Thursday, December 23, 2010

The missing link in China's auto development?

An interesting article in today’s WSJ by ace China auto reporter Nori Shirouzu summarizes an interesting trend in China’s auto development. China’s state-owned automakers, along with their foreign joint-venture partners, are beginning to develop China-only brands.

Battleground in the small car segment

At least part of the impetus behind this trend, I believe, is the popularity of small economy cars in China. Beginning in early 2009, when China halved the sales tax on cars with engines 1.6 liters or smaller, sales of these small cars have really blossomed. (The number of cars sold in the less than 1.6 liter category rose by 71 percent over 2008 while sales of larger cars rose by only 23 percent.) The tax on smaller cars was increased slightly at the beginning of 2010, but small cars have nevertheless remained hot sellers in China.

The good news for makers of Chinese-branded autos was that the foreigners had almost nothing to offer in the less than 1.6 liter space, so Chinese brands dominated. The bad news for Beijing, however, was that the SOEs also had very little to offer in this space. It was the private automakers (along with independent SOEs such as Chery) that benefited most.

New Strategy: Joint development

Enter this new strategy of jointly-developed, Chinese-branded cars that, nearly as I can tell, is a win-win for the big SOEs and their foreign partners – at least in the short-run.

This strategy appears to have two variations. One is for the Chinese and foreign partner to develop a car together, combining the intellectual property of both sides. SAIC-GM-Wuling have taken this route with the Baojun (pictured below). According to the authoritative China Car Times, “The platform was designed in Korea, whilst the body design was done in China with GM’s help, the brand was developed in China and also the engine was developed by [Shanghai Auto] in the UK technical center.”

The SAIC-GM-Wuling Baojun

Shirouzu’s article today reveals that Volkswagen and PSA Peugeot Citroen are considering a similar strategy.

The other variation is simply to re-badge an older model from the foreign partner. Honda and Nissan are doing this with their respective partners in China, Guangzhou Auto and Dongfeng Auto. Guangzhou-Honda is a new Linian model which is a re-badged Honda City from a few years back, and Dongfeng Nissan are building the Qichen from old Nissan technology.

What's driving this trend?

There are a couple of factors at work behind this trend. First, although China’s central government has been pushing hard for development of Chinese brands since China joined the WTO, only China’s independent automakers (both private and local SOEs without JV partners) have made significant headway in introducing Chinese brands. Yes, the big SOEs have also introduced their own brands, but they have been “developed” mostly through purchased technology. That is, the big SOEs have yet to demonstrate any real engineering prowess.

Second, there is a big gap between the foreign-branded, mid-sized cars sold in China and the small, Chinese-branded cars. It’s a gap in terms of both price and quality, and Chinese consumers understand this very well. This is why, despite the growth of Chinese brands (they now make up over 30 percent of passenger cars sold in China), Chinese consumers would still prefer a foreign brand if they can afford it.

The Missing Link

These new, jointly-developed, Chinese-branded cars are, I believe, the missing link between foreign- and Chinese-branded cars. And the fact that this kind of development is happening in almost all of China’s big SOEs at the same time tells me there is some kind of central coordination going on – either that, or it’s just a big coincidence. Regardless, I think the strategy here is to provide Chinese consumers with a new product intended to wean them away from foreign cars and make them more accepting of Chinese brands.

And, if I am right, this should call into question the future role of foreign automakers in China’s market.

Another interesting wrinkle to this story is of whether Chinese automakers are learning any better how to design their own cars.

What some of these SOEs are doing is simply buying (or being given) old designs by their foreign partners, and then slapping on a Chinese badge. On the other hand, China’s private automakers have essentially been doing that for years ... only, they don’t have foreign partners ... and, um, they don’t pay for the stuff they copy. But in the process, the private automakers have probably gotten better at auto design. Even the process of copying must have imparted to the private firms some useful engineering skills that the SOEs have yet really to develop.

Perhaps this new method of (legally) copying what their foreign partners have already done will impart to SOE engineers some of those same skills.

Tuesday, December 21, 2010

The Nation: Thailand shows good potential as top auto producer


Since the Federation of Thai Industries expects the production of vehicles to hit 2.5 million units by 2016, Frederico Gil Sander, a World Bank economist based in Bangkok, said yesterday that it was very likely that Thailand would become one of the top 10 auto producers in the world.


Read the full article here.

Thursday, December 16, 2010

Bangkok Post: Abhisit applauds local automobile industry

Prime Minister Abhisit Vejjajiva yesterday praised the growth of the local auto industry at the Thailand International Motor Expo but remained non-committal about government policy towards the sector.
Suparat: Thailand to be a top-10 maker
Suparat Sirisuwannangkul, chairman of the Federation of Thai Industries' automobile club, said automobile production is poised to grow from 990,000 units in 2009 to 1.6 million this year, making the country the 13th-largest auto manufacturer.

Saturday, December 11, 2010

Umm...What's my motivation here?

Some people were "stunned" this week when the results of the latest OECD-administered exam comparing the performances of students across countries showed Shanghai's students to be the smartest in the world. This isn't something I would normally cover in this blog, but I would like to offer a slightly different perspective on these exam results.

First, I was not at all stunned that the Chinese came out on top. This is a country that teaches math as if their children's lives depend upon it. As I've stated before on this blog "
the average Chinese middle schooler can plot the trajectory of a non-guided missile." The only Americans who can do that are the handful who, for reasons that their friends can hardly fathom, opt to take a physics elective in 12th grade.

Fortunately, a few people did rush to put these results in perspective. Some Chinese experts acknowledged that, while their children are indeed pretty good at math and at taking exams, where they fall far short of their American counterparts is in creativity. (See articles here in ChinaDaily, and an editorial in WSJ by the Deputy Principal of Beijing University High School.) And James Fallows, in the Atlantic, quotes an educator who questions the representative nature of the exam given.

While I saw a lot of chatter about this news item on twitter this week, and read a few blog posts, I have yet to see anyone bring up the thought that originally came to my mind when these results were released. (Perhaps I missed it since I've been doing a lot more writing than reading recently.)

The point I would like to add is that I think various groups of students taking this exam most certainly had different levels of motivation.

Do any Americans remember the PSAT that we had to take in our 10th or 11th grade years? I would be surprised if many did. Does anyone remember the SAT or the ACT? Whether you got into college or not, you almost certainly do.

The only difference between these two exams was that one (the SAT or ACT) mattered, but the PSAT did not. I remember thinking about the PSAT: this has absolutely no bearing on my future, so I'm not going to sweat it. I may have even started to make patterns on the answer sheet as I colored in the dots.

My guess is that the American students who took this OECD exam approached it in pretty much the same way. Unless they could see how it would benefit them personally, they had no stake in the outcome.

As for the Chinese students who took the OECD exam, I have no way to prove this, but I am fairly certain that it was presented to them as something they must do for the honor of the Motherland.

