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Chen Zutao: There are more than 100 automobile manufacturers in China appear normal
At present, the Chinese auto market is home to over 100 automakers, a situation that still seems normal. This scenario echoes the American automotive landscape of the 1920s and 1930s, when hundreds of manufacturers once thrived. However, after decades of competition, only three major players remained: General Motors, Ford, and Chrysler. The same pattern may be unfolding in China today.
Many of today’s well-known names in the Chinese auto industry lack the seasoned leadership seen in the past. One such figure is Chen Zutao, often hailed as one of the founding fathers of China’s automobile industry. Now 80 years old, he has spent over six decades shaping the sector. From his early days at FAW (First Automobile Works) to his roles at BAIC, NAC, and eventually the China Automotive Industry Corporation, Chen has played a pivotal role in the development of China's automotive sector.
His career offers a rare and insightful look into the evolution of the industry. Recently, he shared his thoughts with *The First Financial Daily*, reflecting on the past, current state, and future of China’s auto industry. His perspective, shaped by decades of experience, provides valuable context for understanding the challenges and opportunities facing the sector today.
One of the most significant moments in his career was the Santana project. Back in the early 1980s, Deng Xiaoping approved the joint venture between Shanghai and Volkswagen to produce the Santana model. At the time, the country’s planned economy restricted production levels, and there were even discussions to reduce annual output from 220,000 to 180,000 vehicles. Chen strongly opposed this, arguing that China needed to grow its car industry, not shrink it.
He recalled a heated debate with a planning official who suggested that small cars were unnecessary, calling them a symbol of bourgeois lifestyle. But Chen pushed back, asking, “Why can’t people have their own cars?†Eventually, the project gained approval, leading to the assembly of German parts in China and the rise of the Santana as a dominant sedan in the 1990s.
Chen also spoke about the rise of Japanese automakers in China. In the 1980s, Toyota and Nissan were not yet major players, but they eventually entered the market. He noted that Japanese companies initially underestimated China’s potential, believing that buying large volumes of imported cars was more efficient than investing in local production. However, as demand grew, they had no choice but to establish partnerships.
Today, Japanese brands like Toyota and Honda have become major forces in both the global and Chinese markets. The success of companies like Guangzhou Toyota, which sold over 170,000 Camrys in 2007, highlights the shift in power within the industry.
Looking ahead, Chen emphasizes the need for consolidation. With over 100 automakers, the market is still in a phase similar to the U.S. in the 1920s. He predicts that only 6 to 8 major players will remain in the long run, requiring reorganization to address issues like capital, management, talent, and sales networks.
In his view, mergers and acquisitions are essential for the industry’s survival. He supports the reorganization of Nanjing Auto with SAIC Motor, believing it will resolve financial and technical challenges. He also advocates for a structured approach post-merger, ensuring that expertise and resources are effectively utilized.
Despite the rapid growth of China’s auto industry—now selling over 8.88 million vehicles annually—Chen remains cautious. While the scale is impressive, he stresses the importance of quality, innovation, and sustainable development. The road ahead is challenging, but with smart strategies and strong leadership, China’s automotive sector has the potential to become a global leader.