Faced with the prospect of stagnant global sales over the next five years, the world’s biggest carmakers are jockeying for a share of one of the few buoyant national markets. China’s domestic car sales, growing at more than 10 percent annually, will probably account for 15 percent of global growth over the next five years. So far, global automakers have pursued successful joint-venture strategies by investing heavily in assembly plants operated by Chinese partners. But as competition in China heats up, a new tack may be needed in the quest for profitable market share.

An asset-light strategy would have the major auto companies concentrate on what they do best—developing products and brands—while contracting out not just component supply but also the whole assembly process to Chinese automakers that can capitalize on competitive cost structures. Although scaling back capital investment in such a healthy market might seem bold, outsourcing manufacturing is neither uncommon in other industries nor entirely unprecedented in this one. Moreover, the nature of the Chinese auto industry and market makes outsourcing particularly attractive. Outsourcing might also help Chinese automakers take their first steps to becoming a global manufacturing resource. But if the strategy is to work, global...