Shanghai VW: Origins of the Modern Supply Network

Abstract

A compelling case can be made that domestic (“endogenous”) factors, specifically local companies and local institutions, have been the main factors in sustaining China’s automotive modernization. Thun argues that local Chinese parts companies played the key role in building up the local supplier capacity to feed the final assemblers, and that the Shanghai municipal government provided coordination and institutional support for this process, enabling local companies to capitalize on the opportunities presented by the growth of the Shanghai Volkswagen (SVW) JV.¹ The Shanghai municipal authorities deserve a large measure of credit for building the foundations of a modern local supply network by reacting swiftly to warnings from central authorities that SVW would be shut down if localization did not increase to 40 percent in a short amount of time.² This book builds on Thun’s findings regarding the contributions of local institutions and actors, but suggests that it would be misleading also not to give due attention to the crucial role of the central government and external (“exogenous”) forces in spurring the modernization of China’s automotive industry.