China's Auto Industry Grows Up in Jiading

While the near collapse of America's auto giants was grabbing headlines in 2009, China's car industry has been enjoying growth of ten per cent. A number of economic factors have stoked China's demand for motor cars, however, the industry's ability to meet these unprecedented consumer needs has grown out of new industrial ecosystems springing up in automotive centres such as Jiading district in Shanghai, and much of the infrastructure for these ecosystems can be attributed to Jiading's industrial parks.

China Auto Market Achieved Its Biggest Year Ever in 2009

From January to December 2009, more than 13 million vehicles were sold in China, which represents an annual growth rate of 50% and also makes China the world's largest car market in the world. The rise of the China market also brings good returns to multinational car manufacturers who have invested in China. According General Motors' annual report on its China operations, the combined sales of GM's two joint ventures in China reached 1.82 million units, which is a 66.9% increase over 2008. Over the same period, GM's vehicle sales in the US market reported at 30% drop.

Car Maker Growth Creates an Automotive Ecosystem

At present, China has several major auto parts manufacturing centers across the country, with most of these auto industrial clusters being located close to production bases for major automakers . For instance, Guangzhou is the production centre for Japan's Toyota, Honda, and Nissan and the city's total GDP derived from auto production reached RMB 200 billion in 2009. Nanjing, which is host to Ford's production in China, as well as local car makers NAIC and Chunlan, is another automotive hub. The cities of Chongqing, and Changchun are also major bases for auto parts manufacturing. However, according to a market report published by Congressional Research Service, in 2009 the combined production of Shanghai, Jiangsu, Zhejiang and Anhui provinces accounted for around 40% of China's total output.

Shanghai's Jiading District Leads China's Auto Centres

Among China's auto centres Jiading district in northwest Shanghai is currently the biggest and best known. The total industry output of Jiading reach RMB 216.5 billion by 2008, 20.3% of which is from auto parts and components manufacturing. The district is home to SAIC (Shanghai Automotive Industry Corporation) which partnered with Volkswagen in 1985 to form China's first automotive joint venture, and in 1997 GM also established a joint venture with SAIC to manufacture passenger vehicles.

Besides Volkswagen and GM, over the past ten years, more than 100,000 enterprises have established their businesses in Jiading, many of them related to the auto industry. Nanjing Auto, Dofeng Kia, and Chang'an Ford , as well as leading domestic car manufacturers such as Huapu and Geely have all set up production facilities in the Jiading International Auto City.

To illustrate the economic output of Jiading's automotive enterprises, one need only look at the recent performance of some of the companies established there. Shanghai VW last year sold a total of 708,100 passenger cars in China, ranking first in the top 10 auto producer list released by the China Association of Automobile Manufacturers. And Volkswagen's growth has attracted a large number of parts and components manufacturers, logistics providers and after-sales services providers to Jiading. The nearby Shanghai International Automobile City Auto Parts Industrial Zone now has over 280 investors focused on auto parts and components manufacturing, of which 14 are Fortune 500 companies such as Delphi, TRW, Arcelor, Magna, and Visteon.

Jiading District's Industrial Zones Support China's Auto Industry

Part of the reason for the growth of Jiading's auto industry has been the support that it has received from the local and central governments, and the establishment of automotive-focussed industrial zones in Jiading has played a major role in this success. The Shanghai government has invested heavily in developing infrastructure and incentives to help it achieve its target of making Jiading a world-class auto centre.

Besides the advantages of being close to materials suppliers and the big automakers, many component manufacturers and service provider have been drawn to Jiading by favorable policy conditions for investment. One of the most attractive policies is that international companies can set up wholly foreign-owned auto parts companies in China, which reduces some of the challenges often associated with joint venture projects and allays investor fears of transferring advanced technology to local partners.

Besides favorable rules for enterprise establishment, the Jiading government has created preferential land and tax policies for automotive investors. Foreign-invested enterprises that employ high or new technology can enjoy reduced profit tax rates of 15%; and enterprises that invest in the establishment of R&D centres, regional headquarters (including overseas acquisition centres and logistics centres) of global companies, also can benefit from reduced profit tax rates of 15 percent. Although these terms are normally negotiated ona a case by case basis, industrial zones will also commonly reduce land prices for investors according to the nature of their projects, and the scale of their investment.

