Joint Venture in Chinas Automotive Industry - Coursework Example

Joint Venture in China’s Automotive Industry Contents 4.0 Discussion ………..…………………………………………..……………… 2 4.1 Understanding External Forces and Factors ..……………………….……….. 2 4.2 Internal Analysis …………….…………..……………………….…………… 7 5.0 Conclusion …………………..…………….……………………….………. 13 References ………………..………………………….…………………………. 20 Figures and Tables Figures Figure 1 - Chinese Automotive Sector Growth, 1999 to 2009 ..…..…………….. 2 Figure 2 – China Becomes World Largest Automotive Market …..……….……. 3 . Figure 3 – China’s Small Car Segment Drives Growth ….…………………..…. 4 Figure 4 – Future Automotive Sector Growth ………..…………………….…… 4 Figure 5 – Chinese Automotive Sector ………………………………………….. 8 Tables Table 1 – China’s Automotive Joint Venture Analysis / Chang’an and BYD …. 10 Table 2 – China’s Automotive Joint Venture Analysis, Peugeot, Nissan and Honda ………………………………………………..…... 15 Table 3 – China’s Automotive Joint Venture Analysis, Shanghai Volkswagen and GM …………………………………….... 17 4.0 Discussion In looking into “Is JV really good for China’s Auto industry, and if it is a benefit for local and foreign auto manufacturer development?” the information collected addressed this through a sampling of joint venture comparisons. The rationale for asking this question resides in the fact that recent research concerning joint ventures in emerging markets revealed a failure rate in excess of 50 percent in some industries. In terms of looking at this from a Chinese perspective, a number of joint ventures were examined to ascertain if there was a trend toward failure or success. 4.1 Understanding External Forces and Factors As the world’s largest automotive market regarding production since 2008, this segment of Chinese industry has been highly successful (Fangfang, 2010). The above development was not an unanticipated event as the predictions of this occurrence had been forecast since China’s conversion to a free market economy and its acceptance into the World Trade Organisation (Harwit, 2001).   Figure 1 - Chinese Automotive Sector Growth, 1999 to 2009 (Electro Auto Forum, 2010)   The 13.64 million Chinese auto sales in 2009 surpassed the United States 10.42 million revealing the dramatic gains made in this segment of industry (Electro Auto Forum, 2010). The above was achieved through a number of policy approaches and internal market conditions. The Chinese government’s active involvement in the economy has set policies to boost automotive sales in regional cities as well as rural areas as a way to stimulate the economy (Electro Auto Forum, 2010). This was achieved through lowering the vehicle purchase tax to 10 percent for vehicles with engine displacements of 1.6 litres or lower (Electro Auto Forum, 2010). The above is important as it focused consumer sales on domestic auto companies as opposed to joint ventures (Electro Auto Forum, 2010).   Figure 2 – China Becomes World Largest Automotive Market (Electro Auto Forum, 2010)   Another aspect of government stimulation and incentives focused on providing a subsidy to encourage Chinese residents to upgrade their older vehicles to new compact models (Electro Auto Forum, 2010). As a further incentive, the government included a rebating scheme through taxes that allowed 10 percent of a new vehicle costs up to 5,000 Yuan. This was permitted when citizens replaced a three wheel or four wheel farm vehicle with a light truck (Electro Auto Forum, 2010). The replacement represented new trucks or minivans with an engine displacement of 1.3 litres or smaller (Electro Auto Forum, 2010).   Figure 3 – China’s Small Car Segment Drives Growth (Electro Auto Forum, 2010)   By providing a means for citizens to upgrade or purchase new vehicles, the government helped to stimulate sales and strengthen the automotive segment which is a classical example of its active involvement in the economy (Electro Auto Forum, 2010).   Figure 4 – Future Automotive Sector Growth (Electro Auto Forum, 2010)     The Chinese government has put forth policies that are geared to the development of domestic technology for its brands, however foreign manufacturers hold 70 percent of the market (Wagner, 2012). The key to this vast market share lead is Chinese citizens prefer foreign models over domestic brands (Wagner, 2012). In explaining the difference the president of United States Ford Asia Pacific and Africa region, Joe Hinrichs, stated “There is a belief at this point in time that international brands have more technology, in some cases better craftsmanship” (Bloomberg News, 2012).   