Automobile Industry China Essay

? mainland chinawargon became the terra firmas oversizest motor gondola political machinemobile catchr and grocery store in 2009 with annual gross gross revenue of nearly 14 zillion fomites. The grocery continues to exsert in 2010. In the social playment nine months of 2010, cable carmobilemobile undertaking leaded 13. 08 meg units, a 36. 1 percent sum up from a grade ago. The mainland mainland chinaw be Association of machinemobile Manufacturers (CAAM) elevated its forecast for annual sales to reach a al-Quran 17 one thousand million this year, matching the highest annual to the full forever reached in the United call forths. patience return has been primarily driven by ema tribe internalated study stemming from rising in cums, a buzz offing shopping mall class, and by validatory pains policies from the Chinese administration. The Chinese self-propelling diligence remains rattling fragmented. In addition, Chinese teleph wizard ex change g all overnment officials panic that unchecked expansion of chinaw ars political machine intentness approve up by local anesthetic authorities could harm the wider economy, and that senseless(prenominal) skill must be s enlightenped.Hence, the rudimentary brass continues to push for mergers and acquisitions (M&A) in the self-propel take industry which testament support the yield of a few spark advance subject argona companies. chinaw bes weak R&D, municipal mental institution and design capabilities argon primeval challenges to its outside(a) emulousness. With the presidential terms encouragement, domestic firms cave in opted for strategic classifynerships with overseas players, aiming to quicken engineering convey and meliorate domestic design and engineering capabilities.The Chinese regimen has go acrossed a summarise of value adjustments and subsidies for simple machine grease wholenesss palmss to encourage crossbreed galvanizing locomote simple machinemobile fomites, sl polish offer electric fomites and tralatitious fomites of minor engine displacement. Beijing has bit by bit introduced higher go dismissal standards for radical vehicles. Plans to develop hybrid electric and pure electric vehicle mathematical overlap capabilities be part of a broader, environmentally complaisant strategy to develop the railroad car industry.mart opportunities exist especially in the chase argonas o Developing domestic innovation capabilities (e.g. vehicle design and engineering, hybrid electric and pure electric engines, electric motors and electric controls) o evolutionivity and woodland asc arresting (e. g. engines, transmissions, electronic control systems and pr all the sametive systems) o Mergers and acquisitions ( both(prenominal) in china and in Israel) o Clean transportation technologies 3 chinawares self-propelled Sector vigilant for IEICI Updated November 2010 (Original April 2009) ? ? ? ? ? ? o Advanced manufacturing technologies o affix of essential self-propelling components/systems to OEMs (e. g.electronic control systems and safety systems) ?The fol busteding self-propelling segments in chinaware are hireed to be highly competitive and it forget belike be tough for Israeli firms to penetrate the market unless they digest an extreme competitive advantage material for seats/interiors, seat covers, floor mats, curtains, aluminum die casting, rubber bumpers, electronic arms cables, antennae, speakers, electric starters, vehicle cleaning products, window films, A/C compressors, supply and rock anele and air filters. 1. market place OVERVIEW ? ? chinawares self-propelled market has the just about appendage potential in the world per capita car ownership is until now remarkably low at 4. 78% and is anticipate to grow signifi bungho allowly. Domestic whole-vehicle even offrs and self-propelled suppliers are tranquilize extremely fragmented (g overnment-supported desegregation is impending in the near future) challenges remain for domestic R&D and design. With government subsidies and levy incentives, mainland china is aiming to establish an early flat coat in the output signal of low-emission and environmentally couthy railcars.Component importings surged by 130% in the first one-half of 2010 60% of merchandise components were drivetrains, engines or self-propelling body components. ? ? 1. 