This kind of pressure, combined with the fact that the Chinese system is already geared toward producing outstanding performance on standardized tests, was far more likely ensure a higher proportion of the students were motivated to perform well -- that, and the fact that the average Chinese student can do circles around the average American student in math.

Friday, November 19, 2010

Thai Auto Production May Exceed Target After October Record


Car production in Thailand may exceed this year’s target after reaching a record in October, the nation’s Automotive Industry Club said.
Output may reach 1.7 million units, from an earlier projection of 1.6 million, Surapong Paisitpatnapong, a club spokesman, told reporters in Bangkok today. Production reached 152,689 units in October, the most since Thailand started producing cars in 1961.

VW to invest $70 billion over next 5 years

Volkswagen AG says it plans to invest Euro 51.6 billion ($70 billion) over the next five years as it focuses on modernizing and extending its brands' product range.
The company said Friday that it will put Euro 41.3 billion of the money into property, plant and equipment for its automotive division -- 57 percent of that in Germany, where it has its Wolfsburg headquarters.

Tuesday, November 16, 2010

Thai October Vehicle Output Hits High; Exports Still Expanding


More good news about the Thai Auto Industry:
BANGKOK -(Dow Jones)- Thailand's vehicle production surged to a new high in October, while exports continued to expand from a year earlier with increased shipments to every market, the Federation of Thai Industries said Wednesday.
October vehicle output in Thailand, a regional manufacturing hub for many of the world's biggest automakers, rose 32.7% on year to 152,689 units, the highest ever since the first vehicle was produced in Thailand in 1961, the statement said.


Bangkok Post: Mercedes-Benz building its first engine plant here

Mercedes-Benz has approved the building of an engine plant in Thailand, the first manufacturing facility the German luxury carmaker has had in the kingdom in its 106-year presence.
Although many luxury car models are built in Thailand, Mercedes-Benz has hired Thonburi Automotive Assembly Co for their assembly.


‘‘We started setting up the engine production line two weeks ago,’’ says Prof Paufler. Click here to read more.

China Post: Toyota launches Prius hybrid in Thailand

Toyota Motor Co has chosen Thailand as the third location worldwide for manufacturing its Prius hybrid cars which will go on sale on the local market next month, company executives said Thursday. “Thailand will become the third country in the world that will serve as the manufacturing base of Prius this November,” Toyota Motor Thailand president Kyoichi Tanada said.

Sunday, November 14, 2010

THE STAR ONLINE: 2010 car sales performance in major Asean markets

With less than two months left till the end of the year, major South-East Asian markets, such as Malaysia, Thailand, Indonesia and the Philippines are gearing up for a stellar 2010 as far as their respective automotive industries are concerned.



METALEX

Quick reminder to register for METALEX 2011 at BITEC, Bangkok - an interesting show for those who are involved in Automotive metalworking….. 

You can register free online with 'special privileges' until 21 November 2011.




Saturday, November 13, 2010

Thailand to produce 1.7 million vehicles by year end

BANGKOK, Nov 11 - Thailand is maintaining its position as the "Detroit of Asia", beating all production records to produce about 1.7 million cars by year end and is now ranked as the 14th largest world auto producer, according to the Federation of Thai Industries (FTI)'s Automotive Industry Club….

AFG Meeting: Chris Brutons Presentation

Last Friday evening, AFG Members and friends from the AUSTRADE Automotive Trade Mission enjoyed a truly excellent presentation with lots of information and insight about Thailands economic and political present and future.

View or download the presentation on Slideshare.


Friday, November 12, 2010

Let's have more competition!...Just kidding!

An interesting bit of news came across the teletype today. The annual China-Europe Auto Manufacturers' Forum took place toward the end of last month (October 2010). Sometime during the discussion, the Assistant Director of the State Council's think tank, the Development Research Council, made a provocative statement that apparently freaked out a lot of people.

Let the foreigners have more than 50 percent?

The Assistant Director, Professor Liu Shijin, someone whose views on the auto industry are highly respected and influential, suggested that it was about time for China to end its 50 percent ownership restriction on foreign auto companies that invest in China. Currently, China's policy limits foreign auto assembly joint-venture (JV) partners to an ownership stake of 50 percent or less. (This only applies to whole vehicle assembly operations; parts companies may be wholly foreign-owned.)

(A Chinese source for Liu's statement and the controversy that followed may be found here.)

According to a writer for China's "First Finance" website, "the audience members with blonde hair and blue eyes applauded and nodded in agreement, while those with dark hair and dark eyes shook their heads [in disagreement]." I think what the writer intended to convey was that the foreigners in the audience agreed with Liu and the Chinese did not.

No! We're still not ready!

The Chinese arguments against Liu echoed those made prior to China’s joining the WTO: the Chinese auto industry is not yet mature enough to take on the foreigners head-on. If restrictions were lifted, foreigners would completely occupy China’s market to the exclusion of the Chinese manufacturers.

However, there was at least one Chinese auto executive who fully agreed with Liu: Li Shufu, Chairman of Geely. Li was later quoted:
Only complete lifting of the restrictions [on foreign investment] will help the development of the Chinese auto industry. The current policy of the 50 percent limit on foreign investment is disadvantageous; it does not protect the Chinese auto industry at all. On the contrary, it restricts foreign car companies from entering China.
Reflecting a refrain that Li has been preaching for years, he continues to be so confident in his company’s ability to compete with foreign producers (especially now that Geely owns Volvo) that he welcomes increased competition. (Here's a post on this blog from March of 2009 where Li lays out his argument that the private firms will eventually triumph over the SOEs.)

What Li most likely expects is that increased foreign competition within China would more quickly drive out the weaker competitors. That, of course, is anathema to the central government.

Since an overwhelming majority of China’s automakers are state-owned, it logically follows that an overwhelming majority of the weaker players are state-owned. And because the auto industry has been designated as a "pillar" industry since the mid-80s, it just wouldn't do to have an auto industry dominated by foreign and/or private enterprises.

Well, ... nevermind

The interesting news that came across the wires today is that Liu Shijin has now completely backed away from his earlier suggestion: "I never said I support opening up the restrictions on foreign investment."

Setting aside the fact that he clearly said exactly that at the conference, we have to ask why he's now backing down. Either he said something he shouldn't have, and was threatened with punishment if he didn't go to the media and retract what he said, or he was deliberately floating a trial balloon to gauge the reaction.

Knowing that Chinese planners at the NDRC and MIIT are hard at work on the next version of China's auto policy right now, I am leaning toward the latter explanation. And since he's backing away, it seems reasonable to assume that the 50 percent ownership restriction will remain in the next iteration of the auto policy.

Let the flowers bloom!

From an objective point of view (i.e. from someone who has no vested interest in which auto companies succeed) I think this is a mistake, and here's why.