The governmental design behind the joint venture process was designed to counteract this. The plan represented that through joint ventures technology would be transferred to Chinese partners. The would represent a means for domestic companies to develop their own capabilities to the point where foreign partners would no longer be needed (Luo, 2005). The above factors are important base facets in understanding the Chinese automotive sector, government policy design, and the findings uncovered under this analysis. In equating the success or failure rate of joint venture projects globally, research conducted by Perkins et al (2006) uncovered most joint ventures tend to wind up being unsuccessful. In analysis conducted by Perkins et al (2006) a host of contributing factors was uncovered concerning the reasons behind joint venture failure. In looking at the reasons, Tsang (2000) provides the following explanation. He states an important factor in the success rates of joint ventures is the long-term economic climate of the host country. This is where China’s government policies have made a difference, along with its huge build in consumer market size. The planning of the government in structuring legal facets as well as policies represents an important facet in success or failure (Park and Russo, 1996). In the instance of China, the difference has been the detailed planning of every phase of economic policy that includes FDI, joint venture and government support. The uncertain nature of the direction of an economy as well as other factors has and does make joint ventures and FDI uncertain undertakings if they are structured as market seeking ventures looking to reap profits from a modest sized local market (Park and Russo, 1996). In China Foreign Direct Investment policies were and are carefully crafted under the communist party that is in full control of all aspects of the economy (Park and Russo, 1996). Included the above is the manner the country embraces FDI as well as joint ventures. From the beginning of the country’s path from a communist state in 1978 to a free market economy under the leadership of Deng Xiaoping, every stage and step in the process was planned. Deng Xiaoping crafted what is termed as Chinese socialism in the move to a free market system that retained Chinese characteristics (Xiaoping, 1984). The central control of the country by the communist party that did not have a change of leaders by election, proved beneficial in designating policies and programs to bring a billion people forward into the 21st century (Fortin, 2012).   This is an important understanding as China differed from other underdeveloped countries during its move to become a member of the World Trade Organization, attract investment and form joint ventures (Fortin, 2012). With such a large internal consumer market, natural resources, and stable actively involved government the developmental process had long-term stability. With all of these facets committed to economic gains, the climate for the economic development differed from the chaotic situations of most under developed countries. In fact, as pointed out by Goodspeed et al (2010) the control, stability, ingrown consumer market and government involved in policy design are characteristics usually seen in developed economies as opposed to developing ones.   It was the combination of central government control, crafted policies, attraction of FDI and joint ventures that saw China’s ascension to the World Trade Organisation (WTO). Membership in the WTO provides a stabile arena for the conduct of trade in a complex international economy as it offers a means for 1. peaceful trading, 2. the resolution of disputes, 3. a stabile system of rules that apply to all parties, 4. increase in growth and job stability brought on by international trading, 5. and the availability of options and choices in negotiations (World Trade Organization, 2012). In the instance of China, the centrally run government meant the country was geared to formulate a stable business climate for developmental cycles (BBC News, 2001). The government devised policies and changed enough politically to move toward and achieve WTO accession in 2001 (BBC News, 2001).   In equating if joint ventures are good for China’s automotive sector concerning if it benefits local and or foreign manufacturer development, it is a multi phased analysis as well as answer. First, it needs to be noted that joint ventures and FDI differ in the Chinese context as the country had and has a huge ingrown domestic economy that was based in low wage parameters. This means FDI and joint ventures did not have to successfully compete with established companies internationally, they only has to supply products to satisfy the local market. The government policy of crafting joint ventures by foreign companies with Chinese firms as the means to enter the market represented bringing Chinese companies into the 21st century as they would gain access to technology and process in return for market access for foreign firms. 4.2 Internal Analysis As a means to understand the manner joint venture deals have transpired in China, a look at a sampling of these provides insights that provide answers or insights. The size of the joint venture segment as it relates to automobiles is quite extensive.   