Sunday, May 24, 2009

No One Fully Understands China's Auto Industry

Those who have patiently followed this blog know that I am in China conducting research into business-government relations in the auto industry.

My reason for not posting much recently is not for a lack of material, but for uncertainty about how to frame what I have learned. It also has to do with not wanting to reveal everything I've learned just yet because I would like to save something for my dissertation. (Sorry, but my desire to graduate pretty much trumps my desire to inform the world at the moment.)

I only have a couple of points to make with this post, and they are both very short and very simple.

First, I am starting to become aware that people who work in and around China's auto industry are not necessarily on the same page when it comes to even a basic understanding of how their industry operates. They are much like the three blind men who touched three different parts of an elephant, none of whom was able to tell that he was touching an elephant.

Ask three auto executives from three areas of the same company about the approval process for new models, throw in the perspectives of a couple of expats, and what you have are five different stories that barely overlap.

At first I became disappointed, and a little worried, that I was gathering a lot of conflicting information, but then I began to realize that this phenomenon, in and of itself, is actually quite interesting. There may be an interesting story in the possibility that senior managers across companies have similar insights, quality assurance people have similar insights, manufacturing managers have similar insights, etc.

Also, the fact that they cannot completely agree on which government agencies perform which functions says more than enough about why certain central government policies should be considered mere guidelines. In many cases, it seems the right hand does not know what the left hand is doing.

Secondly, all of the various merger stories about who will buy whom, or who will buy parts of what, are simply a waste of time. I don't know where all of the rumors come from, but I wish those who report them would simply wait for confirmation from the companies themselves.

There seems to have developed a whole cottage industry around trying to predict who will merge, but I don't understand what is to be gained by such handicapping -- unless there is a market for such predictions I am not aware of. Therefore, this particular blog will no longer be party to such speculation.

That said, I have heard directly from a senior leader of a Chinese company that his company, along with a private equity consortium, will be making a serious offer for a foreign company. But since I have just laid down a new rule on such rumors, I'll have to keep it to myself. :-)