In the annual report of Chinese Automobile Association, the president Chuanlin Xiong reported that the at the end of November has already reached 17 million and he also mentioned that this number will go over 18 million at the end of the year, December 9th, 2010 (Chinese automobile association annual report). 18 million means it’s beyond the recorded of United States’ 17 million in the history.
Due to some reasons made the sales volume of United States’ into a hard time. So I want to compare the automobile industries between China and United States. Although, these two countries have different history and they are in the different periods. We can still highlight some factors to do the comparison. I will focus on the re-united, the cash flows, and the parts supply.
Re-Unite
In February 2010, Williams Diehl talked about the situation of American automobile industry, the GM (General Moto) can pass the hard time, but half of the automobile industry will shut down. Also, he explained that when the sale volume reach 17 million, many of the factories’ output were over the average and they have to reduce their products to balance the situation.
Meanwhile, almost every areas and countries are doing re-unite, including China. Last years, many companies, in the whole world, would cut their losing money propositions, so that they can increase the issue of stock and reduce their debt. Otherwise, some companies would be sold to others’.
Chinese automobile corporations had noticed the changed in the world. So to improve their competitive strength is a hot topic among those companies. For the companies, which have limited abilities, self-adjustment is the major way. And those companies that have certain funds to be used, they choose to purchase others. In this way, they can get more advance technology to help themselves get improved. For example, the Chinese brand Geely bought 100% stock of Volvo.
Geely, a chines vehicle brand and only with 13 years vehicle making history. On August 2nd, 2010, Geely bought Volvo. As we know, Volvo used to belong to Ford and based on the Ford CEO Alan Mulally “Volvo has an excellent brand and a strong product lineup. As a Ford division, it had recently returned to profitability after a successful restructuring”. As the Chinese carmaker, it’s a good opportunity for them to have a higher-class car brand so that they can open the market in Europe and America. The young carmaker had a good improvement.
Cash Flows
With the bank’s loan and the other methods to get cash become more expensive than before. Finding another way to get the fund is a major problem for the automobile industries.
Right now, the cash is the most important part in a business than any other time. American people seem like pay more attention on their loan than the vehicle itself during the car purchase. American citizens use credit card for daily shopping and pay after shopping. So the problem his or her paycheck has already been spent every week or month. People don’t have much savings. When they need to do a big investment like buying a car, they have to go through the bank to get loan. With the economic turned to be bad and many people can not pay their loan, the banks have to higher their rate to get balanced, then the demand of vehicle go extremely down. The whole market’s supply is higher than the demand, and then influenced the vehicle industry so bad.
The people of China, have a different style, people will save enough money then buy a car. Loan is not as popular as United Sates. What’s more, with the price of the automobiles become cheaper, more and more people have the ability to buy a car. Cash is the major way for Chinese people to get a car. The demand always higher than the supply. Let’s use the Porsche Cayenne as a sample.
In January 2011. People in China if they want to buy a standard Cayenne, their have to wait for at least 3 month, and there is a fee called rush fee, which is 3000 to 20000 dollars. Otherwise, although you have cash in hand and also you cannot get it anywhere. But in America, once you have cash, you can get any kind of Cayenne you want.
Parts Supply
Automobile parts making company is an important part of the American automobile industry. However, with the American vehicle output drop down, the suppliers are suffering a bad attack. The government has already supported GM and Chrysler, the suppliers didn’t get any aids from the government.
Though, the market in China always has a high demand of autos. The parts suppliers face a big challenge as well. Now, many parts suppliers from other countries use a low price but high quality product give to the carmakers. Recently, a research shows that, 75% companies are negotiating the price of the raw and other elements. With this process, they can have a long-term relationship with the other companies. Because, a company need to spend at least 2 years to have the relationships, and there is no one can stand that.
In conclusion, as I mentioned before, China and United States are having different periods in the history. I am not saying Chinese Automobile Industry is better than America’s or American automobiles will be taken over by Chinese. These two countries are trying their best to find solutions or keep up with the re-unite, the cash flows, and the parts supply. No one can always win in such a competitive market. Both countries have a huge contribution to the world.
Work cited
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