Joint-ventures are notoriously inefficient -- particularly those that attempt to meld vastly different business cultures. Having worked for a 50/50 US-Japanese JV, I have experienced this first hand. When no single owner dominates, everything -- and I mean everything -- has to be negotiated, from corporate strategy to the temperature of the office.

I am not saying that all JVs are, by definition, contentious -- there are exceptions that prove the rule -- but the exceptions are extremely rare.

The original intent of forcing all foreign auto companies into joint-ventures was technology transfer, but over time, it became clear that the foreigners were withholding their best stuff from their Chinese partners. So why didn't the Chinese decide to dispense with the foreigners altogether and just import their cars to reverse-engineer?

Because Chinese consumers love foreign brands. And they love them so much that Chinese-foreign JVs have become cash-cows. National pride runs pretty deep in China, but if there's anything that runs deeper, it's a love of money, and the huge SOEs have become drunk off of cash generated by their partners' foreign-branded cars.

And here's why I think Liu's suggestion was a trial balloon. If the true goal of having foreign partners is no longer tech transfer (though I recognize the ostensible reason is still tech transfer), then why not be willing to take a smaller share of what could become a much larger pie?

Rather than take 50% of the profits of an inherently inefficient JV, why not take 49% of a much more efficient, foreigner dominated JV? And if there are certain things you don't want the foreigners to do with their increased economic control, then just circumscribe those behaviors by law.

If Li Shufu and the handful of China's planners who believe increased competition would more quickly lead to a shaking out and consolidation of China's auto industry are correct, then the quickest way would be to remove the 50 percent restriction. Entering the WTO did not devastate China's auto industry in the way that everyone feared it would. Indeed, it has become even larger and stronger.

No matter how much the SOEs are urged and ordered to be innovative, they will never do anything more than copy what others have already done. The problem is that SOE incentives are political, not economic. SOE leaders are only interested in their next assignment, but private sector leaders don't have a next assignment. They have no choice but to succeed.

If China truly wants a dominant auto industry, it needs to get over its obsession with state ownership and unleash the creativity of its hungry private sector. One way to do that is to open up competition.

Thursday, November 11, 2010

UK platform + US battery = Chinese EV?


A123 Systems announced that its lithium-ion batteries will be used in Shanghai Auto's (SAIC) Roewe branded electric vehicles.

The Roewe brand (
荣威 - rong wei -- yes, it sounds like "wrong-way" -- go figure) was created by Shanghai Auto prior to its merger with Nanjing Auto, after which the two combined the intellectual property and auto platforms purchased from the UK's MG-Rover several years ago.

The first electric Roewe will be the 750 (pictured above) which is derived from the British Rover 75. The battery supplier (and IP-owner), A123 Systems, is a purely American company, headquartered in Massachusetts. Though SAIC does own the IP of the Roewe, it was not originally designed in China.

Since the introduction of China's 2004 Auto Industry Development Policy, the constant refrain from Beijing has been a wish for Chinese automakers to develop Chinese-branded "new energy vehicles" using Chinese intellectual property.

While it is a good thing that SAIC is on board with the new energy vehicle trend,
I'm not sure this is exactly what Beijing had in mind when it urged Chinese automakers to develop their own hybrid and electric vehicles. The battery, after all, is the heart of the EV -- its most expensive component.

It also calls into question the viability of BYD's battery technology (or that of any other Chinese battery company) when a fellow Chinese automaker would rather pay royalties to an American battery company.

It seems a reasonable assumption that a Chinese-designed battery would be less expensive than an American-designed one. Perhaps the fact that SAIC's partner, GM, which is putting an A123 battery in the Chevy Volt was able to get SAIC a good deal on batteries?

IP issues aside, SAIC's Roewe 550 (below) which was designed in China, will eventually be electrified as well. (And it's a very nice-looking car, in my opinion.)

Tuesday, November 9, 2010

The sincerest form of flattery?










For reasons I don't fully understand, Chery Auto chose to give itself a name very close to the shortened moniker of Chevrolet (Chevy).

But maybe that was a coincidence.

Then, Chery comes out with a car called the QQ that not only looks like the Chevy Spark but whose doors can be swapped with those of a Spark.

Yet another coincidence?

Now Chery has beat BYD to market with its first pure electric car, the M1-EV.

Well, at least it doesn't look too much like Mitsubishi's iMIEV.

Friday, November 5, 2010

What is China? It's all in the name.

I've had little time for blog posting recently as I face the pressure of looming dissertation deadlines. But today I cannot hold my tongue as I observe the incredible audacity of a China that either does not understand the impact of its behavior on the rest of the world, or has simply decided it no longer cares.

I have been a scholar and watcher of China for a couple of decades, so by now, very little China does really surprises me; however, China's recent (over)reaction to Liu Xiaobo's Nobel Prize has caught me off guard. It caught me off guard, not because I never expected this kind of behavior from China, but because I just didn't expect it so soon. The latest news is that China's Foreign Ministry has delivered letters to other foreign embassies in Oslo, warning the representatives of other countries not to attend the awards ceremony for Liu Xiaobo.

Yesterday, China's Vice Foreign Minister Cui Tiankai made the warning even more explicit (from BBC website):
The choice before some European countries and others is clear and simple: do they want to be part of the political game to challenge China's judicial system or do they want to develop a true friendly relationship with the Chinese government and people? ... They have to make the choice according to their own judgment. If they make the wrong choice, they have to bear the consequences.
Excuse me? Is this the same China that constantly rants about people intervening in its internal affairs? Whatever happened to the China that was clever and reserved, the China that was supposed to be, according to Deng Xiaoping "concealing its capabilities and biding its time"?

What happened was that China decided the current recession affecting the West was the signal that China may now return to its rightful place as the "central kingdom".

Central kingdom? Yes, central, not middle. For years I have been trying (apparently ineffectively) to convince people that "middle kingdom" is not the proper translation of 中国. While the 中 may be translated as "middle", as in a physical location, it may also be translated as "central," as in importance, as in 中央政府 (central government).

This may be difficult for non-Chinese to understand, especially non-Chinese speakers, but to the Chinese, the name of the country has a meaning: it's not about a place, it's not even (primarily) about a race, it's about importance. When one is taught from the earliest age that the country in which he was fortunate enough to be born is the world's central kingdom, that means something.

To the rest of the world, it's just "China", a word applied
centuries ago to a far way country due to one of its valued talents -- making really nice pottery.

I mean no disrespect for China. If anything, my respect for China has only grown over the years as I have spent much time in China and as I continue to learn much about the place and the people on a daily basis. My purpose today is to say that, if you, like me, are surprised at China's latest hubristic display, don't be. China is simply being what it is: the central kingdom. And that will never change, not as long as its name is 中国.

The difference now is that China's 150 years of misfortune at the hands of foreigners is over, and it is no longer the "central kingdom" in name only. And if the rest of the world refuses to recognize that, well, "
they have to bear the consequences."

