Japanese carmakers in China: how to explain their decline?

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Abstract:

While Japanese main carmakers and suppliers succeeded in their endeavors in USA and Southeast Asia, they lag behind some American and European rivals in China. What are the causes of their low market shares in China? Is it due to cultural explanations and Chinese policymakers’ reluctance to welcome Japanese FDIs? Does it follow a similar trajectory than in Western Europe where from the 1970s governments used several tools to protect their national champions? Is it due to failures in their product policies, such as having not developed SUVs while this market was booming?
This presentation is an attempt to explain the story of this trajectory from an economic sociological stance, taking into account history of the Japanese FDIs in China, and empirical data collected during several fieldworks. It is often stated that VW, PSA, and GM were the forunners in China. However, Toyota had already commissioned a group of firms in the 1960s to explore the possibility of investing this market. They were most eager to develop early on in China. The turning point is without any doubt during what might be called the second phase of market development and stabilization in the 1990s~2000s. This period was very important for the establishment of the institutions of the Chinese car industry and market, and Japanese carmakers could not get control over strategic resources. This talk will present and analyze the causes and context of this specific period, through several case studies of negotiations with central and regional governments related to JVs, product portfolios, and development of dealership networks.
Hence, our explanation does not rely on the cultural (the so-called “Chinese risk”) or efficiency theses, but rather the sociopolitical dynamics of negotiations that shape institutions of market stability.