Figure 5 – Chinese Automotive Sector (Luo, 2005) As there have been recent developments in the joint venture segment since 2005, the above Figure has been updated where appropriate. The areas indicated in the following Table are used to permit an analysis of joint ventures in keeping with space constraints of this Discussion section. In compiling this information it needs to be noted that data availability represented a problematic aspect concerning obtaining up to date as well as complete data for all areas. This represents a slight hindrance in evaluating the Chinese automotive sector as statistics and other information forms required extensive research to find materials, if they could be located. As a means to understand important analysis areas, Tables have been prepared that review important analysis points on a key sampling of joint venture and R&D projects. This analysis of internal factors was key to this study as it provided a means to evaluate important facets of joint ventures to ascertain if this form is helping or hindering Chinese automotive firms, or their foreign counterparts. The first Table will look at Chang’an Automotive Group, BYD Auto. These were done as a basis for understanding nuances of joint ventures for evaluating Peugeot, Nissan, Honda, Volkswagen and General Motors. Table 1 – China’s Automotive Joint Venture Analysis / Chang’an and BYD (Section 1of 2) Analysis Area Chang’an Automotive Group BYD Auto Management & Corporate Culture Is a State owned subsidiary of China Weaponry Equipment that concentrates on building standard level no frill compact vehicles. It is one of the top four of Chinese automotive companies that includes Shanghai Automotive Industry Corporation, Dongfeng Motor, and FAW Group (Chang’an, 2012). Is the sixth largest Chinese vehicle manufacturer in terms of cars sold (Shirouzu, 2009). Risk of Technology leakage This area sees little chance this will occur in the direction of the Chinese company as foreign technology is guarded. As the company, BYD, is obtaining its technology from Daimler, an experienced joint venture and global business company. Thus, there is little chance of leakage. Project- Investment size Chang’an’s R&D in England (Nottingham) represents an initial employment size of 25 to 30 jobs that will expand to 200 in 2014 (Roberts, 2010). The financial investment was not indicated. No figures could be located on the R&D project out of Italy (Turin) (Na, 2011), Japan, (Yokohama) (Na, 2011), and the United States (Detroit) (Lee, 2011). The size of the investment, or personnel assigned was not contained on any sources. An electric car developmental program represents BYD’s only joint venture, which it has formed with Daimler. This is a move for the future in the vehicle segment that is slated for introduction in 2013 (Industry Week, 2010). Overseas investment experiences Chang’an is actively committed to gaining overseas investment exposure as evidenced by the above foreign R&D sites. The company’s website has a special section devoted to “General Engineering Research” that reveals it is progressive in this area. It is expanding into the European market starting in 2013, followed by the United States (De Feyter, 2012). The company’s motorcycle division has been the strength of the company in China as well as overseas (Bradsher, 2006). It sells more vehicles globally than it does in China, due to markets in Europe, Japan, Ethiopia, and the Middle East. Mexico, Canada, Brazil, Peru, Uruguay, Guatemala, Vietnam, the Philippines and Laos (Lifan Motors, 2012). Knowledge of local market, As a domestic company, Chang’an is one of China’s four largest, and sold in excess of 2 million vehicles in 2010 (Bloomberg BusinessWeek, 2011). The company’s vehicle emphasis has been vehicle export as opposed to the domestic market (Bradsher, 2006). R&D The company is committed to the development of its vehicles and has opened R&D centres in Chongqing, Heilongjiang, Changhe, and Shanghai (GlobalTimes, 2010). Its Beijing R&D centre was opened in 2010 to deal with crossover, and commercial vehicles, with passenger car lines to be added in late 2012 (Fangfeng, 2009). As an entry into the electric vehicle market, the R&D joint venture with Daimler represents technology sharing (Industry Week, 2010). Daimler is seeking to position itself for the growth in hybrid and alternative technologies in China through this association. Table 1 – China’s Automotive Joint Venture Analysis / Chang’an and BYD (Section 2 of 2) Analysis Area Chang’an Automotive Group BYD Auto Resource access In terms of Guanxi, which means relationships in Chinese culture (Dictionary.com, 2012), it is the equivalent of Western Relationship Marketing in a sense. The exception is it (guanxi) includes the populace in more of a word of mouth engagement than the Western form (Relationship Marketing) (Simmons and Munch, 1998). In terms of Changan a defined marketing plan could not be located. As a developmental project, there is no resource allocation at this stage. As Guanxi is a sort of Western word of mouth, its sit under resource access throughout the remaining analysis segments is treated as part of the standard areas under this category. Cost Costs in terms of Joint ventures and Research and Development projects for this company were not located. Costs and other financial details were not revealed. Profit Maximization Unlike foreign companies, a transparent annual report for the past three years could not be located to pull profit figures from or costs. As a future oriented project, profit maximisation figures would be dependent on when the finished project was projected to hit the market. That would also entail taking into account the state of the market at that time for an electric vehicle, competitors, term period for breakeven and returns. The project data for this was not available. Marketing Chang’an sells through wholly owned dealership outlets in China, and is establishing a dealer network in Europe and the United States for its international expansion (De Feyter, 2012). This