Thursday, November 4, 2010

Automotive World.com: Thailand combined sales up 40.3% in September

New vehicle sales in Thailand rose year-on-year for the 13th consecutive month in September. Sales were up 40.3% last month, reaching 68,261 vehicles, Toyota Motor Thailand said.

Tuesday, October 19, 2010

In China, not all politics is local

I realize a lot of my posts are about BYD, and I think that attests to the prowess of their PR team and their ability to keep themselves in the news. (One could say the same for Geely.) Today's story, however, is not one that BYD's PR department would have wanted us to know about.

About a week ago the news emerged that BYD was being fined and having some of its factories in Xi’an confiscated as punishment for a land-use violation. This came as a bit of a surprise to me.

First, a little background

In July of 2009 BYD signed an agreement with the Xi’an High Tech Zone to build a factory that would expand production by 200,000 vehicles per year. That same month, two different village governments in Huxian County (in the Xi’an area) appropriated 725 acres of land for BYD’s project, and, according to law, compensated the people who were being moved off the land. As is turns out 91 percent of the land appropriated was arable.

Huxian County then asked the Xi’an city government to approve an expansion of the BYD project land to about 807 acres (90 percent of which would be arable). Xi’an City then passed this request up to the Shaanxi Provincial government who approved the request in November of 2009.

By the following month, BYD had begun construction on seven factory buildings including a dormitory, a mixing plant and surrounding roads on about 121 acres of land, 92 percent of which was arable. (The difference between the acreage being used by BYD and that requested by Huxian County is not immediately apparent.)

All of this came to light in July of 2010 when the Ministry of Land and Natural Resources ordered a halt in construction and launched an investigation into illegal development of arable land.

As I mentioned in an earlier post, the development of arable land has become a serious issue in China, drawing much discussion at the National People’s Congress in March of 2010. The law, as it pertains to this issue, also seems pretty serious: any potential non-farm use of arable land, anywhere in China, must be submitted to China’s State Council (the Cabinet) for approval.

By agreeing to BYD’s use of arable land for factory construction, the Shaanxi Provincial Government was clearly in violation of this law. It had no authority to grant an approval.

BYD, for its part, thought it had covered all its bases. It went to the local government and filed its request, and within a few months, it received the approval it wanted. And this kind of behavior by BYD and local governments was not out of the ordinary.

The Ministry of Land and Natural Resources, however, did not see it that way. It fined BYD nearly $500,000 and confiscated all of its illegally constructed buildings. And since an entire hierarchy of local officials from village to county to city to province had granted approvals, Beijing handed out punishments to them as well, meting out fines, warnings and demerits to 14 officials at various levels.

What this means

The fact that both BYD and local officials were punished was a clear signal from Beijing that this law in particular is not to be broken – killing a few chickens to scare the monkeys. Monkeys all over China are now duly warned.

What initially surprised me upon the announcement of the investigation in July was that the Ministry of Land and Natural Resources (MLNR) would enforce this law against BYD, a company that appeared to be among Beijing’s favorite private companies due to its success in selling low-emission cars and development of new energy vehicles. BYD was even the favored recipient of a loan from Bank of China last December for building a solar plant.

My assumption had been that someone above the MLNR, perhaps in one of the more powerful ministries like MIIT or the NDRC, would trump MLNR’s decision, and BYD would get off lightly. Well, a nearly $500K fine and confiscation of buildings is anything but light. (Fortunately for BYD, they weren’t also forced to restore the land to its pre-construction arable state!)

And this comes at an unfortunate time for BYD whose sales have been dropping. In the summer it announced a significant scaling back in projected sales for 2010 from 800,000 to 600,000. Its F3 (a Toyota Corolla clone) was the best selling sedan in China in 2009, but it wasn’t even among the top-ten sellers last month. Also, for reasons that are not entirely clear, BYD has backed away from its previous intention to introduce its all-electric E6 crossover in California this year.

But BYD’s difficulties are not the most important part of this story. The issue here is that Beijing is getting serious about the use of arable land, and it is sending out the signal that such abuses of the law will no longer be tolerated.

(This is, in my opinion, related to China’s concern for self-sufficiency which borders on paranoia. The apparent fear is that other countries will hoard goods China needs as it may now be doing with the rare earth metals that Japan needs. Perhaps China is not aware that the United States sold grain to the Soviet Union at the height of the Cold War. But I digress…)

Many China-watchers observe local governments getting away with ignoring Beijing’s dictates and assume this means that Beijing is powerless to enforce its will in the provinces. This simply is not true. As this incident demonstrates, even a relatively weak ministry can get its way when it wants to. Just because you can get away with breaking the law today doesn’t mean you can do it tomorrow.

__________________

Chinese sources consulted for this article:

国土资源部公布四起部挂牌督办违法案件处理结果
比亚迪项目违规占地受罚
比亚迪西安违法占地案处理超预期 14名官员被问责

Friday, October 8, 2010

Bangkok Post: Thailand's investor appeal reviving, but more help needed

A calmer political atmosphere has returned in late 2010. No party has a clear mandate to enact new legislation or to provide us some insight into next year's election. The economy is also noticeably better, employment is strong, and the buoyant stock market makes us feel good. Yet, populist policies for energy and in a host of areas are continuing while infrastructure spending is not at the levels needed to increase the industrial and logistics competitiveness of Thailand.

Wednesday, September 22, 2010

UPDATED--It's about M-O-N-E-Y, Mr. Friedman

Last week New York Times columnist Thomas Friedman wrote another of his "Wow, China is awesome!" columns. This one is about how the Chinese are on top of climate change while the Americans are so caught up in partisan bickering that they have allowed an opportunity to slip out of their hands.

So far, so good. Nothing to disagree with there, at least as far as his impression of the US is concerned.

But Friedman takes comments by Peggy Liu (of JUCCCE) that the Chinese are running various clean energy pilot projects as a signal that the Chinese are serious about cleaning up their environment.

This is where I have to part ways with Tom. As someone who has,
for the past 16 years, lived in or traveled frequently to China -- not just the big cities, but the countryside as well -- I can only verify that things have become worse, not better. There are many things China could have been doing for the past decade or so to clean up its environment or to reduce its carbon footprint, but it hasn't done any of them. I'm sorry, I like China, I love the people, but the place is filthy.

Still Friedman manages to make one valid connection -- that China's clean energy efforts are all about "J-O-B-S". He's pretty close on that one, but while
J-O-B-S are certainly a nice side-effect, it's really more about M-O-N-E-Y. I've made these same assertions before on this blog:
Ultimately, Beijing sees great opportunity in the climate change movement. But contrary to outward appearances, the opportunity for China lies, not in cleaning up its environment, but in selling related technologies to foreigners.

