Research On The Relationship Between Vertical Integration And Corporate Performance Of China’s Automobile Industry

The automobile industry, as a pillar industry of the national economy, is related to our sustained and coordinated development of the national economy as a whole, since the reform and opening up, after30years of development and growth, China’s automobile industry has been occupied a certain position in the world. In2011, China’s automobile industry production and sales ranked first in the world, China has become a veritable big but not powerful country in the world’s automobile industy.Vertical integration, the relationship between vertical integration and corporate performance has been a hot theorists analysis.This article analyses the motivation of vertical integration of automobile industry based on the theory of industrial organization, transaction cost theory, property rights theory, enterprise resource capability theory and describes the intrinsic link mechanism between vertical integration with enterprise performance in automobile industry from transaction cost savings, increased production and sales stability,promoting technological innovation, raising market concentration and industry barriers. There is consistently high degree of vertical integration in the automobile industry in China, mainly for the high parts of the vehicle manufacturer’s homemade rate. In recent years.with the global economic downturn, our entire automobile industry, especially small and medium-sized auto parts suppliers, is in a very difficult situation; small and medium-sized auto parts manufacturers in order to survive, without taking into account the quality of products, leading to the disorder competition in the parts industry, the quality of the auto parts and supply increasingly unstable; coupled with weak independent innovation capability of the automobile industry, lack of core parts technology, confusing vertical structure of the automotive industry chain,China’s compliance with its WTO commitments, release the limit of the lowest shares of foreign-invested enterprises in automobile industry,the automobile products market accelerate monopoly by foreign.The relationship between vehicle manufacturers and parts suppliers in the automobile industry is the development of disharmony. In recent years, more and more automobile companies for the considerations of assurance of the quality and stability of the parts supply, have self-built parts system or merger parts suppliers, trying to come through this vertical integration strategy to deal with risks, and improve business performance.From long-term perspective, however, whether the vertical integration of automobile companies and parts manufacturers in the automobile industry can really improve the performance of the automobile companies? This article collects20automobile listed companies in China operating data from2003to2011China take advantage of VAS index method estimates the index of the vertical integration of the automobile industry in China, found that China’s auto industry overall is downward trend in the extent of vertical integration, but the rate of decline is slow. A simple regression model China’s automobile industry vertical integration index and the performance of automobile companies and multiple regression model with two control variables of the degree of concentration of the automobile industry and vehicle size. The empirical model measure the performance of the enterprise from two aspects of corporate profitability and development capacity. Select the ROE indicators reflect the automobile companies earnings capacity, the ability of the main business profit growth rate targets for the development of the automobile companies. Two model results show that there is a significant negative correlation between the ROE and the main business profit growth rate and the degree of vertical integration of China’s automobile enterprises,in another way,show that the vertical integration in China’s automobile industry is negatively related to corporate performance. Automobile companies implementing a vertical integration strategy, will not only significantly reduce the profitability of the automobile companies, but is not conducive to the future growth of the enterprise. Therefore, in the long run, vertical separation is the optimal choice in the automobile industry. Trend of the automotive industry businessmen blowing vertical integration in recent years is a short-term behavior. The car manufacturer companies should stop self-built components system, further exit most production areas of components supply, reducing homemade ratio, stripping auxiliary industries...