project detail was not available. Industry growth rate The company looks to increase vehicle sales to 3 million in 2015, increasing to five million by 2020 (Zhang, 2010). Electric vehicle sale forecasts for China are indicated as 8,000 vehicles for 2010, 17,000 for 2011, 33,500 for 2012 and moving up to 127,000 by 2015 (Omotose, 2010). This is behind the growth pace for the United States, Europe and Japan as electric recharging station networks need to have an infrastructure that will delay Chinese rollout in larger numbers. Business motive This has to be stated for Chang’an that individual project details for any of its joint venture and Research / Development projects this fact could not be located. The company seeks to establish a leading position in the electric vehicle segment (Industry Week, 2010). Core competencies Chang’an excels as an automotive manufacturer and as such follows government implemented policies. In terms of joint ventures and R&D projects, the latter represent heightening development of parts and manufacturing techniques (Law, 2011). Its strength is general competence, but noting in terms of excellence was uncovered through research. The company’s motorcycle sector is stronger than its vehicle division that makes mid-sized sedans, which are touted as being well built (Bradsher, 2006). The above analysis of two domestic Chinese companies has been undertaken to show the size and complexity of the comparative areas. As a result, the remaining analysis is conducted in the Conclusion segment to show the success of automotive joint ventures in China. 5.0 Conclusion The above analysis of varied joint ventures has been conducted to show these types of operations have been good for Chinese automotive companies. One clear example shows the structure protects Chinese automotive companies as the risk and finances are borne by the foreign entities. This being the case, China’s joint ventures from the domestic standpoint have been profitable. The case studies of Volkswagen, Honda, Nissan and General Motors, shows the results from the process have been exceptional. In terms of selection parameters, this is based on the fact it is impossible to analyze all joint ventures formed in the country between auto companies as space is a constraint. This was governed by information availability as well. With regard to joint venture companies set up in the automotive sector, an article written by Bloomberg News (2012) research division provides an illuminating insight. It stated the domestic brands of the country represent the least sought after by Chinese consumers (Bloomberg News, 2012). In explaining the difficulties and challenges faced by domestic Chinese vehicle manufacturers, the report by Bloomberg News (2012) said the policy of forming joint ventures with foreign automotive companies “… appears to be failing in one of its key goals …”, to help Chinese domestic manufacturers build strong brands. In analysing this statement Liao Xionghui, who is the vice president at Lifan Industry Group, said "We have been trying to exchange market access for technology, but we have barely gotten hold of any key technologies in the past 30 years”. In understanding that it is the aim of the government and Chinese automotive companies to seek an equal footing in the vehicle technology, foreign manufacturers keep them behind the technology curve. While one would be hard pressed to find a statement or policy revealing this, it is an understood fact. Evidence of this can be found in a recent statement by the Chinese government that it “… wants foreign automakers to share technology as the price of entry” (O’Dell, 2010). In understanding the above and the manner the Chinese automotive market is developing, its progress has not moved along the lines the government intended when it set up joint venture policies aimed at building its automotive segment (Wagner, 2012). In another analysis Jeff Chung of Daiwa Capital Markets located in Hong Kong added “Foreign partners are not willing to transfer their key technology to local partners, and most state-owned companies don’t really care that much” (Wagner, 2012). Chung continued by stating the above situation has developed as a result of domestic vehicle companies focusing more on achieving sales, regardless of brand origination (meaning foreign or domestic) (Wagner, 2012). Charles Mills of J.D. Power Commercial Consulting Shanghai explained that the Chinese consumer believes that despite the advances in the exterior appearance of domestic models, they lack the internal component technology, craftsmanship and other engineering advances found in foreign brands (Wagner, 2012). The following analysis brings together the external aspects brought forth under the Discussion segment to show that joint ventures have been beneficial for Chinese automotive companies. The variable that represents the difference are the vehicles. Table 2 – China’s Automotive Joint Venture Analysis, Peugeot, Nissan and Honda (Section 1 of 2) Analysis Area Peugeot JV Nissan Honda Management & Corporate Culture The Peugeot JV existed 1985 through 1997 as termed Guangzhou Peugeot Automobile Company. This represented Peugeot and the provincial government as opposed to a local domestic auto company (Kueh, 2006). Nissan’s joint venture is with the Dongfeng Group