Clean technology will be expensive, and a country facing a demographic time bomb in a decade or so cannot afford to waste a single percentage point in GDP growth to clean up its environment. China will, however, be more than happy to sell the necessary technology to those countries that are already on the bandwagon.
But don't take my word for it. Let's see how the Chinese government describes what it is doing. The following is a summary from China's 2009 Auto Industry Yearbook (a government publication) summing up the purpose of China's pursuit of "new energy vehicles":
新能源汽车行业有望为中国汽车提供赶超国际汽车先进国家的机会... 有望在全球新能源汽车产业分工中获取更大收益。

Translated:

The hope of the new energy vehicle industry is that it will provide China with an opportunity to overtake countries with advanced auto industries ... the hope is that, in the division of labor in the new energy vehicle industry, [China] can earn more profit.
While this is just part of the summary paragraph, there's nothing in the the entire section on "new energy vehicles" about climate change or environmental protection. Though the term "energy saving" is used once or twice.

The point here is not to pile on China and accuse it of being duplicitous. China is actually being very clear about what it wants. The problem is when the Tom Friedmans of the world fly into Beijing, stay in five-star hotels and then proceed to interpret Chinese actions through their own worldview.

I think it's great that China is undertaking all of these pilot projects. This work desperately needs to be done, and much more could be done in the US if our political leaders were more focused on the good of the country than they are on their careers (and if voters would punish them for it).

But it is way too early to draw the conclusion that China is concerned about climate change. This is a country that is concerned more about growth than anything else. If things continue on their current course, China will get what it wants: M-O-N-E-Y.

And they'll continue to get it from the US.

________________
UPDATE:

I came across this article today, from a law professor at Beijing University, that supports this idea. The basic message of "China's green laws are useless" is that, while China's environmental laws are impressive, they have had no effect on the country's environment.

Tuesday, September 14, 2010

China Auto Mergers: It's a sellers' market...

...and nobody's selling.

An article in today's People's Daily (English) says that the auto industry tops the list of industries in which China's State Council wants to see an acceleration in mergers and acquisitions. The article goes further to say that the Ministry of Industry and Information Technology (MIIT) is drafting specific policies on mergers due to be released later this year.

The article is right in that consolidation of this industry is much needed. There are currently more than 100 auto assemblers in China, though only the top 20 or so really really count. Still, if China is to develop a globally competitive auto industry, they will need for a lot of the smaller producers to either disappear or be consolidated into larger producers.

If the article is correct, these new policies that MIIT is working on will do something to accelerate M&A in the auto industry. If those new policies are to do anything to accelerate mergers, however, it will require a pretty drastic change in Beijing's behavior.

Ever since China's government began to take notice of its auto industry around the mid-1980s, there has been an increasing desire to make China's industry globally competitive. And part of every auto policy that has been written to date has focused on a need for consolidation. I know this because I've read all of them.

Early on in the reform era, the auto bureaucracy du jour was always well aware of how other countries' auto industries had developed. For example, they knew that, in the early part of the 20th century, the United States also had more than 100 auto companies, and that number had shrunk to about half a dozen by the late 1950s, and only three by the century's end.

As the US has, until recently, been the one market China most wanted to emulate (since the US was, and still is, the world's largest economy), it seems to have made sense to auto planners in Beijing that the route taken by America's "Big 3" should soon be taken by China's largest auto companies.

And until now no matter how strongly the government has stressed the need for consolidation, implementation has always included allowing the market to determine the outcomes -- just as it presumably did in the US. Yet, while there have been a handful of mergers over the past decade (First Auto-Tianjin, Shanghai-Nanjing, Guangzhou-Changfeng, Chang'an-Hafei-Changhe), there have been nowhere nearly the number one might expect if the market were truly determining the outcomes.

Many of China's smallest auto companies continue to soldier on, year-after-year, cranking out a handful of cars. In a true market economy, these would
never have survived on their own, yet in China, they do. Why? Because their local governments want them to. They employ people, they pay taxes, and they also very likely give local leaders a few vehicles to drive around every year.

If not for local governments who stand in the way, the market would have indeed taken care of China's fragmented auto industry. There is no lack of desire on the part of the CEOs of large auto groups to buy others; there's simply no desire on the part of small company CEOs and local governments to sell.

So these new policies that MIIT introduces later this year will probably not look much different from those we have seen to date. Beijing will very likely still want the strongest companies to take over the weaker ones. The question is whether Beijing will put any teeth in its policy. Will it change the incentive structures faced by local governments that keep them from supporting consolidation where necessary?

The tradeoffs are pretty clear. The status quo (little consolidation) helps to prevent social instability that could result from closure or merger of less efficient players. On the other hand, significant consolidation would help China's auto industry to become more globally competitive.

Which is really more important to Beijing?

Thursday, September 9, 2010

Is China "skirting the rules" on clean tech support?

Maybe, maybe not, but I think there's a far more important story here.

There's a great article by Keith Bradsher in today's New York Times, "On Clean Energy, China Skirts the Rules". Bradsher compares the extent to which clean tech firms in China and in the US receive government support. The upshot of the article is, as has become de rigeur recently, to paint a picture of a China that is getting ready to clean America's clock (pun intended).

Bradsher quotes the CFO of a US-based clean tech company on difficulties:
"You can’t get a penny in the United States, it doesn’t matter who you call — banks, government. It’s awful," he said. "Therein lies the hidden advantage of being in China."
Then he closes with this quote from the head of a Chinese tech company with operations in both China and the US:
"Who wins this clean energy race," Mr. Zhao of Sunzone said, "really depends on how much support the government gives."
Beijing-based lawyer, Stan Abrams, adds some illuminating commentary on this story at his blog, China Hearsay. He looks at it from more of a legal standpoint and concludes that, though China does appear to be skirting the rules, little to none of its behavior appears to be in gross violation of China's WTO commitments.

My sense is the recent rash of "China is kicking America's ass in clean tech" articles is really more about prodding the US government to take a larger role.

What concerns me is, if those who promote such views get their wish for more US government involvement in industry, would the US government know where to draw the line?

At some point government support in the US (and elsewhere) starts to result in diminishing returns. Once you unleash the state, it's hard to put that genie back in the bottle. Once you put in place a new bureaucracy, the people inside it begin immediately to plan for a perpetual existence.

During a recession, it becomes easy to clamor for government help, but when conditions improve, how likely is the government to withdraw?

This, to me, is a fascinating difference between the Chinese and US systems. We know that, over time, democracies bulk up with special interest driven programs that beneficiaries will fight for to the death, and that the rest of the population rarely have the collective will to fight.

On the other hand, China's "special interests" are all pretty much contained within the Politburo. They fight, someone wins, then they move on.

All the hand-wringing about whether the US should help with clean tech, though important, seems to be missing the much broader point (though raising the vital question) of whether the political system that has served the US well for over 200 years is sustainable in its current form.

