An analysis of risks and chances for the German automotive supplier industry within the Chinese market

“China – big but not easy” (1)

titled the Automotive Industries Magazine in its July 2005 issue, reporting about the German premium car manufacturer Audi, who is manufacturing in China since 1999. This simple statement breaks down the risks and opportunities for the German automotive supplier industry in China into two keywords. The first one is “big”: in the last decades, the eyes of the world’s automotive supplier industry have been directed to China, because it is promising to be the world’s biggest market soon. Given the fact that one fifth of mankind lives in China and its standard of living is rapidly improving, it is only a question of time until the promise becomes real. In addition to this enormous sales potential, the advantages of cheap labor and an improving level of technology and education show China’s attractive sourcing potential. The second one is “not easy”: exploiting this potential and taking part in the growth comes with a variety of challenges to the foreign suppliers: a completely different culture, a dynamic and highly competitive market and a political-legal system that favors its home industry over the foreigners – only to name a few. Although this paper is concerned with the German automotive suppliers in particular, it is inevitable to draw a complete picture of the country in general and the situation of the automotive manufacturers, which are in many areas the driving force behind the supplier’s activities. So the first chapters describe the market environment, progressing from the general to the specific and providing the framework necessary for the in-depth analysis of risks and opportunities. These are separated into internal and external aspects. Internal risks and opportunities derive from the weaknesses and strengths of a company itself. The external risks and opportunities in contrast can hardly be influenced by the suppliers as they are effects of the political and economical development. But the suppliers can develop strategies to adapt: using the opportunities and avoiding the risks! So, the aim of this paper is to show why China is such an important but difficult market for the German automotive suppliers and – as a conclusion – to give recommendations and strategies for being Successful in China.


(1) Wessel-Aas (2005), p.1