Auto Manufacturing in China for the Chinese Market A May 2006 report on Canada's auto industry suggested that there is a trend emerging to assemble automobiles in the country for which they are ultimately intended. As a result, competition among assemblers of automobiles will be intense. One way to keep costs down is, of course, cheap labour. Assembling the product at its ultimate destination also serves to lower delivery costs. China repre- sents a massive potential market. New car sales in China were 3.1 million in 2005 and from the first quarter 2006 increased 74 percent to 890,000. Can Canadian manufacturers take advantage of this? China has many domestic manufacturers who provide low-cost cars of reasonable quality, but the higher end automobiles are generally produced through joint ventures with for- eigncompanies. The Chinese manufacturers might decide to focus on their domestic market, which would create competition for Canadian firms looking to assemble in China to access the huge Chinese market. On the other hand, the Chinese might try to move into the export market. Moving into foreign markets will create several problems for the Chinese. Issues such as environmental and safety concerns will arise, asswill the desire to protect domestic manufacturers in Canada, the United States, and Europe. Also, Chinese auto brands are virtually unknown outside China, and service support could be a problem. Given the advantages of staying domestic and the challenges of exporting globally, the Chinese might choose to focus on the local market. Hence, Canadian manufacturers attempting to assemble in China would be in direct competition with local auto manufacturers. 1. Do you see a place for Canadian automobile manufacturers in China? 2. Do you see a potential for Chinese automakers to export to Canada