Monday, September 6, 2010

Updated statistics for Vehicle & Parts Exports

… by The Thai Automotive Industry Association

Bangkok Post: Thailand World Expo in 2020

The cabinet on Tuesday approved in principle for Thailand to propose for hosting Thailand World Expo in 2020, Thailand Convention and Exhibition Bureau (TCEB) director Akrapol Sorasuchart said.

Sunday, September 5, 2010

Bangkok Post: Thailand: It's only in your mind


Great article from Khun Voranai our next speaker:

The government would like to rebrand Thailand, in accordance with the slogan "Thailand in your mind". Citizens are invited to vote on four choices: Thailand as a country of open-minded people with a positive attitude, or as a country with local wisdom that is still open to the world, or as the place where business, culture and nature converge into one destination, or as a hub for investment and exemplary service.


Friday, September 3, 2010

US and China support for auto industries: not that different

A comparison of auto industries: China's government supports its auto firms in growth and development while the US government only rescues its auto firms from bankruptcy. (Right?)

For the past several weeks, I have been plowing through this nearly complete set of China Automotive Industry Yearbooks, tracing China's auto policy since the early 1980s.



Toward the end of the 1990s, I began to see references to a supposed US government program the Chinese call "新一代汽车伙伴计划" (literally translated: "new generation vehicle partnership plan"). My first thought was, they have to be making this up to justify their own intervention in the auto industry. The US government does not intervene in the auto industry -- or at least it didn't until it had to rescue GM and Chrysler last year. Before that, the only other time was to rescue Chrysler (the first time) in the early '80s.

After seeing several references to this program and another one they called "自有汽车" (Freedom car? Seriously?), I decided I had to find out what this was all about. What I learned was that the US government has indeed established partnerships with the former "Big 3" American automakers to develop new vehicle technologies.

The first one "Partnership for a New Generation of Vehicles" (PNGV) was started in 1993 under the Clinton administration and, according to this article at Wikipedia, resulted in the development of some useful technologies that made vehicles lighter and more efficient. The program also resulted in diesel-burning cars built by each of the Big 3 that were able to get at least 72 miles per gallon. (You never heard of this? Funny. Neither had I.)

Curiously, this program was ended by the Bush Administration in 2001 (apparently at the request of the Big 3) and replaced with a new program called "Freedom Car". This new program dropped the focus on current technologies and began a push to make fuel-cell vehicles commercially viable.

In more recent times, I have become aware of funds have that been made available under a Department of Energy program to support the development of advanced lithium-ion batteries for electric vehicles, but my assumption had been that this was a one-off program put together under the stimulus program. However, as it turns out, I was wrong about that too. This program started in 2007, well over a year before we started to notice the economic downturn.

US government involvement in the auto industry, as it turns out, is not an aberation; it's quite the regularity. And it's not only about rescue from bankruptcy; the US government has been pushing all along for development of advanced vehicle technologies.

As is typically the case with Wikipedia articles, people with competing agendas are able to edit the pages to which I have linked above, so those articles do contain some bias. Still, it was interesting to discover that China isn't the only country whose government wants to see its automakers develop new technologies.

And I found it especially ironic that I had to learn about these US efforts from Chinese government documents.

Tuesday, August 31, 2010

Chevy's Volt in China: Why not call it the Volt?


China Car Times reports that the new Chevrolet Volt was unveiled at an event in Shanghai today, though it won't be going on sale until sometime in 2011.

I'm always curious to know how the names of foreign products are Sinicized for sale in the Chinese market. In this case, GM has picked the Chinese name 沃蓝达 (wo lan da), a name apparently intended to sound somewhat like "volt". (Incidentally that's the same 沃 used in Wal-Mart in China: 沃尔玛.)

I wondered why they didn't simply call it "volt" in Chinese. I mean, they do have electricity there, and it's also measured in volts. So I looked it up.

The word "volt", meaning a measurement of electricity, is translated as 伏特 (fu te), which sounds exactly like the Chinese translation of Ford Motors, "福特" (fu te).

Tuesday, August 17, 2010

Elusive Innovation: Inventing Stuff is Hard

Once one has climbed to the top of the hierarchy of the global division of labor, it really isn’t all that difficult to reach back down. However, if one has yet to make it to the top, getting there is extremely hard.

The US no longer manufactures most of what it buys, and many items it formerly manufactured are now being made elsewhere. But it’s not as if the US no longer has any economic activity. Much of that manufacturing activity was replaced by “higher level” knowledge work, part of which includes research and development that brings us such innovations as iPhones and this internet thing.

Despite the loss of manufacturing, one advantage the US has is that it can always decide to manufacture something if it wants to. All it has to do is throw money at the problem. The US rescue of General Motors is a case in point. It is quite likely that GM would no longer be building cars in the US if the US government had not determined to save the company. This is not to say the rescue of GM was necessarily a good strategy, just that, if the US government so desires, it has the wherewithal to pull it off.

China’s economy now provides a significant portion of the world’s manufacturing, a task for which it is currently well-suited. It has more people than it can count to throw at factories requiring unskilled labor. But an unfortunate disadvantage for China is that, whereas the US has the option of employing brute force (i.e., lots of money) to keep manufacturing onshore, China cannot simply employ brute force to encourage innovation.

Innovation is a higher level activity that requires a certain quality of education and a relatively free and open political environment. In absence of these requirements, China can throw all the money and slogans it wants at innovation and it will still not happen.

And this is why the US is in a far more favorable position relative to China. If, for whatever reason, all trade between China and the US were to stop for a period of time, not only could the US buy manufactured goods from other countries, but it would also have the option to begin rebuilding the manufacturing industries it once had. Again, while that may not be the optimal strategy, at least it is an option for the US. On the other hand, China, try as hard as it might, cannot become an innovative society without undertaking the kinds of political reform necessary to encourage innovation.

(And ironically, if China were to undertake such political reform, the probability of an interruption in trade between China and the US would quickly drop to about 0%, making this whole discussion more or less moot.)

To slightly oversimplify, while the US can do what China does, China cannot do what the US does. Not today.

But it is not as if China is a stranger to innovation. While my European ancestors were still banging sticks together, the Chinese were inventing cool things like gunpowder, the plow, the compass, paper. So I am quite certain the current lack of innovation is not an issue of human capacity, but more of a systemic one.

Of course, the bad news for Chinese citizens is that, in the short term, the system will not change. But the good news for many educated Chinese is that there is always the option of emigration to more innovative societies. Unfortunately for China, this is a double blow to the country as a whole. Nearly every educated Chinese who leaves is not only a minus-one for China, but also a plus-one for the country to which he or she immigrates.

The global hierarchy of the division of labor, as it currently stands, has brought the world both innovation and inexpensively manufactured goods. The current structure, despite its flaws, works pretty well, but a major problem China has with the current structure is that China is not in its traditional place on top. We can see this dissatisfaction in the central government’s continually unsatisfied demands for “indigenous innovation”.

