Is There a Segmentation inside Global Value Chain of the Automobile Industry in China?

Abstract

Since German Volkswagen accessed to Chinese market in building a joint venture in the mid-1980s, the automobile industry in China has been engaged in global value chain (GVC) activities for more than three decades. China went through three stages of start-up, large-scale expansion and overseas M&A, and very quickly established a comprehensive manufacturing system, remaining the world’s first place after 2009 in terms of output and sales. However, in line with the rapid expansion of production scale, automobile industry in China, due to the lack of some value-added links in the global value chain of automobiles, has failed to form a closed-loop reflux pattern in the GVC of automobile industry, resulting in a significant segmentation phenomenon. It mainly manifested in: 1) In the production process, there is the break between the upstream design and key parts against the mass local vehicle manufacturing, and the high-added value chain links are held by foreign operators. 2) In the sales process, there exists a fault zone between large-scale sales of vehicles and very few export volumes. And the value chain of automobile industry in China has not been effectively extended to overseas market. This paper further investigates main reasons behind the segmentation of the automobile industry value chain in China: 1) the business strategy of multinational automobile companies aim to seize of China’s local automobile market, which blocks the overseas extension of the value chain; 2) The control of domestic automobile sales channels by the foreign stake in JVs leads to the monopoly of supply chain and post-market of automobile industry, which indirectly leads to the segmentation of value chain. 3) Low value acquisition mode of independent brand automobile enterprises is isolated in the high value-added link of global value chain, which leads to the segmentation of value chain directly. 4) Some of the industrial and trade policies lead to the abnormal high price in automobile market and the difficulty of extending the overseas value chain. Furthermore, this paper puts forward the research prospect of whether the value chain segmentation of automobile industry in China exists for a long time, and the alike problem of value chain segmentation. The new energy vehicles will confront.