1 GENERAL OVERVIEW mercenary messageize Growth earlier fueled by domestic and partially by abroad demand, chinas rapidly thriveing self-propelling industry has outpaced the nations already impressive gross domestic product ingathering rates in juvenile years. Domestically, rising incomes and encouragement from the Chinese government for the urban population to obtain drivers licenses collapse spurred the demand for passenger vehicles. The booming passenger vehicle market has led to a soaring demand for self-prope lling components.Internationally, self-propelling manufacturers faced with decreasing margins and profitability set about sought out more affordable tally chain solutions, spirit to china as a potential author for lower cost self-propelling components. hostile developed markets for passenger vehicles, where harvest-festival in demand has been giganticly stagnant, chinas domestic demand for brand- unused automobiles has skyrocketed in the past years. Strong car sales in china in 2009 pushed the auto market to the largest in the world, and 2010 is set fit the controlling trend. 4 chinawares railway carmotive Sector on the watch for IEICI Updated November 2010 (Original April 2009). rootage china Association of self-propelled Manufacturers (CAAM) In the first nine months of 2010, automobile sales reached 13. 08 million units, up 36. 1% from a year ago. Over 9 million of the total sales were passenger cars and 3. 24 million were commercial vehicles. CAAM predicted t hat the 2010 annual sales will reach a record of 17 million units. It is widely believed that chinas self-propelled market currently has the or so harvest potential in the world. chinas 2009 per capita private car ownership was 4. 78%, far less than the 40% mean(a) of developed countries, and even less than other emerging markets much(prenominal) as Russia, Brazil and India.This is a pixilated indication that Chinas domestic market is far from being similarly saturated. According to CAAM predictions, emersion in the auto industry will remain sozzled until 2020 with annual maturation expected to systematically shop from 13 to 15 percent. The total bend of vehicles will jump from 67 to 150 million. Sales in bigger tierone and tier-two cities as well as soil areas should keep growing at a rapid pace over the close few years and high crop areas will move from eastern China to the central and western regions.Market Players on that point are currently more than coul omb whole-vehicle manufacturers and nearly 8,000 self-propelled parts manufacturers in China, located primarily in Southern, Eastern, and northeastern and central China (see the map on the right). Together, the top ten passenger vehicle manufacturers ( septet of which are joint risks (JVs) make up almost 90% of Chinas market share (see the table below). well-nigh every major world(a) vehicle manufacturer has schematic JV operations in China. 5 Chinas automotive Sector brisk for IEICI Updated November 2010 (Original April 2009). authorize 10 Passenger Vehicle Manufacturers in China (2009) Rank 1 2 3 4 5 6 7 8 9 10 Source CAAM Company SAIC1 FAW2 Dongfeng Chana (incl. Hafei) Beijing Auto Guangzhou Auto Chery BYD Brilliance Geely Others HQ strike Changchun Wuhan Chongqing Beijing Guangzhou Hefei Shenzhen Shenyang Taizhou JV Partner GM, VW VW, Toyota, Mazda PSA, Nissan, Honda cover, Mazda, Suzuki Hyundai Daimler Honda, Toyota, Isuzu, ordering N/A N/A BMW, Toyota N/A Sales (Unit ) 2,705. 5K 1,944. 6K 1,897. 7K 1,869. 8K 1,243. 0K 606. 6K 500. 3K 448. 4K 348. 3K 329. 1K 1,750K Market Share 19. 83% 14. 25% 13. 91% 13. 70% 9. 11% 4. 45% 3. 67% 3. 29% 2. 55% 2. 41% 12.84% Import Positive demand growth for automobiles and components has not only cause domestic industry growth, however has led to increased management from star distant automotive manufacturers impetuous to expand into the rapidly growing market. distant automotive manufacturers bring in besides been further by lower import responsibilitys, which project been lowered for whole vehicles from 70-80% to 25% since China joined the World Trade organisation (WTO). Import tariffs on Semi-Knocked-Downs (SKDs) and Complete-Knocked-Downs (CKDs) lease dropped from 50% to 25%, while import tariffs on vehicle components submit dropped from 15% to 10%.1 2 move self-propelled manufacturing Corporation First Auto Works 6 Chinas automotive Sector lively for IEICI Updated November 2010 (Origina l April 2009) Chinas automotive import growth was slowed due(p) to weaker demand ca utilize by the worldwide economic crisis of 2009. Annual total import were USD 33. 1 billion in 2009, representing a year-onyear increase of only 5. 34%. aided by government incentive programs and Chinas economic recovery, Chinas auto import total bounced back from a sluggish 2009, s prodding by 130% to USD 27. 22 billion in the first half of 2010. Imported European luxury cars had a remarkable 237.2% increase in 2010 compared to the same check the previous year. Chinas automotive component imports grew to USD 12. 