For how long will insistence on rule by an unelected government continue to outweigh the Chinese desire to once again lead the world in innovation? For as long as China’s single greatest fear is instability. Until China's government can become comfortable with a little unpredictability, it should expect little in the way of breakthrough innovation.

Sunday, August 15, 2010

BREAKING NEWS: China surpasses US in population!

Does anyone think about quality anymore?

I came across this article to which someone linked on Twitter this morning. The article, entitled "China has Already Surpassed the U.S. in Cleantech" convincingly lists nine areas in which China is quantitatively miles ahead of the US:
  • IPOs
  • M&As
  • Solar
  • Rare earth elements
  • Stimulus
  • R&D
  • Speed
  • Nukes
  • Investment
I would add more items to this list as well:
  • Population
  • Food consumption
  • Particulate pollution
  • Carbon output
  • Land mass
  • Squat toilets
  • etc...
The point is that, when you compare China to other countries in strictly quantitative measures, it will increasingly come out on top. But what does that mean?

China is very good at mobilizing when the central government gives the orders. When Mao told Chinese to build furnaces in their backyards to make steel during the Great Leap Forward, that's exactly what everyone did. And, as it turned out, almost all of the steel was crap because no one really knew how to make steel.

This is not to say that Chinese people are incapable of innovation. Indeed, much of the innovation coming out of the US has the involvement of people of Chinese ethnicity. But the difference is in the environment for innovation.

To this day, China still lacks either the educational system or the political freedom to encourage innovation. There is a lot of talk about innovation, and there is a lot of money being thrown at it, but in the end, where is the innovation? Aside from a way to turn an iPod Touch into a cell phone, what innovations have come out of China?

What about BYD's hybrids and electric cars, you may ask. What about them? Out of the 400,000-plus cars they sold last year, only a hundred or so did not have traditional gasoline engines. So far this year, they've sold a few hundred more of their new energy cars, mostly to taxi fleets. By this time next year, there will be thousands more Chevy Volts and Nissan Leafs in the hands of consumers than BYD hybrids or electric vehicles.

In a previous post on ChinaBizGov, I referred to a quote from the Economist that, when it comes to cleantech, ultimately China will still do most of the manufacturing and the US will still do most of the inventing. This is what these two economies are set up to do.

China will not suddenly become a hotbed of innovation simply because the central government repeats over and over that it wants innovation. And the US is not going to stop innovating simply because it is going through a difficult recession. The underlying environments of these two countries have not changed.

Thursday, August 12, 2010

Why? 'Cuz picking winners is bad, mmmkay.

There's an interesting article in this week's Economist, "Picking winners, saving losers" that deserves a read if you're a subscriber. If not, I would like to highlight a few points.

As expected, the Economist still finds industrial policy to be largely unsuccessful, though the evidence they present is only anecdotal. They say that industrial policy is back in fashion now for four reasons:
  1. Weakness in the world economy
  2. Efforts to rebalance economies away from sectors such as finance and real estate. (They mention the US here, but I see no evidence whatsoever that the US is trying to rebalance away from real estate. Indeed, I'm pretty sure everyone in Washington gets on his or her knees every night and prays for a rebound in the real estate market.)
  3. Emergency efforts to rescue recessionary economies has led to demands for more industrial policy
  4. Rich countries are responding to the apparently successful policies of countries like China and South Korea.
All of these reasons sound plausible, and I think the last one is one of the most important. Why? Because, despite all of the economic theory telling us industrial policy is bad, China is the elephant in the room that no one seems to know how to address.

Is China, with its "state-led capitalism", making a huge mistake that it will pay for in the future, or is it the exception that proves the rule? And if China is right, where does that leave all of the other countries that are hoping to abandon industrial policy as soon as the recession is over?

One of the Economist's concluding lessons (which it says are "clear") is that, "the more [an industrial policy] is in step with a national or local economy's comparative advantage, the more likely it is to succeed". Okay, so the Economist is allowing that industrial policy could work, but how can it explain the fact that some countries have successfully created industries where none previously existed?

If Japan and South Korea had listened to the Economist's advice about comparative advantage, neither would have an auto industry right now. Same goes for China. Everyone would still be farming in the countryside.

The article quotes a Michael Liebreich, CEO of Bloomberg New Energy Finance, on industrial policies currently supporting clean technology. "Where the industry ends up will inevitably be different from where the money went in," he says.

Despite the fact that China and the US are both spending piles of money on clean technology, says Liebreich, China is still likely to end up with most of the manufacturing, and the US is still likely to end up with most of the R&D -- the implication being that money spent on R&D in China and on manufacturing in the US is probably being wasted.

Again, though no hard evidence is offered to support Liebreich's prediction, this does seem about right. But it's only because I see no real evidence that China is willing to make the kinds of political changes that would create an intellectual environment where innovation is encouraged.

On the other hand, we also see a US government completely willing and able to spend a lot of taxpayer money to keep manufacturing at home. Without question, GM would not exist if the Bush/Obama administrations had not saved it.

Since I am not an economist, I'm not sure I have the tools to solve the questions of industrial policy. Then again, I'm not sure the economists do either. The only thing that's "clear" to me is that the real world keeps throwing out examples that their models cannot explain.

China's green subsidies are an investment. America's are an expense.

Here's one for my fellow finance geeks...

Having emerged from the recent global recession relatively unscathed, China has launched what appears to be an all-out assault in its ambitions to become a major player in the future of green technology. As one of the most polluted places on the planet, China’s motivation seems natural and unsurprising. However, there is a much more important motive than cleaning the environment behind China’s drive to dominate this sector. China understands very well that the world’s developed countries are prepared to shame each other into doing whatever is necessary to mitigate climate change. Whoever is able to develop these cutting-edge technologies, or to make existing technologies more affordable, stands to generate a lot of revenue.

When we see such news as the recent announcement that China is committing upwards of $15 billion toward “green” cars, we need to understand that, from China’s perspective, this is not just about cleaning up China. It is an investment in China’s future.

But could we not view America’s investments in the same manner? In a word, no. There is a big difference.

During the late 1990s / early 2000s, under the leadership of Jiang Zemin and Zhu Rongji, China embarked on a far-reaching program of privatization. Under Zhu’s direction, thousands of state-owned enterprises (SOEs) were closed, privatized or downsized, and over 40 million SOE workers lost their jobs (many to be reabsorbed by the private sector). But under the leadership of Hu Jintao, China has pulled back from the brink of privatization and begun to consolidate and solidify the role of the state in China’s most important industries.

And even in industries where private and state-owned enterprises compete, such as China’s automobile industry, the private players are typically beholden to local governments in a mutually beneficial relationship. The private enterprises provide employment and tax revenue while the local state provides land, tax breaks, and free or cheap utilities. Furthermore, when private enterprises in important industries become large enough, and are seen to be following the desired policies of Beijing, China’s central government has been more than willing to step in and provide assistance in the form of subsidies or easy access to credit.

