China’s 40-Year Quest to Build a Car to Call its Own: Where is the Innovation?

ABSTRACT

Over the last several decades, China has developed itself to a large manufacturer and started its way to be an innovator. In this article, we are interested in whether China is on the right track of making true innovation in automobile industry. Through a micro view, we looked at the history of the automobile industry and went through specific firm cases like NIO and BYD. As software and electronic vehicle (EV) become more essential to automotive business, technology firms enter automobile industry; China has an opportunity to compete with other global automakers if it can catch this important industry change. Nevertheless, in the future we can explore more questions like how strong China can be in doing original innovation compared to other countries.

Acknowledgments

Research support for this article came from the New York University Center on U.S.-China Relations.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Zhou, Y., Lazonick, W., & Sun, Y. (Eds.). (2016). China as an innovation nation. Oxford

University Press USA – OSO. https://doi.org/10.1093/acprof:oso/9780198753568.001.0001, accessed 28 June 2023

² Xinhua. (2012), “How Will China Become World Technological Power?” China Daily, Sept. 25,

http://www.chinadaily.com.cn/business/2012–09/25/content_15780903.htm

³ International Organization of Motor Vehicle Manufacturers, 2020 Production Statistics. Details see https://www.oica.net/category/production-statistics/2020-statistics/

⁴ China Association of Automobile Manufacturers (2022), Vehicle industry operation status 2021, page 4. Details see http://www.caam.org.cn/chn/4/cate_154/con_5235337.html

⁵ Nikkei Asia (2021), Mercedes, Audi and BMW driven deeper into China by pandemic. Details see https://asia.nikkei.com/Business/Automobiles/Mercedes-Audi-and-BMW-driven-deeper-into-China-by-pandemic

⁶ China Association of Automobile Manufacturers (2022), Vehicle industry operation status 2021, page 7. Details see http://www.caam.org.cn/chn/4/cate_154/con_5235337.html

⁷ Details see: Holweg, M., Luo, J., & Oliver, N. (2009). The past, present and future of China’s automotive

industry: a value chain perspective. International Journal of Technological Learning,

Innovation and Development, 1, 76.

⁸ See Weinstein (2022), Beijing’s “re-innovation” strategy is key element of U.S.-China competition. Brookings. Details see https://www.brookings.edu/techstream/beijings-re-innovation-strategy-is-key-element-of-u-s-china-competition/

⁹ More electric vehicle producers: BYTON, CATL, EVE, Faraday Future, Gotion, Karma, Tencent, Xpeng.

¹⁰ More autonomous vehicle technologies producers: Innovusion, Plus.ai, Pony.ai, TuSimple, WeRide.

¹¹ According to Fung, Aminian, & Tung, enhanced power of internet development is a paradigm shift of automobile industry. For details see: Some characteristics of innovation activities: Silicon Valley, California, China and Taiwan. Economic Change and Restructuring 49, no. 2–3 (2015):221–240. doi: 10.1007/s10644-015-9162-x

¹² Details on Baidu USA’s website: http://usa.baidu.com/about

¹³ Yang, Sun & Munroe (2021). Baidu’s EV firm Jidu hires ex-Cadillac designer. Reuters. Details see https://www.nasdaq.com/articles/baidus-ev-firm-jidu-hires-ex-cadillac-designer-2021-06-28

¹⁴ Tang. R. (2009). The rise of China’s auto industry and its impact on the U.S. motor vehicle industry. Congressional Research Service. Retrieved on Nov.28 2020 https://sgp.fas.org/crs/row/R40924.pdf

¹⁵ Mentioned by Holweg et al. (2009) as “Big three, small three,” which was the Chinese policy that clearly set out which manufacturers were to be sustained. Details see: Holweg, M., Luo, J., & Oliver, N. (2009). The past, present and future of China’s automotive industry: a value chain perspective. International Journal of Technological Learning, Innovation and Development, 1, 76.

¹⁶ Candelo, Troise, Matricano, Lepore, & Sorrentino, M. (2021), innovation of automobile industry was generally divided into three stages: internal innovation, collaborative innovation and toward open innovation. Details see: Candelo, E., Troise, C., Matricano, D., Lepore, A., & Sorrentino, M. (2021). The evolution of the pathways of innovation strategies in the automotive industry. The case of Fiat Chrysler Automobiles. European Journal of Innovation Management. doi:10.1108/EJIM-01-2021–0058

¹⁷ By Olsen (2020), according to China’s “Opinion on Strengthening the United Front Work of the Private Economy in the New Era,” private economic figures are to be more closely united around the party, thereby achieving “a high degree of consistency with the Party Central Committee on political stand, political direction, political principles, and political roads. This is different from private company functions in a free market. Details see Olsen (2020). Are private Chinese companies really private? Diplomat. Retrieved in June. 28^th 2023; https://thediplomat.com/2020/09/are-private-chinese-companies-really-private/