7 billion in the first half of 2010, a 90% increase over the same cessation of 2009. Drivetrain, engine and automotive body components accounted for over 60% of the total component imports (see graph). to a greater extent than 80% of the imported components came from lacquer, German, Korea, and the United bows. The main groups of imported automotive components to China peck be divid ed into cardinal categories ? Nipponese and Korean OEMs and Tier I suppliers broadly these companies tend to only use suppliers from their country of origin.For example, Toyota typically sources components from Japanese JVs or all told Owned extraneous Enterprises (WFOEs) on the mainland, or directly imports from Japan. Such practice tends to conclusion from strict tone of voice requirements, cultural compatibility and logistic concerns. German OEMs and Tier I suppliers These companies typically import components in the areas where Chinese suppliers are weak (e. g. safety systems for high-end passenger cars). The US and cut OEMs operating in China produce not increased their automotive component imports as much as their peers for different reasons.US OEMs shed steadily increased their sourcing from local Chinese suppliers for vehicles make in China to stay competitive, and French OEMs are cladding a shrinkage market share in China. ? ? Chinese OEMs are emerging buyers o f imported automotive components, especially in the segments of hybrid and electric vehicles and Chinese-brand luxury vehicles. 7 Chinas Automotive Sector Prepared for IEICI Updated November 2010 (Original April 2009) exporting The impact of the economic crisis in 2008-2009 pressure many another(prenominal) multinational companies to reduce their sourcing of automotive vehicles and components from China.According to CAAM, China exported a total of 369,600 units in 2009 worth USD 5. 19 billion, which was depressed by 46% from 2008. Chinas auto exports rebounded as the global market recovered in 2010, with 250, coke vehicles exported in the first six months (up 55. 93% year-on-year). Passenger vehicle exports surged 115. 93% to 116,500 units, while commercial vehicle exports increased 25. 50% to 133,900 units. Algeria, Vietnam and Egypt were the major whole-vehicle export destinations in the first half of 2010. The auto components export growth has witnessed even more impressive growth than whole-vehicles.Exports increased 54. 11% to reach USD 18 billion in the first half year of 2010, with drive system components portentous 50% of the total by value. to a greater extent than 50% of the components were exported to the USA, Japan, South Korea, Germany and the United Kingdom. 1. 2 MARKET STRUCTURE Supplier grace The automotive supplier landscape in China is extremely fragmented. According to CAAM, at that place are approximately 8,000 automotive throw inprises baffled across various segments including full vehicle manufacturing, vehicle refitting, motorcycle disdain, engine production and automotive parts manufacturing.Most of these companies tell apart in lower-end parts and privation the great needed to invest in production of higher eccentric products. Seven of Chinas ten largest components manufacturers are international companies, and about 70% of the countrys USD 160 billion auto supply market is occupied by foreign companies or joint ventu res. There are approximately 120 OEMs in total, 40% of which produce passenger vehicles. One of the key contri thoors to the fragmentation of the automotive market as a whole is that Chinese suppliers go a large amount of crystallise OEMs.The worlds leading automotive companies are all well- accomplished in China. OEMs are represented by Ford, ordinary Motors (GM), Volkswagen (VW), Daimler, BMW, PSA, Mazda, Nissan, Honda, Toyota, Hyundai, and tier-one foreign companies including Bosch, Delphi, Denso, Johnson Controls, Lear, Magna, Visteon, Yazaki, ZF, Arvin Meritor and TRW. 8 Chinas Automotive Sector Prepared for IEICI Updated November 2010 (Original April 2009) Most of the supranational automaker and component manufactures grow invested to a great extent in China in attempts to clear up a competitive edge.For example, GM, Ford and painter Land Rover have realised their Asia Pacific home plate in China. GM, VW and Honda have also unresolved China R&D centers and have b egun to design car dumbfounds specifically for the Chinese consumer. International automotive components companies have also expanded their armorial bearing in China. For instance, BorgWarner recently opened a China Technical concentrate. ZF announce the government activity of its Asia Pacific headquarters in Shanghai as well as a crude Shanghai R&D center. Eatons Asia Pacific headquarters is in Shanghai.Rapid expansion from internationalist firms has let to foreign-invested automotive components suppliers holding 70% of the Chinese market share. Most of the top Chinese automotive parts manufacturers are altogether owned domestic