BEIJING - For decades, the Chinese government told a tightly controlled auto industry to meet two goals: employ a lot of people and make as many vehicles as possible. Quality and efficiency were secondary.
No more. Even large job cuts are considered necessary as individual Chinese consumers are expected to begin buying from an industry that has provided vehicles almost exclusively for government and commercial fleets.
'What we're responsible for is creating a good market environment for the auto industry,' said Xie Penhong, deputy director of the Department of Automotive Industry in China's Ministry of Machinery Industry.
The department's altered view of its role is part of a broader shift in the Chinese system. 'This is a big transformation from a centrally planned economy to more of a market economy,' said Xie.
In an interview with Automotive News here, Xie affirmed the central government's desire to see China's auto industry become competitive, even if that means shedding excess workers. He acknowledged, however, that the central government cannot force the provincial governments to go along with a leaning-out of the industry when it conflicts with their desire to boost their own local economy and employment.
The 'biggest strain' in the Chinese auto industry is to shift emphasis away from government purchases to individual car buyers, Xie said. He also confirmed that China eventually wants to develop its own car for export.
China's vehicle makers employ an estimated 2.2 million people to build 1.3 million cars and trucks a year.
'Many of these redundant workers will have to be transferred. Or companies (now building cars) will switch to making components,' he said. 'It's a very cruel market rule. If we don't adopt this model, we will lose.'
Layoffs are becoming a painful reality in a nation where companies and work units, not the government directly, provide the social safety net.
For instance, Beijing Jeep Corp., a joint venture between Beijing Automotive Co. and Chrysler Corp., provides its employees with housing, a free lunch, health insurance and schooling for their elementary-age children. Beijing Jeep Vice President Andy Okab, a Chry-sler manufacturing executive who joined Beijing Jeep last month, estimates that the tab for these benefits roughly equals a worker's monthly pay of about $200.
Yet the message is out.
The plant's body shop installed its first two welding robots in the last year. Now, a white-on-blue banner there proclaims in both Chinese and English: 'You'll lose your job if you don't work hard.'
SLOW TO CONSOLIDATE
In addition, the industry will consolidate to generate efficiencies. First Auto Works, China's biggest vehicle producer, has already absorbed 'six or seven' small vehicle makers over the last four years, Xie said.
The top 16 makers now account for about 88 percent of production.
But the consolidation is not moving swiftly.
Gerald Kania, vice president of Ford Motor (China) Ltd., said about 1,000 mom-and-pop companies made trucks in China several years ago, when the government first began pushing them to merge.
Today, he said, there are probably 1,200. Companies and local governments keep jumping into the business.
Change is dramatic on the sales side, too.
'The biggest strain in the Chinese auto market is that the consumption of autos is quickly changing from public consumption to private ownership of cars,' said Li En Quan, deputy chief of the Division of Economic Cooperation at the Ministry of Machinery Industry.
He estimated that 70 percent of the growth in car sales this year will come from private buyers.
About 40 percent of the trucks built by a joint venture between Second Auto Works and Citroen are sold to individual buyers, Li added.
That is a sea-change from the days when government agencies, state-owned enterprises and other institutions accounted for all vehicle sales.
All major vehicle makers are trying to build up sales and service networks.