THE PHOENIX THE PHOEN
EDITOR’ S NOTE
Understanding Chinese auto subsidies
The emerging automotive industry success of successive Asian regions has generated extensive analysis and study.
American and European automakers deeply studied Japan’ s lean production systems in the late 1980s. Then followed the Korean success, with the country’ s powerful consumer electronics and Smartphone industry helping elevate the in-car technology offerings of Korean vehicles.
Now it’ s the time of China. The elements that made Japan and Korea such successful automotive development and assembly zones are all present in China, but on an unprecedented scale. The Chinese domestic consumer electronics industry is enormous, which gives Chinese automotive OEMs access to unrivalled quality, diversity and scale in in-car touchscreens and electronics.
With each Asian automotive success, the question of protectionism, tariffs, and subsidies becomes a point of discussion. And with China, global automotive industry analysts and strategists at legacy OEMs are desperately trying to understand the depth of subsidy support for Chinese car companies and how to counter it.
The world’ s largest auto markets are protective of their market access and domestic auto industries, with good reason. It’ s why American auto industry policy gives foreign automakers such lucrative land, zoning, and tax breaks to build in the Southern states. But keeps steep tariffs against imports in place. in the traditional South, outside the traditional hub of North American automaking, Detroit and greater Michigan.
In China, the primary forms of subsidy support are land access and construction support. Chinese provincial governments and city mayors have a policy goal of creating employment. Luring automakers with free land and rapid construction project support are their tools to secure automotive industry development and the primary and downstream jobs that come with it.
Subsidising the Chinese auto industry with land and buildings is a smart strategy for local policymakers in Chinese provinces and cities. If the auto industry venture fails, they haven’ t sunk investment capital into the projects and have to write off bad loans. The land and buildings that have been‘ gifted’ can easily be repurposed for other industries by moving failed automakers out and moving in new, more entrepreneurial automakers, or other industries.
Chinese cities and industrial zones have one purpose: employment. It is an excellent model that has created tremendous success. For the South African manufacturing industry, anchored by the automotive sector, the Chinese incentive model is worth emulating. South African planners and policymakers in special economic zones should take note.
Lance
Jobs are everything
China’ s automotive industry is not that dissimilar to America’ s. Since the late 1990s, policymakers in the American South, desperate for manufacturing employment, have given lucrative subsidies to European and Japanese car companies.
BMW, Honda, Mercedes-Benz, Toyota, and Volvo have built extensive automotive industry capacity
JUNE 2026 1 WORDS IN ACTION