Government Intervention and Automobile Industry Structure: Theory and Evidence from China

Abstract

The development of the automobile maintenance industry less developed to satisfy the increasing demand for automobile maintenance service as the automobile manufacturing industry increased rapidly in China. This is not conducive to the sustainable development of the automobile industry. Besides the factors of market behavior that can affect the automobile industry structure, like an investment, operation structure or economic development stage, the structure is also influenced by government intervention. We investigated the unbalanced development of automobile structure from the perspective of government incentives, and provide a logical framework for analyzing the industrial policies on the automobile industry. We first established a two-sector theoretical model with government intervention, and we found that the governments’ GDP incentive induced the biased intervention policy. More preferential policies are given to enterprises of automobile manufacturing industries as they contribute more to intermediate goods and capital. The greater the government’s GDP incentive, the more biased the intervention will be. Then we test the differential impact of GDP incentive on tax avoidance of the two kinds of firms empirically. The empirical results show that GDP incentive of the government induced more preferential treatment to automobile manufacturing enterprises, and thus, increased their tax avoidance. This phenomenon is more significant in SOEs, larger firms and firms belong to local governments. Understanding the incentive and implementation of industrial policy can help us know the evolution of automobile industrial structure better, and then improve industrial policy better to promote the transformation and upgrading of automobile industrial structure.

The government as an inducer of the automotive industry: propositions for Brazilian automotive sector

“…As seen with the compulsory scrapping policy, which creates cycles of steady growth in the Chinese automotive industry, in addition to normal market behavior factors that can affect the structure of the auto industry, such as investment level, operating structure, or stage of economic development. , this structure is also influenced by direct government interventions (Ma et al, 2019). According to the authors, the Chinese government pays special attention to companies in the automobile manufacturing industries, as they contribute more to intermediate goods and capital.…”

Impact of Key Marketing Tools on Global Car Market Development

“…In the process of studying the marketing activities of enterprises in the car market and the prospects for their effective operation, it is necessary to take into account the globalization processes [1][2], restrictions on access to natural resources and increase of their value [3][4], digitalization of society [5][6], intensification of competition [7][8] and government regulation [9][10][11], which are key factors influencing development of the automotive industry in the world. Besides that, since 2020 the world economy has largely been affected by the COVID-19 crisis [12] that has a great impact on the consumer's behavior worldwide; in general and on the global car market, in particular.…”