Changchun to Defend its Status as Motor

　　Due to historical reasons, the city of Changchun, or Jilin Province obtained regional competitive advantage with the development of FAW Group. However, faced with reality, the glorious history is little bit out of touch, according to the First Financial Daily.

　　Guangzhou, Shanghai, Chongqing, Wuhan and other cities have used foreign capitals to develop automotive industry and Changchun was left behind. Nowadays FAW Volkswagen has been extending its business to the South China such as the city of Chengdu and Guangzhou. Based on the market-oriented rule, Changchun, a remote city located in the Northeast China, is facing a severe test to defend its honor of history.

　　Collision between history and reality

　　For Changchun, history is a unique symbol which makes it different from other regional cities. In 1956, Changchun's FAW plant produced the first Jiefang truck, ending the history that China was not able to produce vehicles. Two years later, the first sedan with the Dongfeng brand was developed successfully. In the same year, China manufactured the first Red Flag high-end car. Changchun and FAW witnessed most of historical events for Chinese domestic automotive industry which were also closely linked with them.

　　For Changchun, the history of producing vehicles has lasted for more than fifty years. This old industrial city in Northeast China can be called as the "Motor City". According to the official figures, in 1978 the output of automotive industry in Changchun was 440 million yuan, accounting for 13.5% in Changchun's total industrial output. In 1988, the proportion rose to 22.1%. In 1998, it surged to 62.6%. In 2008, automotive industry's output accounted for 67.5% for Changchun's entire industrial output. Automobile industry has become a pillar industry in Changchun and can exert direct impact on the development of Changchun's economy.

　　As the birthplace of Chinese auto industry, Changchun has 330 above-scale auto enterprises including FAW. Changchun and FAW have a deep relationship and they depend on each other. Long-term history has deeply implanted auto culture into Changchun. Walking on the streets in Changchun, you will find some roads with the name of automobile brands, such as Benz Road, Bora Street, Golf Road and so on. In other cities, you may not find such kind of names. However, the people living in Changchun have been familiar with those them.

　　On October 20, 2009, Chinese auto industry embraced a rather symbolic day. By that day China had produced ten million cars in the year of 2009. The ceremony was held in Changchun, which is undoubtedly an affirmation for FAW and Changchun's historical status.

　　However, with the rapid development of Chinese economy, some rising stars in automotive industry such as Guangzhou, Shanghai, Wuhan, Chongqing, Tianjin and even Shenyang or Dalian which are also located in Northeast China have begun to build a modern automobile industry chain with the use of foreign capitals. Faced with fierce market competition, Changchun's competitive advantages are gradually fading away.

　　Yao Jingyuan, the Chief Economist of National Bureau of Statistics, pointed out there was the associated interaction between automotive industry and regional economic growth. The development of auto industry can promote the growth of economy. At the same time, the sustained GDP growth and improvement of people's living standards can promote the development of auto manufacturing industry.

　　Compared with Yangtze River Delta and Pearl River Delta, Northeast China's per capita GDP growth increases relatively slowly. To some extent, the situation constrains Changchun to enhance its status as China's auto center.

　　In the fierce competitions, foreign auto giants attach great importance to the vast Chinese market. After building a plant in the city of Chengdu, Volkswagen is planning to enter South China market effectively. Most of FAW Volkswagen's production is concentrated in Changchun. Because of transportation cost, saving working time and other considerations, FAW Volkswagen has planned to build new factories in Foshan, Guangdong.

　　Whether heading the west and the south, a modern automaker has to make the psychological distance with consumers become closer which is a necessary means of marketing. In terms of geographical conditions, Changchun obviously does not have powerful advantages.

　　Difficult transition

　　Aware of its shortcomings, Jilin Provincial Government is actively seeking the transition of industry location.

　　Earlier this year, during the visit to the FAW Group, leaders from Jilin Provincial Government pointed out that auto market would embrace a golden period in the next few years. Different areas and auto manufacturers are planning new development and accelerating to capture market share in China. The development of the automotive industry in Jilin Province is facing severe challenges and unprecedented competitive pressures. We can say that slow progress is equal to setback.

　　Faced with intense competition with domestic and foreign automakers, FAW Group is also under tremendous pressure.

　　Facing heavy historical burden, Xu Jianyi conducted asset stripping and secondary business restructuring immediately after taking office without stops. At the beginning of 2010, his efforts final bore fruit. After the adjustment, FAW Group retains Jiefang heavy truck, bus, and car, Xiali and micro car companies. FAW Volkswagen, FAW Toyota and other manufacturers producing mold and casting will be retained as well.

　　FAW has thrown off heavy burden and developed a near-term goal that “by the year of 2015 FAW's vehicle sales will be more than four million units of which more than 50% belong to domestic brands".

　　Dependence on FAW Group is still Changchun's axis to defend its honor of Motor City. According to the latest automotive development plan issued by Jilin Provincial Government, the local government will strive to raise Changchun's automobile production capacity to three million units within the 12th Five-Year Plan. In the city of Jilin, the micro car annual production capacity will reach one million units. The local matching rate for capacity increment will reach 50%. Last year, the supporting rate between local component manufacturers and FAW Group was 38%.

　　However, FAW is not the only target for Changchun. The city is conducting industrial restructuring. As to automotive parts industry, the city of Changchun invented a new business model that the research and development and sales are finished in the U.S. and the production base is located in Changchun. In November last year, Changchun Auto Parts Export Base North America Service Center was officially established in Detroit-the Motor City of the U.S. Now Changchun is ready to develop overseas business.

　　Perhaps Changchun is ready to step forward. (Translator: Qinghua/Hanxin)

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　　http://auto.sohu.com/20100514/n272120751.shtml