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Around the World: China drives toward world auto market

The demand for automobiles in Asia is estimated to reach 5 million before 2010, and China's share is expected to reach 3 million units in this period. If this forecast is accurate, China would become the world's largest automotive market over the next two decades, making the automotive industry a pillar of China's national economy after 2015, according to a report on the 10th Five-Year Plan for the Automotive Industry by China's State Economic and Trade Commission.

To capitalize on this potential, China has set an output target of 8 million motor vehicles at a value of 2,300 billion yen ($278 billion), employing some 3.5 million workers in the auto sector and some 30 million in related sectors. The export value is tagged at $10 billion.

According to the China Association of Automakers, the country's automotive industry has been maintaining an average annual growth of 24 percent in added value since 1990. Moreover, since 1981—when it launched the first foreign-funded auto enterprise—the industry has set up more than 600 foreign-funded auto enterprises in cooperation with companies from more than 20 countries and regions.

With infusions like this, the industry could be able to develop new models and a complete range of auto products while matching or even surpassing manufacturing technology in other countries.

China turned out 1,853,800 units in the first three quarters of 2001, a 12.9 percent increase over the same period in 2000. The output in September 2001 was 239,200 units, rising 16.4 percent from 2000 figures. Total output of cars from January to September 2001 was 521,500 units, a 15.8 percent increase, and the unit sales were 546,400, up 26.66 percent.

Foreign Investment

According to Delphi Automotive Systems board chairman and CEO J. T. Battenberg, almost all the automakers in the world have set up manufacturing bases in China. The world's leading auto parts producer has reaffirmed its long-term commitment to the Chinese market and in 1993 set up its first Chinese representative office in Beijing. Since then the company has established 13 solely funded businesses and joint ventures, a technology center, and a training center, a total investment of more than $400 million. Its sales in China hit nearly $500 million in 2000.

Acknowledging that there are new uncertainties in the industry, Battenberg pointed out that technological development, economic globalization, and changes in consumption are expected to create new opportunities for the industry as well. Delphi also seeks to export one-third of the products made from its Chinese ventures, which already are taking a position in the company's global supply system.

Technology Paves the Way

Expressing similar sentiments are large local engine parts companies such as Shandong's Runyuan Industry Ltd., one of the largest private manufacturing companies, with subsidiaries in cylinder, piston rings, and crankshaft manufacturing, as well as auto parts.

Runyuan has made a commitment to advancing the industry by using advanced technologies. For example, its crankshafts are produced with advanced materials and technology to ensure high tensile strength and geometric accuracy.

Its operations incorporate flexible manufacturing systems, failure modes and effects analysis, statistical process control, and online inspections. It uses integrated and fully computerized testing programs for finished products, including on-road test simulation, and tests for breaking, torque pressure, and fatigue.

To produce cylinder heads, the company has custom-built, specialized machines to handle assembly. They are used for pressing, sealing, partial assembly, and testing. Each of these machines has several stations through which workpieces proceed for various assembly and testing cycles in short production sequences. Semicompleted workpieces are positioned for the next operating step at high speed with automated extensions such as transverse sleds and transfer units. Sequences typically are controlled centrally via computers and intelligent regulators.

In addition, to achieve efficiency in practical production of typical parts, the company is considering data and work flow improvements, as well as new production layout designs. Also, the use of metal matrix composite material in the automotive industry has demanded the development of finite element method (FEM) and advanced computer-integrated manufacturing (CIM) techniques through validated software tools.

At the end of its preliminary studies, the company realized that software tools can affect cost and quality of part fabrication favorably if production variables capitalize on CIM strategies that expedite information flow on the production floor. Runyuan anticipates that this could lead to a substantial reduction in design-to-product time.

The company's facilities also utilize state-of-the-art CAD and quality control systems to ensure dimensional and finishing accuracy. The staff specializes in developing, testing, and using coating processes and metal finishing. Currently its staff has begun training in various aspects of coating processes with the longer-term goal of transferring laboratory-developed technologies to the production environment.

Today Runyuan President Ding Yue Zhi is proud to employ 1,100 people and is committed to allocating more money to research and manufacturing.

With such technology-inclined companies, China's automotive industry has become an attractive sector for foreign investors after two short decades of development. According to State Bureau of Machine-Building Industry officials, more than $5 billion of foreign investment has reached China's automotive industry to date.

The Effects of Globalization

As in other industries, globalization is having a major impact on the metal fabricating business, with automakers and OEMs establishing operations in China and requiring suppliers to follow suit. General Motors' plant in China is one example; it requires its die casting suppliers also to relocate facilities.

The China Association of Machine-Building Industry said that China's automotive market is expected to become active and competitive, exposing smaller producers to global competition. However, tariff cuts and lower costs should boost demand and stimulate the development of the auto industry and therefore benefit domestic producers.

Industry experts have warned, however, that China's auto industry should not be state-owned nor should it try to solve its problems by completely selling to international companies. Many have suggested instead that more laws and regulations be established to liberalize the industry.