research and development ( R & A ; D ) , spread outing market and so forth. These are non a one-off payment, but long-run, sustained investings, which may non be recovered in five or ten old ages. Besides, the Chinese province industry policy requires that a company should hold two billion kwais in lower limit in order to do investings ( Qiu, 2005 ) . All the factors discussed above brand it hard for new entrants to this market, because they non merely necessitate to acquire adequate money, but besides should fix for long clip debt and trouble to spread out market and obtain clients.

    However, with the rapid development of economic system, people ‘s demand for private autos is increasing rapidly, particularly for inexpensive auto. And authorities released new policy that leting non-stated financess to be invested in rider auto market in 2004. Besides the two factors above, China ‘s accession to the WTO and few bing companies produce low-end autos which sold at low monetary value besides become motives for new entrants to come in the market. Harmonizing to the China Automobile Industry Yearbook ( Recent Year ) , there have been 13 independent car manufacturers until now, including Chery, Geely, BYD, and others.

  3. Menaces of replacements merchandises and services — — weak
  4. There are three common ways considered as the replacements of private cars in China, that is, bikes, bikes, and public conveyance.

  5. Dickering power of purchasers — — strong
  6. Dickering power of providers — — weak
  7. Competition among the existing houses — — strong

Scheme of Chery Automobiles ( 1200 ) [ possibly uniting other specific strategy-pricing, and so forth ]

Using porter ‘s generic scheme to analyze how chery addition the competitory advantages.

  1. Cost leading
  2. Differentiation
  3. Focus

Decisions