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China's auto industry shifts into high gear

Partnerships with West have given it needed technology; now it's the world's biggest car market, having passed the US this year.

By Bill SavadoveContributor to The Christian Science Monitor / September 13, 2009

'Red' Car nation: Visitors to an auto show in Beijing last month watch the demonstration of a Lexus convertible. Foreign brands still dominate the high-end market.

Andy Wong/AP

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Shanghai, China

As General Motors emerged from bankruptcy and launched the new LaCrosse under its surviving Buick brand this summer, the car showcased a unique feature: an interior that was entirely designed in China.

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The leather seats and blue ambient lighting sprang from the minds of 1,700 Chinese engineers working at a Shanghai-based technical center, a joint venture between GM and one of China's top automakers, Shanghai Automotive Industry Corporation.

"This is an example of where China drove that car," says Maryann Combs, president of the Pan Asia Technical Automotive Center. "The No. 1 selling country in the world for Buick is here."

In just 20 years, the auto industry here has leaped ahead through partnerships like these, acquiring technology from foreign companies in exchange for access to China's vast market.

The global economic crisis is accelerating the industry's already rapid advance, as foreign companies seek haven in China's still-growing market. At the same time, Chinese carmakers are looking to scoop up – at fire-sale prices – foreign technology and brands to expand their know-how and global reach, though ­integrating foreign companies could prove difficult.

"For foreign companies it is a double-edged sword," says Klaus Paur, regional director automotive for North Asia at market research firm TNS. "On the one hand, they are contributing to the rise of future competitors. At the same time, if you don't do it you won't have access to the market. Now we see Chinese manufacturers getting much more confident to go out and look for technologies and brands; to manage them by themselves."

Car sales here are surging, helped by government incentives: Vehicle sales reached 7.2 million in the first seven months of this year, up 23 percent from the same period last year. By contrast, US sales fell 32 percent during the same period, to 5.8 million, making China the world's largest car market today – despite the boost from the US Cash for Clunkers program.

People like Li Rong indicate why the market will grow. Though the sales clerk can't afford a car, she recently got her license anyway. "I want to buy a car, but now I don't have that much money. I think Ford would be quite good," she says.

Ford and other international companies have played a key role in developing China's auto industry, since Beijing requires them to take a local partner, essentially trading technology transfer for market access.

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