Analysis On The Competitiveness Of Chinese Alternative Energy Vehicle Industry Based Upon The Diamond Model

Environmental and energy problem are common challenges to the entire world. In recent years, China’s pollution problem is so serious, that menacing haze swept across whole China in2013. Air quality report released by the Ministry of Environmental Protection showed that the pollution index of three cities of the74major cities reached an annual average concentration of secondary standards. In addition, energy security problems plagued China. From2009, China’s the index of the dependence of foreign oil had crossed the cordon of50%, and in2013China’s index of dependence on foreign oil reached58%, which means that oil crisis may make a significant adverse impact on China’s auto industry and economy. Recently, China’s own brand vehicle sales declined continuously. Data shows that as of August2014, sales of our own brand of conventional cars have dropped12consecutive months. Therefore, standing business point of view, in order to reshape our own brand, we need a breakthrough to get out of this predicament. The development of alternative energy vehicles could not only solve the problem of energy and the environment but also make our own brand get out of the predicament. Comparison of China’s alternative energy and foreign can help us to understand our advantages and to make up our deficiencies.Firstly, this article analyses the current situation of the development of China’s alternative energy vehicle based on five factors of diamond model, namely production factor conditions, demand conditions, related industries and pillar industries, corporate strategy structure and competitive conditions, and government. In the production factor conditions, China has rich resources of the primary production factor, but in advanced production factor we are relatively lack of technical manpower, infrastructure and technical resources which need further investment. In terms of demand conditions, because of large population bringing great demand for cars, China has a vast market prospect of alternative energy vehicle. In recent years, China’s automobile production and sales maintained a rapid growth:from per capita ownership perspective, in2013China’s auto ownership per capita is only0.93sets, which compared with world average per capita level of1.4sets is low. But now the enthusiasm of the private purchase of alternative energy vehicles is not high, and how to transform this potential demand to the real demand is a problem to be solved. In related industries and pillar industries, alternative energy vehicle industry has a long industrial chain. The upstream industry chain composes battery industry, motor industry and electric control industry; the downstream industry chain is constituted by energy supply and infrastructure services companies. Battery industry especially the power battery industry of alternative energy vehicle has a technical barrier, so the market is relatively concentrated, and in order to access the key technologies companies require to invest a lot of R&D funding. China has become the largest producer of motor and electronic control, but China’s motor belongs to the low-end production, whose quality cannot be compared with foreign motor and cannot meet the needs of alternative energy automotive motor. In corporate strategy, structure and competition situation, along with the promotion of alternative energy vehicles, the upsurge of new energy vehicles is appearing, and more and more car companies produce new energy vehicles. According to the survey,80%of China’s auto companies have the intention to develop alternative energy vehicle. Our own brand of cars on the sensory quality, and performance models are in relatively low-end products in the industry position, brand image but also to the "low quality", developing its own brand of new energy vehicles helps to improve China’s own brand vehicles. Our own brand of cars" sensory quality, performance and models are low-end products in the industry position, whose brand image is "low-quality and low-price". Enterprises can improve the brand image through seizing the opportunity to develop alternative energy automobile. In the policy, Chinese government implemented various policies to promote the development of alternative energy vehicles, through which leap from scratch was achieved.Next, the paper will make a competitiveness of China’s alternative energy automotive industry into nationwide ones based on the five elements of the diamond model. In terms of factor conditions, this paper selected technical resources as the representation to make a comprehensive analysis. On the mast of the core technologies and R&D investment, China’s at a disadvantage, in addition to several aspects, the core technology has been developed to master. Lack of R&D investment and the shortage of technical resources are the main problem of China. Our R&D investment to sales ratio is averagely2%lower than foreign enterprises. In demand conditions, this paper selects sales compared with other countries. The results showed that from2011the demand of alternative energy vehicles in China has maintained a steady growth, and sales during the first half of this year have exceeded the sales of last year especially the Plug-in hybrid is growing rapidly. But compared with the United States and Japan, China’s scale of demand is obviously inadequate. In related industries and pillar industries, paper selectes the lithium-ion battery industry as the representation and makes a comparison with foreign industry. The advantage of large production number provides a guarantee of construction of complete lithium-ion battery industrial chain. But in the field of battery power, China’s market share is small relatively, and Korea, Japan, the United States lead in the world by virtue of a lithium-ion battery performance. In term of corporate strategy and competition structure, paper selects several typical enterprises to analyze. Enterprises of different countries have different characteristics. China’s BYD uses cost leadership strategy and differentiation strategy to dominate the market, while foreign auto companies seek the breakthrough of technologies in different basis of alternative energy. Compared with other countries,, China’s government policies put more financial resources to support the alternative energy automotive industry, and have achieved good results. However, from the point of view of the breadth of coverage our policies need to be widened.In the last part, the paper combines with the US and Japan experience to provide suggestion of the development of alternative energy automotive industry. The development of alternative energy vehicle in the United States began from the new generation of cars cooperation programme implemented by the Clinton administration in1993. Then after three governments’ promotion, America occupies a certain advantage now. First of all, the US has a culture of innovation. Whether in new products and new technology or in the business model, the United States translates the word "innovative" very well. This is one of the most important determinacy of achieving the international competitiveness. American companies invest a lot of money in the automotive R&D, and actively seek business model innovation. The emergence of many new energy automotive service companies such Tesla’s is the best example. On the other hand, the United States also has a mature consumer groups to support the rapid development of alternative energy vehicles. Japan is a country which is lack of natural resources, so the development of alternative energy vehicles started deployment early. The world’s first hybrid vehicle and pure electric vehicle are manufactured by Japanese car companies. Japan in the development of new energy vehicles has two major advantages, namely the advantages of battery technology and industry alliances. In the battery technology, Sony was the first company used the lithium batteries for commercial production, until now Japan has the most advanced battery production technology. The achievement of Japanese advanced battery technology is inseparable from the vertical and horizontal industry alliances. Japanese car companies cooperate with all kinds of domestic and foreign auto companies to establish a large number of alliances with different sizes. And they are managed by Japan’s New Energy Development Organization (NEDO) to make sure operational efficiency. Finally, I propose how to promote the competitiveness of China’s new energy vehicles.