Jiading's Top Five Industrial Parks for the Automotive Industry

Although Jiading district represents only a section of Shanghai, this sprawling suburb is already home to a number of industrial zones and parks that provide potential homes for auto investors. Here are RightSite's picks for the top five Jiading industrial zones that auto investors should consider, and the outstanding characteristics of each development.

Shanghai International Automobile City

Located in the western outskirts of Shanghai, Shanghai International Automobile City (Shanghai Auto City) is a a comprehensive auto production centre. Shanghai Auto City consists of a core zone, a car-manufacturing and parts supply zone, an education area and, and Anting New Town. Shanghai Volkswagen is also located in the industry area of Auto City.

After more than 10 years of development, the Auto City has grown into a comprehensive auto-making centre as well as a new modern town with integrated functions of manufacturing, R&D, trading, sports, tourism. When complete this special economic zone is expected to cover an area of 68 square kilometres, and it already includes Shanghai's Formula One circuit. Auto City has recently launched its RMB 250 million “entrepreneurs park” project to encourage new enterprises, and the park is already under construction.

RightSite Listing: http://rightsite.asia/en/industrial-zone/shanghai-international-autocity

Shanghai International Automobile City Auto Parts Industrial Zone

About 80 percent of enterprises in Shanghai International Automobile City Auto Parts Industrial Zone specialise in auto component manufacturing, covering nearly all the elements of vehicle production, from small screws to critical parts such as engines and body panels. The zone, formerly known as Shanghai Volkwagen Industrial Zone, was established in 1998 as a municipal-level industrial zone and covers a total area of 8 square kilometres. The Auto Parts Industrial Zone currently hosts over 280 enterprises including fourteen Fortune 500 companies such as Volkswagen, Delphi, TRW, Arcelor, Magna, and Visteon.

RightSite Listing: http://rightsite.asia/en/industrial-zone/shanghai-international-automobile-city-auto-parts-industrial-zone

Jiading Industrial Zone

Jiading Industrial Zone is a municipal-level industrial park belonging to the Shanghai government which supports both auto-related enterprises and other key industrial sectors. Leading industries in the zone include automotive parts and components manufacturing, opto-electronics production, precision machinery manufacturing, and new materials. So far more than 400 enterprises have been established in the zone, totaling more than US$10 billion in investment. Major investors include DuPont, International Paper Group, BMW, Fiat Group, Sweden Sandvik, and Zapallo.

Jiading Industrial Zone occupies an area of over 78 square kilometres in northwest Shanghai and is situated to the east of Shanghai International Automobile City and Kunshan, and to the west of Baoshan district. The zone is divided into a north sector and a south sector. The south sector was established in October 1992 and has an area of 24.8 square kilometres. The north sector was established in January 2003 and has become the zone's advanced manufacturing base.

RightSite Listing: http://rightsite.asia/en/industrial-zone/shanghai-jiading-industrial-zone

Shanghai Anting Industrial Zone

Shanghai Anting Industrial Zone is located in the northwest suburbs of Shanghai and occupies a total area of 26.7 square kilometers. The zone is 32 km from the centre of Shanghai and 25 km from Hongqiao International Airport. To date the zone has received investors from more than ten nations, including the US, Germany, Japan, Korea, Singapore, Thailand, Hong Kong, Macao, and Taiwan. Among these investors are many famous international corporations such as General Motors, Ford, and Japan's Sumitomo. Anting Industrial Zone focuses on automobile fittings, scientific instruments, medical apparatus production, chemical development and building materials.

RightSite Listing:http://rightsite.asia/en/industrial-zone/shanghai-anting-industrial-zone

Shanghai Jiading High-Tech Park

Located in Jiading Industrial Zone, Shanghai Jiading Hi-Tech Park was approved by the State Council as one of the first national level business incubators for returned overseas students. The planned area of the park is 2 square kilometres, of which 1.6 square kilometres has already been developed. The High-Tech park now offers 10000 sqm of business incubator facilities and 20000 sqm of space to host businesses established by returning entrepreneurs. Enterprises in the park own more than 100 invention patents and among them 18 are recognized as high and new technology enterprises by Shanghai's High and New Technological Office.

RightSite Listing:http://rightsite.asia/en/industrial-zone/shanghai-jiading-high-tech-park