It has been a long, rocky ride for the foreign partners of joint-venture carmakers on the mainland and, as things are going, they are in for an even bumpier drive.
As if cut-throat competition and declining margins were not hard enough, these foreign partners must contend with rising costs as they have to rely on sourcing crucial parts from their mother companies abroad to protect copyright and preserve jobs in their base countries.
'Important parts such as electronic chips and engines involve intellectual property rights issue, therefore joint-venture auto carmakers continue to make these parts in their home countries,' said Heron Chan, managing director of Digi-International Exhibitions, which will launch a car parts exhibition in Hong Kong in May.
'Because of the higher costs [of shipping these parts to China], it is difficult for these auto carmakers to cut the prices of their vehicles. Unless these joint-venture carmakers shift to using parts made in China, they will continue to lose market share.'
In contrast to the pricing problems faced by western carmakers with operations on the mainland, their Japanese and South Korean rivals have been able to keep prices down by sourcing either domestically or from their nearby home countries.
For instance, Volkswagen's market share in China has slid from 25.2 per cent in 2004 to 17.3 per cent last year while Japan's Honda Motor and Korea's Hyundai Motor have been gaining ground.