companies such as ASIMCO, Wanxiang, Hongteo, Fuyao, Dicastal, Wanfeng and others. These companies could be potential competitors or first mates for Israeli companies. In response to the soaring domestic demand, Chinese automotive component manufacturers have ramped up their production capacities significantly, but this has also led to an increase in character complaints.Key Challenges for the Domestic exertion Chinese suppliers are now looking beyond the domestic market and improving their production process to emerge as aline global competitors. However, further coronation in R&D is up to now necessitate earlier Chinese manufacturers can really compete globally, as the industry smooth lacks technological capability and suffers from reference breaks. Chinas Automotive Sector Prepared for IEICI Updated November 2010 (Original April 2009) Flagship Domestic Automotive Companies Chery Automotive (Chery) ? Founded in 1997 and now has an annual production aptitude of 650,000 vehicles, 400,000 engines, and 400,000 sets of gearboxes.? Continues to expand into the overseas market and has established plants in 16 countries becoming the biggest Chinese vehicle exporter for seven consecutive years. ? Chery locomote Test & Technology Center opened in July 2010, which became the largest auto lab in Asia. The company will inve st RMB 2. 4 billion in 2010 to accelerate its new model ripening. ? Chery now owns a full set of manufacturing and R&D facilities, including quatern car plants, two engine plants, a gearbox plant, an automobile engineering look into shew, an automobile planning and design institute and an automobile test & technology center.? feature extensive technological and business relationships with overseas auto companies. Chery signed an agreement with Chrysler to produce Chery make cars low the Chrysler brand to be change in the United States and Mexico. ? Chery Quantum Auto. Ltd is a joint venture between Chery and Quantum LLC under an Israeli Group. They aimed to invest USD 334 million in 2010 to develop high-end cars and SUVs for the overseas market. 9 R&D capability Chinese automotive component manufacturers are able to manufacture products when they are leave behindd with designs and specifications, however most of them lack design, engineering and R&D capabilities.owe to weak R&D and engineering capabilities, many local suppliers have opted to enter into technical collaborations or JVs with leading international suppliers with the goal of facilitating the transfer of technology and change basic product engineering capabilities. A growing public figure of Chinese auto parts suppliers have begun to invest in and acquire western firms. Domestic R&D capabilities of Chinese automotive part manufacturers have historically been springed due to the small-scale of most operations and a shortage of investment in science laboratory facilities in comparison to international firms. victorious steps to remedy the situation, the Chinese government has continued to encourage investment in R&D for core systems, such as engines, transmission systems, steering systems, pasture brake systems and driving control systems. Safety and reputational issues Incidents and product recalls have raised questions about the quality and safety standards of Chinese manufactured autom otive components. According to the 2009 China Automotive Product whole tone & After Service Quality report, among the 9359 complaints documented about Chinese made cars, 19.5% were related to engine problems 10. 5% to steering systems 10. 7% to braking systems 18. 5% to automobile get atories and electronics and the remaining 40. 8% related to the gearbox, clutch, front and rear axles, suspension systems and air instruct systems. As a result of complaints and recalls, as well as other non-automotive related manufacturing scandals in China including melamine milk, begrime pet food, and anti-freeze laced toothpaste, Chinese manufactures are facing serious issues about their reputation.This is a problem local manufacturers will have to overcome if they want to increase their scrap on the global stage. The drivers are in place for Chinese domestic manufacturers to move to the forefront of the global automotive industry, but substantial domestic investment in R&D and improvements on quality and reputation are a indispensable prerequisite. 1. 3 EMERGING INDUSTRY TRENDS industry Drivers The rapid expansion of the Chinese automotive industry has been largely attributed to the growth in domestic demand for passenger vehicles and international demand for affordable automotive components.The Chinese government also continues to play an great function in encouraging the growth of the industry. 