Volatile markets are a cause for concern for Chinese OEMs and their joint venture partners. Although it has been the global economic success story of recent years, the days of ‘explosive’ growth are probably over for the Chinese car market. This was one of the themes to come out of the recent AMS China conference, held in Shanghai. There was much more focus on optimising the utilisation of existing production facilities, introducing new manufacturing technologies, improving efficiencies and perhaps above all, ensuring flexibility in the production lines.

Being able to produce more than one model per line and the ability to introduce new models quickly is seen as key to satisfying the changing demands of Chinese car buyers, who are now bypassing cheaper domestic models for higher specification foreign brands. However, to achieve these levels of flexibility and efficiency will ultimately require greater levels of automation and the associated increase in investment. This arguably undermines one of China’s big assets; a relatively cheap labour force.

This raises another topic; the increasing localisation of suppliers. The need for high quality components and equipment has been a driver for many Chinese machine suppliers, who are now seeking to rival the imported products in all areas. Fast, reliable service and spares are essential if automated lines are to operate at full functionality and here localisation offers the benefit of much shorter supply chains and reduced costs. So, while this area is still developing we are seeing an increasingly strong representation of Chinese supplier companies providing high levels of technical expertise.

Many of these are benefiting from similar partnerships with foreign companies that Chinese carmakers have been enjoying over the last decade. The nature of these partnerships has also changed over recent years, developing into much closer, more cooperative relationships. Foreign OEMs now see the benefits of adapting their production processes to better integrate into the local infrastructures, adopting a much more Chinese-centric approach.

The euro zone crisis has captured much of automotive headlines of late. While joint ventures in China continue to prosper, OEMs face severe problems of rapidly shrinking sales and over production in Europe. General Motors continues to shuffle its Opel ‘chess pieces’ around the European board, shifting production of new models while deciding where best (or most politically expedient) to wield the axe. Fiat is similarly facing difficult decisions regarding its production facilities while its acquisition of Chrysler seems to have transformed the fortunes of the ailing American carmaker. Also experiencing the effects of an unprecedented drop in European sales, like Fiat, Renault and PSA are looking east to bolster their fortunes. Harsh lessons have been learned by the carmakers following the economic collapse in 2008 and it will be interesting to see how they apply what they have learnt to their new ventures.