¹⁸ See article written by Shirouzu (2021) of why Shufu Li bought Volvo and the meaning of Volvo to Geely. https://www.reuters.com/article/autos-geely-lishufu-srep-idTRNIKBN2FY0YN

¹⁹ Details see: BYD official website. Retrieved 2022 https://en.byd.com/bus/about/#:~:text=Success%201%20%20More%20than%20%24250%20million%20invested,Berkshire%20Hathaway%20is%20one%20of%20the%20largest%20shareholders

²⁰ In China, new EV startup needs permission from the government so that they can enter the EV market and produce EV. More details available on the website of The Central People’s Government of the People’s Republic of China. Retrieved Nov.29 2022, http://www.gov.cn/gzdt/2009–06/25/content_1350379.htm

²¹ See McKinsey&Company (2019) for analysis on how companies in new industries such as software and electronics companies entered automobile industry rapidly. Details see: Burkacky, O., Deichmann, J., & Stein, J. P. (2019). Mapping the automotive software-and-electronics landscape through 2030. McKinsey Insights.

²² KPMG (2021) especially mentioned “The company brought a new and cool perspective to car ownership by means of bypassing dealerships and integrating the appeal of consumer electronics into environmentally friendly vehicles.” Details see: Sinocharged: The bright future of China’s electric vehicle market. https://assets.kpmg/content/dam/kpmg/cn/pdf/en/2021/01/2020-china-leading-autotech-50.pdf

²³ From BMW (2022)’s website, “Experts define a connected car as a car that can be linked to other services and devices via a network.” More details available: https://www.bmw.com/en/innovation/connected-car.html

²⁴ Manthey. N. (2021). SAIC & Alibaba set up Zhiji Auto for electric car label IM. Electrive. Retrieved Nov. 29 2022 https://www.electrive.com/2021/01/15/saic-alibaba-set-up-zhiji-auto-for-electric-car-label-im/

²⁵ Sun. Y & Zhu. J. (2021). Huawei-Changan smart car partnership expands to include chips -sources. Reuters. Retrieved Nov. 29 2022 https://www.reuters.com/business/autos-transportation/exclusive-huawei-expand-smart-car-partnership-with-changan-chips-sources-2021-05-21/

²⁶ Reuters (2021). Geely formed a partnership with Tencent to develop smart cockpits. Retrieved Nov. 29 2022 https://www.timeslive.co.za/motoring/news/2021-01-19-geely-teams-up-with-tencent-on-smart-car-tech/

²⁷ Randall. C. (2022). Baidu & Geely invest EV joint venture Jidu Auto. Electrive. Retrieved Nov. 29 2022 https://www.electrive.com/2022/01/26/baidu-geely-invest-ev-joint-venture-jidu-auto/

²⁸ Bloomberg (2020). China Ride-Hailing Giant Didi to Partner With BYD for EVs. Retrieved Nov. 29 2022 https://www.bloomberg.com/news/articles/2020-09-21/china-ride-hailing-giant-didi-to-partner-with-byd-to-make-evs?leadSource=uverify%20wall

²⁹ See Chen, Feng, Lin, Liao, & Mei (2021)’s for analysis on research efficiency and achievement conversion efficiency of Chinese automobile companies. Details see: “Research on the technology innovation efficiency of China’s listed new energy vehicle enterprises.” Mathematical Problems in Engineering, 1–9. doi:10.1155/2021/6613602

³⁰ See Schmidt, A., Trenka, J., & Holtgrave, M. (2021), especially Figure 4, on specifically how Tencent, Alibaba and Baidu connect and integrate vehicles with their respective ecosystems. Details see: Schmidt, A., Trenka, J., & Holtgrave, M. (2021). The future of automotive sales in China. Accenture.

³¹ See Chen et al. (2021)’s article for more analysis on BYD and similar companies that features high technology research and development efficiency. Details see: Chen, S., Feng, Y., Lin, C., Liao, Z., & Mei, X. (2021). Research on the technology innovation efficiency of China’s listed new energy vehicle enterprises. Mathematical Problems in Engineering, 1–9. doi:10.1155/2021/6613602

Additional information

Funding

The work was supported by the New York University Center on U.S.-China Relations.

Notes on contributors

Michael Dunne

Michael Dunne is an entrepreneur, author and keynote speaker. He is the CEO of ZoZoGo, an advisory and investment firm with expertise in global electric vehicle markets. He received a bachelor’s degree, a master’s degree in Chinese history and an MBA from University of Michigan. He is the author of American Wheels, Chinese Roads: The Story of General Motors in China, and the creator of The Driving with Dunne Podcast. Dunne is now working on a new book about China’s ambitions to dominate electric car and battery markets: China’s Master Plan to Dominate Electric Car Markets Worldwide.

Weiyue Chen

Weiyue Chen is a Ph.D. student at Economics department of University of Washington - Seattle. She received a bachelor's degree in economics and psychology from the College of William & Mary and a master's degree in economics from New York University. She is interested in industrial organization, game theory and microeconomics.