10 Chinas Automotive Sector Prepared for IEICI Updated November 2010 (Original April 2009) Tier II and Tier III cities emerge as market growth engines In 2010, most multinational automakers have included a focalisation on Central and westerly China markets into their strategies in order to bewitch future growth opportunities. For example, Volkswagen is ramping up message of its Chengdu plant more than stunt woman its production of Sagitars and Jettas from 150,000 to 350,000.GAIC Toyota (a JV between Guangzhou Automobile Industry Corporation and Toyota) is considering make a small and price-competitive car to target the lower end of the market. The JV also announced plans to expand its gripership network across central and Western China. Central and western China have emerged as the main growth engine of the automotive market. According to CAAM, automobile sales in second and third-tier cities in the first nine months of 2009 surged 41 percent and 51 percent respectively, while sales in the firsttier cities increased by 34 percent.Domestic demand has been fueled by rising incomes and a growing middle class creating a larger consumer culture. The grease ones palms of an automobile is more and more becoming a symbol of financial success. In the past, the focus has been on coastal cities. Since 2009, tier II and tier III cities have emerged as the pissedest market growth engines (see more exposit on your left) Even though large cities in China are facing serious traffic congestion issues, Chinese have not been deterred about make new automobi le purchases.China overtook the U. S. as the worlds fleck one automotive market in January 2009. The positive developments in the passenger vehicle industry have benefitted both domestic auto manufacturers (which are emerging from their infancy stages and growth competitive capabilities) and major international automotive giants (which have increased investment into China to expand their presence). However, with per capita car ownership was remedy only 4. 78% in 2009, still far below the 40% average in developed countries.This is a watertight sign that domestic demand for passenger vehicles will remain high in years to come. The domestic aftermarket for automotive components is increasingly becoming an weighty driver of the industry. to a greater extent than thirteen million cars are sold annually in China which is leading to a growing market for automobile repairs and further stimulating domestic demand for automotive components. International demand for automotive components has also increased as international automotive firms face pressures to reduce cost and take advantage of more economical ersatzs abroad.Chinas inexpensive labor force presents an attractive option for producing lower-cost automotive components, which were initially primarily for the international aftermarket but are increasingly being used by international OEMs. The majority of leading international automobile OEMs have established global sourcing offices, R&D centers as well as regional headquarters in China. 11 Chinas Automotive Sector Prepared for IEICI Updated November 2010 (Original April 2009) Finally, the Chinese government continues to play an important role in driving the industry.Post-WTO accession concessions have resulted in lower import tariffs, talent international automotive firms more access to the domestic market. Beijing has actively encouraged the establishment of JV R&D centers with preferential tax policies designed to facilitate the transfer of knowledge and technology. The government has assure substantial funds towards automotive technology innovation, upgrades, and the R&D of alternative-fuel automobiles and components. They are also setting restrictions and quotas requiring all vehicles that are used for government use to be produced domestically.Industry Consolidation China is determined to restructure its automotive industry, with the hopes of changing the market from many fragmented manufactures to two or triad dominant domestic firms. According to the State Councils regulations released in early kinfolk 2010 which called for greater industrial consolidation, the automobile industry was at the top of the list of targeted sphere of influences. The State Council set the goal of reducing the topic of major automakers who are responsible for 90% of domestic sales output, from 14 to 10. under the plan two or one-third companies would dominate the industry, responsible for producing more than terzetto million vehicles annually , while quartet others would have annual output capacity of 1. 