Article at a glance:

A tune-up for China's auto industry

With China's domestic automobile market projected to break into the world's top three by the end of the decade, global carmakers should rethink their strategies in the Chinese market. Since most global automakers have had large investments in that country only since 1999, it may seem odd to advocate scaling them back now. Yet an asset-light strategy in China would allow carmakers to concentrate on what they do best—developing products and brands—while contracting out the full production of autos, and not just components, to Chinese manufacturers.

The take-away

Global carmakers can not only manage their costs and capital better by contracting out the manufacture of whole vehicles to Chinese companies but also work their way toward an even more valuable endgame: building Chinese automakers into a global manufacturing resource.