【正文】 panies.THE NEED FOR AN ASSETLIGHT STRATEGYCompeting in China involves big money: a capital investment of $ billion for GM 抯 Shanghai plant alone, for example, as well as $ billion for the two facilities of VW 抯 joint ventures. Thanks to protection of the industry, this investment has largely paid off: with tariffs ranging from 80 to 100 percent, models bear price tags up to 150 percent higher than those in the United States and Europe, allowing successful joint ventures in China to enjoy levels of profitability not seen anywhere else. For each Honda Accord, to give one example, Honda 抯 Guangzhou joint venture makes over $3,000 in profit, three times the profit for a parable US model.But greater petition is already squeezing those margins. Even with technology upgrades, the list price of the standard Santana fell by 25 percent, to 115,000 ren min bi ($13,850), in the five years up to October 2022. As tariffs fall, so will prices. Meanwhile, sales and marketing costs will rise in a more petitive market, and more frequent model upgrades mean that heavier investment will constantly be needed to retool assembly plants.This scenario—global panies stuck on a directinvestment treadmill as financial returns bee more uncertain—has been played out in much of the world. China, which almost alone among new markets has its own very large auto industry, offers a point of departure. For the global carmakers, pursuing an assetlight strategy would involve contracting out the manufacture of vehicles to Chineseowned production panies. If they can meet this demand for production, as 5 / 10Chinese firms have done in other industries, their global partners would reap a number of advantages.First, the global carmakers would retain the continuing advantages of Chinese production: the ability to overe whatever nontariff barriers to imports (such as quotas and licensing restrictions) survive China 抯 entry into the WTO, as well as cheaper labor, reduced freight, and localgovernment concessions. And the global panies would gain these advantages with lower financial risk than they would bear if they tried to produce cars themselves.Second, there are the direct benefits of contracting out. Global automakers in China could employ up to 40 percent less capital, which promises a corresponding 60 percent increase in their return on capital. Alternatively, contracting out would free up funds that could be concentrated on the highervalue skills of product development and design, and sales and marketing. It would also enable global panies to pursue those parts of China 抯 embryonic aftersales market—retail financing, leasing, servicing, repairs, spare parts, and rentals—open to them after China 抯 WTO entry. In developed markets, these activities generate 57 percent of the industry 抯 profits, yet there are few established players in China (Exhibit 4).Finally, indirect benefits would flow to the global carmakers from the increased specialization and scale of the Chinese contractors, whose chief advantage is that they can develop and use their expensive technology and capacity to serve more than one customer. Given the size and automation level of the relevant assembly plants in China, doubling a plant 抯 output would translate into a 5 percent savings in unit costs. Ultimately, global brands may draw on this Chinese resource to supply other markets with goodquality, petitively priced cars, which would in turn build the scale of Chinese factories to an optimal costreducing level.6 / 10In many ways, this assetlight strategy would mimic the success some global automakers have had with recent sales and distribution initiatives. Since mid1999, dealers of Audi, GM, and Honda cars have invested more than $250 million in facilities and other infrastructure in China. Audi exemplified the successful implementation of this strategy when it became heavily involved in developing the sales and management skills of Chinese firms, but without investing capital in the process. The pany took more than a year to select its 32 dealers, seeking entrepreneurs from the auto industry and elsewhere who were market oriented, ambitious, a