Large loans by the state-owned Bank of China last year to BYD and Geely, two “private” auto manufacturers serve to underscore this point. BYD is seen by many to be on the cutting edge of development in electric vehicles, and Geely recently completed its acquisition of Volvo. In both cases, the central government was willing to lend a hand (and more importantly, yuan) to help these two companies in pursuit of Bejing’s auto policies.

Why is China’s government willing to support private companies that compete with its state-owned giants? Because ultimately, the returns on the state’s investments, whether they go to private or state-owned enterprises, are Chinese. Ultimately, technology developed (or copied) in China finds its way into the hands of massive state-owned enterprises. And ultimately, the profits generated by these massive SOEs finds its way into the hands of their owners: the state.

So when China subsidizes its companies to develop new green technologies – or to “borrow” and tweak such technologies from abroad – the goal is to generate a return on China’s investment.

By contrast, when the federal government of the U.S. chooses to channel $69 billion in subsidies, tax credits, low-interest loans and grants to green technology companies, most of which (with the glaring exception of General Motors) are in the private sector, the state is not generating a return for itself. The ultimate beneficiaries of U.S. generosity, assuming the recipients of government largesse are ultimately successful, will be the shareholders of the companies receiving the money.

In short, whether they are actually accounted for this way or not, China’s industry subsidies are an asset on its balance sheet and America’s are an expense on its P&L. But does the accounting really matter? I would argue that, in the short- to medium-term, it does.

In a country that faces major demographic challenges during the next decade or so (as retirees begin to significantly outnumber workers), China’s leaders fully understand that they need to generate as much economic growth as possible now while it is still relatively easy. Cash banked now will help to create the massive welfare state that China will eventually be forced to build.

China’s investments in green technology are not about cleaning up pollution or mitigating global warming, though these will surely be positive side-effects; they are about preparing China for an uncertain future. This is a battle that China’s state-owned enterprises have to win. By contrast, it is a battle that the U.S. government only hopes its private sector can win.

Wednesday, August 11, 2010

Teen Tune Up Night at Kent Rylee Automotive Solutions

Kent Rylee Automotive Solutions is hosting a Teen Tune Up Night on September 7th. Please help us spread the word. Free vendor booths available, cash prizes for individual teen contests and opportunities for student organizations to win cash prizes. JJ Ryan on site with live remote. Photo booth and much more!  Pass this info along to a Teen you know or anyone involved with raising funds for a teen organization.  For more information go to http://www.kentrylee.com/content.aspx?content_id=9

Monday, August 9, 2010

China's MIIT Orders Capacity Cutbacks

According to an announcement on the website of China's Ministry of Industry and Information Technology (MIIT), 2,087 companies in 18 industries have been ordered to close outdated, heavily polluting factories by September.

While this sounds like a positive step by a government that values the environment, it also sounds like similar orders that have been given in the past -- long before it was cool to care about climate change. I hate to sound skeptical (and I would like to be wrong about this), but, frankly, I'm not buying it this time either.

The punishments suggested for companies failing to comply are restrictions on access to bank financing and new project approvals. First of all, most of the companies on MIIT's list are small or medium sized enterprises, and many of them are privately owned. These companies never had access to bank lending anyway. Furthermore, because they are so small, their approval processes -- if indeed there were any -- most likely never went further than their local governments.

In addition, local governments are still heavily incentivized on two very measurable criteria: social stability and economic growth. Closing local businesses is unlikely to help their job performance measurement under either criterion.

While local governments will, of course, have to be seen to follow central government orders, it's not hard to imagine that local authorities are already working with the owners of these businesses (which in many cases are the local governments themselves!) to find a way around Beijing's dictates.

Ultimately, Beijing sees great opportunity in the climate change movement. But contrary to outward appearances, the opportunity for China lies, not in cleaning up its environment, but in selling related technologies to foreigners.

Clean technology will be expensive, and a country facing a demographic time bomb in a decade or so cannot afford to waste a single percentage point in GDP growth to clean up its environment. China will, however, be more than happy to sell the necessary technology to those countries that are already on the bandwagon.

Friday, August 6, 2010

Bangkok Post: Somboon plans B3.5bn investment to expand capacities

The SET-listed auto-parts maker Somboon Advance Technology (SAT) is planning to invest 3.5 billion baht to expand its production over the next three years to serve expected high growth of the automotive industry.

American Chronicle: Germans keen to invest in Thailand: Chemical, auto-parts makers making plans

Excerpt:


Alexander Becker, executive assistant to the president of Continental's chassis and safety division, said the company plans to step up its presence in Thailand through new investment to build a new automotive parts plant. Its first engine plant in Thailand started in 2009.
Continental wants to double its revenue in Thailand from 30 million euros at present to 60 million in 2015 partly through seeking closer access to Japanese customers such as Toyota and Honda to gain more market share.
"Despite a (political) crisis over recent months, Thailand has shown a very good rate of economic growth and growing vehicle sales," said Dr Becker. "The eco-car programme is a very good strategy for developing the auto industry."

People Daily: Thai GDP in 1st half of 2010 to grow 10%: Bank of Thailand chief

Thailand's gross domestic product ( GDP) in the 1st half of 2010 could increase 10 percent year on year, Bank of Thailand (BOT) governor Tarisa Watanagase said on Thursday, the Bangkok Post's website reported.

Friday, July 30, 2010

Thanks to All Who Made Ladies Night a Success!

Thank you to all who participated in our Ladies Night Event! Congratulations to door prize winners....Gwen Bridges, Tricia Sparks, Deb Tice, Betty Julian, Christie Fournier and Rhonda Porter! Thank you to all who set up vendor booths as well. We hope everyone got their your automotive questions answered. We appreciated you being here. We will be doing something similiar to this in September for Teens.

Thursday, July 29, 2010

More Local "New Energy" Vehicle Subsidies

In addition to the central government's subsidies for new energy vehicles in China, two more local governments have announced their own subsidy plans.

Shanghai is planning subsidies of 40,000 to 60,000 yuan for individual buyers of plug-in hybrid or electric vehicles, and the city of Changchun, along with Jilin Province, is also planning a subsidy of about 40,000 yuan.

Shanghai is the home of Shanghai Automotive which owns the MG and Roewe brands (bought from the UK) and has joint ventures with both Volkswagen and General Motors. Changchun is the home of First Auto Works, a centrally-owned company that has joint ventures with Volkswagen, Toyota and Mazda, and is producing some of its own-branded vehicles as well.

Shanghai and Changchun join Shenzhen which earlier announced it would provide new energy vehicle subsidies.

These are the subsidies available so far. ($1 = 6.8 RMB)



People buying pure electric vehicles in Shenzhen could get a subsidy of up to 120,000 RMB ($17,600). That approaches half the cost of an electric vehicle.

Now, if only they can find a place to plug it in...