under a 50 / 50 agreement in 2003 (Uteman, 2012). Honda and the Dongfeng Group entered a 50 / 50 agreement in 2003 (Uteman, 2012). Risk of Technology leakage Not an issue. The lack of a Chinese automotive partner was the weakness in the JV deal. Nissan has not made a statement nor published any information where this was raised as an issue. Nissan has not made a statement nor published any information where this was raised as an issue. Project- Investment size The investment size could not be located. The project produced less than 100,000 vehicles during its entire period of operation (Wang, 2003). New plan calls for $800 million USD investment for a new plant to produce 300,000 vehicles (Uteman, 2012). The follow up investment to expand capacity represents $350 million USAD (Honda, 2012). Overseas investment experiences Peugeot’s failed U.S. market investment as well as China means the company is regionally based (EU) as opposed to international until recently (Fernandez and Liu, 2007). Nissan has successful operations in Japan, Europe, Africa, Asia, as well as North and South America (Jagannathan, 2009). Honda is the experienced overseas investment partner. Knowledge of local market, Peugeot had no knowledge of the market and this showed in its assuming a deal with all the risk (Sun et al, 2010). Nissan formed its joint venture with the Dongfeng Group that had local market knowledge as well as operations as an automotive company (Kuchiki, 2009). The Dongfeng Group has local market knowledge as well as operations as an automotive company. R&D There was no R&D set up as the JV served the Guangzhou province as opposed to the market (Sun et al, 2010). Established a RMB 330 million R&D laboratory early on with the Dongfeng Group for increased production method analysis and raw material conversions (Von Zedtwitz, 2004). As is the case with Nissan, the Honda Dongfeng Group has a number of R&D projects in force (MarkLines, 2007). Resource access The marketing was mainly to government employees, government fleet use and taxis as opposed to a consumer marketing plan (Peng, 2000). The joint venture is managed and run well, with expansion plans to bring on more Nissan models. Equating intangible and tangible assets / resources were not found in research materials. Same as for Nissan. Table 2 – China’s Automotive Joint Venture Analysis, Peugeot, Nissan and Honda (Section 2 of 2) Analysis Area Peugeot JV Nissan Honda Cost No figures available. No figures available. No figures available. Profit Maximization The venture did not maximise profits as it was state run and sold vehicles to state employees as well as being used for state fleets (Peng, 2000). The Nissan Dongfeng Group has proven to be a successful joint venture posting a profit of 2.86 billion Yuan in 2010 (Bloomberg News, 2011a). The Honda Dongfeng Group was found to have the happiest buyers according to a J.D. Powers survey (China Car Times, 2012). Marketing The marketing foundation was poor as it was limited to state and government sales (Peng, 2000). The joint venture uses dealerships and advertising under traditional marketing approaches. (Reign, 2010). This is the same as Nissan. Industry growth rate The prospects for industry growth were basically eliminated as a result of the regional province sales structure. The Nissan Dongfeng Group announced a 1 million unit sales goal in 2008 as its target for 2012 (Nissan, 2008). The company achieved this mark in 2011, this indicating the success of the partnership with the Dongfeng Group (Nissan, 2011a). Has exceeded is growth target projections. Business motive Business motive on the part of Guangzhou was low cost vehicles with Peugeot assuming the financial risk and costs (Sun et al, 2010). As two established automotive companies, the business motives were to achieve consumer market penetration (Hofer et al, 2007). Same as Nissan. Core competences With only one member having a core competency, Peugeot was in the position of assuming the financial risk, supplying the expertise, plant and related inputs. Guangzhou simply supplied the opportunity without sharing in the risk (Sun et al, 2010). The Dongfeng Group is known for having a strong dealer network and a weak understanding of the Chinese consumer (Standard Chartered Bank, 2006). Same for Dongfeng Group as with Nissan. The remaining two joint venture analysis are as follows: Table 3 – China’s Automotive Joint Venture Analysis, Shanghai Volkswagen and GM (Section 1 of 2) Analysis Area Shanghai Volkswagen GM Management & Corporate Culture Shanghai Volkswagen has been a 27 year undertaking and is the first German / Chinese joint venture (Volkswagen, 2009). This long history has developed a management culture since its establishment in 1984 has resulted in “… the largest as well as most modern car manufacturing capabilities …” in the country (Volkswagen, 2009). GM Shanghai Motors has 11 joint ventures in China (General Motors, 2011). Risk of Technology leakage The technology utilised is specific to the brands being used in China, with sensitive material components made in Germany and shipped into the country (Pujol, 2010). This means the risk of technology leakage is minimised. Furthermore, in the event of reverse engineering, VW’s methods for assembling components are difficult to duplicate as well as the