Automobile Industry in China - History - 1980 To 1990

1980 To 1990

The passenger car industry was a minor part of vehicle production during the first three decades of China’s socialist economy. As late as 1985, the country produced a total of only 5,200 cars. To announce that the desire for consumer goods was no longer politically suspect and stimulate personal spending, while also advertising the opening of the Chinese market to foreign producers, a fabricated news story about China's first peasant to own a car was distributed across the world. Sun Guiying, a chicken farmer from near Beijing was touted has having purchased a silver Toyota Publica with her earnings. While the article was largely fraudulent (Mrs. Guiying did not know how to drive, and her husband was a senior official rather than a peasant), the message came across loud and clear. Car sales shot through the roof, although they were almost entirely purchased by danweis (work units - private car ownership was virtually unknown at the time, in spite of the Sun Guiying story).

As domestic production was very limited, import totals rose dramatically, despite a 260 per cent import duty on foreign vehicles. Before 1984, the dominant exporter of cars to China had been the Soviet Union. In 1984, Japan's vehicle exports to China increased sevenfold (from 10,800 to 85,000) and by mid-1985 China had become Japan's second biggest export market after the US. The country spent some $3 billion to import more than 350,000 vehicles (including 106,000 cars and 111,000 trucks) in 1985 alone. Three taxi companies in particular thirsted for Japanese cars, such as Toyota Crowns and Nissan Bluebirds.

As this spending binge began to lead to a severe trade deficit, the Chinese leadership put on the brakes, both through propaganda efforts and by making foreign exchange much less accessible. Customs duties on imported goods were raised in March 1985 and a new "regulatory tax" was added a little later. In September 1985 a two-year moratorium on nearly all vehicle imports was imposed.

While limiting imports, China also tried to increase local production by boosting the various existing joint-venture passenger car production agreements, as well as adding new ones. In 1983, American Motors Corporation (AMC, later acquired by Chrysler Corporation) signed a 20-year contract to produce their Jeep-model vehicles in Beijing. The following year, Germany’s Volkswagen signed a 25-year contract to make passenger cars in Shanghai, and France’s Peugeot agreed to another passenger car project to make vehicles in the prosperous southern city of Guangzhou. These early joint ventures did not allow the Chinese to borrowing much foreign technology, as knock-down kit assembly made up the majority of manufacturing activities; tooling may not have been allowed to slip past borders.

Three big joint-ventures and three small joint-ventures:

Shanghai Automotive Industry Corporation - Volkswagen: Volkswagen Santana mid-size/compact car.
First Automobile Works - Volkswagen: Volkswagen Jetta compact car.
Dongfeng Motor Corporation - Citroën: Citroën Fukang compact car.