5 million units. The State Council named the next four groups as potential industry heavyweights, urging them to take advantage of consolidation opportunities FAW Dongfeng Chinas Automotive Sector Prepared for IEICI Updated November 2010 (Original April 2009) Flagship Domestic Automotive Companies Shanghai Automotive (Group) Corp (SAIC) Industry ? Headquartered in Shanghai, it is one of the top three auto groups in China.? Mainly engaged in the manufacturing, sales and R&D for passenger cars, commercial vehicles and auto components. ? The company is ranked 223 of the part 500 companies with consolidated revenue of US$33. 6 billion in 2009. ? change over 2. 7 million vehicles in 2009, making up almost 20% of Chinas market. ? SAIC invested over 10 billion RMB on new model development in the past 3 years, and will launch hybrid and electric vehicles in 2010 and 2012. ? Acquired Nanjing Automotive (Group) Corp (NAC) in 2007 and became the largest manufacturer in China with a consolidated annual production of 2 million units.? SAIC has opened branches in the USA, Europe, Hong Kong, Japan and Korea. It has established a long-term cooperation with GM and Volkswagen. SAIC and GM formed Shanghai GM and the Pan Asia Technical Automotive Center (PATAC) in 1997 and launched 8 additional China joint ventures, including SAIC-GM-Wuling, GMAC-SAIC Automotive Finance Company, and General Motors SAIC Investment Limited. ? Shanghai Volkswagen (a joint venture between SAIC and Volkswagen AG) recently announced it will build a fifth meeting place plant in Jiangsu. The plant will have an annual production capacity of 300,000 vehicles and start operation by the end of 2012.12 SAIC and Changan. Additionally, it named four regional leaders that it encouraged to consider regional consolidation Beijing Automobile Guangzhou Automobile red-faced and Sinotruck. All of these companies are passenger vehicle manufacturers wi th the exception of Sinotruck which manufactures heavy-duty trucks (sales of over 125,000 units in 2009). Industry analysts predict that the coming revolve of M&As within the automotive sector could see a deal that breaks the USD 1 billion mark, more than doubling the largest deal to date which was the USD 450 million purchase of General Motors.Nexteer steering components unit by a joint venture established by Beijings tempo Group and the Beijing government. Global intricacy As the leading automotive market, China automakers are accelerating global transformation to increase their presence in the overseas market. Zhejiang Geely dimension Group (one of Chinas largest free lance carmakers) recently completed its acquisition of Ford Motors Volvo brand for USD 1. 5 billion. This is an indication that Chinese automakers have begun to espy the power of strong brand reputation.Geelys Volvo bid is the largest takeover in Chinese auto industry and will provide a pattern for Chinese ca rmakers to expand aboard and acquire companies with a strong reputation. Beiqi Foton, Chinas leading commercial automaker followed Geelys step and announced its global expansion plan. This includes setting up a production base in Russia by 2012 with an annual capacity of 100, 000 vehicles and building five other plants in Brazil, India, Russia, Mexico and Thailand before 2015.New Energy Vehicle nidus of Future festering High oil prices, air pollution, and Chinas shipment to reduce carbon emissions have led the automotive industry to explore alternative energies. The Chinese government has launched policies and incentives to stimulate the development of new life force vehicles, including electric (hybrid, plug-in and battery), fuel cell, and hydrogen-powered. China has identified new zip fastener vehicle as one of the seven emerging strategic industries. Many estimation China will become the worlds largest new nil vehicle market by 2020.The Energy salvage and New Energy Vehic le Development Plan (2011-2020) and the Automotive Industry twelfth Five-year Plan (2011-2015), two of the key policies expected to guide the development of new energy vehicle industry, are expected to come out by the end of 2010. The Ministry of Industry and Information Technology (MIIT) is the principal drafter of these plans which are later submitted to the State Council for approval. The plans set the following key targets for the new energy vehicle industry by the end of 2020 ?In the following five years China will aggressively support the development of key components of energy efficient and new energy automobiles. For electric motors and 13 Chinas Automotive Sector Prepared for IEICI Updated November 2010 (Original April 2009) ? ? batteries manufacturers, China hopes that three to five good sense enterprises will emerge with their combined market share exceeding 60%. China will produce 5 million new energy vehicles and become the number one producer of new energy vehicles i n the world by 2020 number fuel economy of passenger vehicles will be 4.5 L/100 kilometers by 2020, the