company upgrading parts and or changing components on a consistent basis (Pujol, 2010). This makes leaked (if it happens) technology basically outdated by the time it is usable for the market. No information on this area could be located. Project- Investment size The joint association of Shanghai Volkswagen has “… increased share capital from 160 million to 11.5 billion RMB (1.13 billion Euros)” (Volkswagen, 2009). The total assets have increased “… from 350 million to 32.3 billion RMB (3.18 billion Euros)” (Volkswagen, 2009). The initial investment GM made in China could not be located, however in the overall scheme of things it does not matter. GM’s joint venture with Shanghai Motors has been highly successful (Chang, 2012). Overseas investment experiences As a result of its German partner, Shanghai Volkswagen has a strong overseas foundation (People’s Daily, 2000). In 2000 the Group set up Shanghai Volkswagen Sales Co. Ltd with an initial investment of $30 million USD to sell Chinese made Passat vehicles in global markets (People’s Daily, 2000). GM does business in 120 countries (General Motors, 2011). Knowledge of local market Volkswagen’s involvement in the Chinese market since 1978, along with the local knowledge of Shanghai Automotive Industry Corporation makes for a strong partnership regarding local market understanding (Buckley et al, 2005a). Shanghai Automotive is one of China’s big four, thus it has extensive local market knowledge (Buckley et al, 2005b). Shanghai Motors has done an excellent job of promoting the GM La Crosse as luxury brand. It is the number one large size car in the country (Chang, 2012). Table 3 – China’s Automotive Joint Venture Analysis, Shanghai Volkswagen and GM (Section 2 of 2) R&D Of the many Shanghai Volkswagen R&D projects, one of the more recent involves an electric car under the Tantus brand (Cain Information Net, 2011). General Motors as a number of R&D ventures in China with Shanghai Motors (SAIC, 2011). Resource access The resources utilised by Shanghai Volkswagen entails a mixture of corporate marketing and operations to sell, and operate in the Chinese market (Depner and Bathelt, 2005). As one of the oldest and most established Chinese joint ventures, the association has learned to maximise resources from all systems (Depner and Bathelt, 2005). GM has used its American approach to marketing by position the LaCrosse as a large luxury vehicle (Chang, 2012). Cost While there are a number of press releases on the project, none indicated the cost of the electric car R&D project. No figures available. Profit Maximization As the world’s largest automaker, Volkswagen brings considerable know how as well as operational understandings to the joint venture. In terms of looking at profit maximisation of the electric vehicle project, it is looked at in terms of its long-term potential as opposed to seeking immediate returns (Hays, 2011). The results of the association have been excellent. Marketing (Product and distribution channel) The new electric vehicle will be sold through the existing Shanghai Volkswagen Chinese dealer network of 500 that is a part of this joint venture (De Feyter, 2011a). Buick’s La Crosse is the best selling car in China (Baserga, 2010). Industry growth rate The growth rate for Shanghai Volkswagen surged 40 percent between 2009 and 2010 (Tianyang, 2010). The VW brands sold in China have been highly popular, with varied models of the Jetta along with Skoda capturing loyalty due to quality (Fangfang, 2006). The sales of the La Crosse model has made GM a solid performer in China. Business motive In terms of the business motives behind Shanghai Volkswagen, the electric car association is an obvious positioning move for the future (Zhao, 2011). The mixture of Shanghai Motors has resulted in the number one selling brand in China. Core competences The operational competencies of the Shanghai Volkswagen joint venture spread through to manufacturing, operations, dealer networks as well as Research and Development (Zhiming, 2009). Expertise in the Chinese market as to what consumers are seeking is the demonstrated competency of Shanghai Motors. The above analysis reveals “… JV.s have been good for China’s Auto industry, and benefited local and foreign auto manufacturer development”. It represented a definitive means to answer this through a detailed analysis. In looking at the results achieved by all but Peugeot, it is obvious that joint ventures have been a boon for Chinese automotive companies. Automotive joint ventures have been a successful transaction approach for Chinese automotive firms as well as their foreign partners. There have been some Research and Development deals located outside of China, but these are support ventures as opposed to transactions geared to yield revenues. The structured approach and rationale established and used by the government in setting policies, along with the size of the Chinese market have been critical success facets as a result of pent up demand. At present, foreign models hold the lead in sales and consumer preference. This represents a development not expected from the government crafted joint venture approach that was to serve as a means for Chinese automotive companies to achieve technology proficiency. 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