Liu Yu thought he was making a pretty generous offer: a $1 million subsidy to entrepreneurs willing to build a dealership for BAIC Motor’s Beijing car brand. Although that covers three-fourths of the cost of each outlet, the BAIC deputy sales chief has struggled to recruit the 150 dealer candidates he wants by yearend. In contrast, BAIC’s state-run parent company has no trouble finding dealers for its joint ventures with Mercedes-Benz maker Daimler (DAI) and Hyundai Motor—even without subsidies. “China’s indigenous cars are the lowest in the food chain,” says Liu. “Many consumers are biased against them.”
Three decades after China began requiring foreign automakers to form ventures with domestic manufacturers to build cars in the country, the strategy appears to be failing in one of its key goals. While the policy has attracted investment and created millions of jobs, it’s done little to help China build strong car brands of its own.
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