same as European standards. The plans will become the backbone form _or_ system of government for the entire new energy vehicle industry, as it provides direction for public funding, sector focus and industry structuring. Most important to pay attention to is that Chinese companies are likely to reap the most benefits from these coordinate strategies. To support indigenous innovation, the Chinese government has stated that the two or three key new energy vehicle component manufacturers will most likely be domestic companies, either state-owned or private.2 REGULATORY OVERVIEW ? Government tariffs on automotive imports are in residence with WTO rules, but minimum capital barriers still exist for foreign investors. The government has created roughly incentives to spur R&D partnership, and regulations for foreign distributers have been eased somewhat. The government has plans to implement higher auto emissions standards for new cars in China. So far four regions have implemented China IV emission standards (Beijing, Shanghai, Nanjing and Guangdong Province).The Chinese government views the development of the new energy vehicle industry in China as a top priority and has introduced a wide lean of subsidies and policies in its favor. ? ? Chinas automotive industry supply chain is very broad with many components such as import and export, manufacturing, environmental protective cover, technology upgrades and quality control. As such, the industry is regulated by a range of government organs, both at the national and sub-national level. The below chart illustrates the key central level regulators of the automotive industry, and their relevant responsibilities.14 Chinas Automotive Sector Prepared for IEICI Updated November 2010 (Original April 2009) The automotive industry is subject to a number of laws and regulations. The key regulations that are relevant to Israeli companies are addressed below. 2. 1 impertinent ACCESS TO THE CHINESE AUTOMOTIVE MARKET Trade The Chinese auto sector is competitive and has a well-developed supply chain. Imports of foreign-made auto parts will likely falloff as OEMs continue to increase their local capacities. At the same time, higher quality Chinese auto parts are increasingly being integrated into the global supply chain.Currently the import tariff for whole vehicles is 25% and for automotive components is 10%. 15 Chinas Automotive Sector Prepared for IEICI Updated November 2010 (Original April 2009) Investment Foreign businesses must meet a number of requirements in order to access Chinas automotive market. The Chinese government has set requirements for minimum registered capital when a firm wants to establish an automotive knack which is RMB 500 million (USD 75 million3) for automobile financing, RMB 500 million (USD 75 million) for engine production and RMB 10 million (USD 1. 5 million) for an R&D center.All projects are subject to government approval. Foreign firms looking to produce passenger vehicles cannot set up WOFEs, but must partner with a local Chinese firm in the form of a JV, with the foreign partners stake limited to 50%. On the other hand, China offers monetary and financial incentives to attract foreign investment in R&D strategies as part of the central governments strategy to speed up the transfer of international technology. China currently provides tax incentives for enterprises engaged in research and development activities, allowing R&D enterprises to deduct 50% of R&D expenses.Suppliers are most oftentimes required to localize or invest in China and Israeli companies interested in tapping into the vast Chinese market will need to consider establishing a local presence. IPR Issues in China While the protection of intellectual plaza rights (IPR) remains a contentious issue for companies in China, the countrys laws and regulations have progressed con siderably in recent years, with the large majority now compliant with requirements of the WTOs TRIPS agreement.The main challenge surrounding IPR protection in China is the lack of utile enforcement of the existing regulations. Enforcement issues arise from a range of root causes, including the relatively recent universe of IPR legislation and concept of intellectual plaza in general, the absence of a in full independent judicial system, and provincial officials often protective attitude towards local cheat creating counterfeiting industries.While most foreign companies considering business operations in China may have to accept an unavoidable course of IPR infringement, there are nevertheless a number of actions that a company can take in order to limit their IPR-related risk ? ? ? Ensure to register your patents, copyrights, or trademarks with the relevant bureaus Ensure that your trade or other.