In China, Culling the Carmaker Herd

Almost two decades ago, Western car companies watched uneasily as the Chinese government embarked on a plan to forge a powerful domestic auto industry using technology won through joint ventures with foreigners. Regional governments and companies—a cigarette maker, a liquor distiller, a refrigerator manufacturer—jumped into the market. In one sense, the plan has been a smashing success: China today has more than 70 automakers. But the bottom 55 of those account for just 11 percent of the country’s vehicle sales, according to the China Association of Automobile Manufacturers (CAAM). Ten companies haven’t sold a single vehicle this year.

The government has had enough of the free-for-all. Two years ago officials said they wanted 10 or fewer carmakers to account for 90 percent of vehicle sales by the end of 2011. This year the top 15 producers (both domestic and foreign brands) have 89 percent of the market, according to CAAM. In July, Industry Minister Miao Wei renewed the call for a shakeout in the industry, but the government is now aiming for 2015.