Rose Yu of the WSJ has a nice recent article on the fragmented nature of the Chinese auto market and how this is leading to over capacity in the industry. Mark Lehrer identifies some nice classroom uses for this article in the WSJ WeeklyReview service. Here is what he suggests:
- SUMMARY: The US auto industry has long had three big domestic car makers. China has more than 170. Optimistic Chinese auto executives send shudders through the rest of the global auto sector. Industry watchers worry that the world’s No. 1 auto market could soon be awash in overcapacity. That would rev up competition in China and pressure companies here to export more of their cars.
- CLASSROOM APPLICATION: As a case in industry analysis, excess capacity seems to be an endemic feature of the car industry (related article). As a study in foresight, the question for class discussion is, first, how to deal with the problem in the US, and second, how to brace for the problem furling over from China in a few years.
- (Introductory) Traditionally (related article), how did Detroit automakers deal with excess capacity, especially car makes that were not selling well? How were car dealerships involved in the process? How did Detroit induce and enforce cooperation by the car dealerships?
- (Introductory) How and why is this changing in the US? Why is the bargaining power of car dealers increasing? How is Michael Jackson exercising this power?
- (Advanced) How can Detroit automakers now hope to deal with excess capacity furling over from the Chinese market? How should they adjust their car makes?
- (Advanced) When will the tidal wave hit? Exactly how certain is it? Exactly when and how should US automotive firms need to start to take active measures?
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Contributed by Mark Lehrer
I didn’t realize the struggle that Chinese automakers face at the moment. China being the world’s number one car industry will prove difficult for new entrants and it is also difficult for cars to be exported.