Empirical Analysis Of The Technical Efficiency Of Chinese Auto Producers Based On The Stochastic Frontier Analysis Model

Technical Efficiency is used to measure the producers'ability to get the maximum output (or minimum input cost) under the existing technical level, in the same investment scale, the same investment proportion and same market price. It indicates the extent how the actual production activity is close to the production frontier. It has a strong relationship with the production frontier. The production frontier means to use all possible combinations of input to achieve the maximum output. Therefore, the production frontier can represent the "best operation" technique. The technical efficiency is used to measure the distance between the actual output and the maximum output under certain input conditions. The bigger the distance is, the lower the efficiency is. It can be used in the investigation and evaluation of the performance of various enterprise, industries, and also the economic growth of a region or a country.It uses a panel data of 10 representative auto producers in China over the period 2000-2009, and applies the stochastic frontier production function model on Cobb-Douglas production function to investigate the efficiency of Chinese auto manufacturing.The empirical results suggest, overall, the technical efficiency of China's automobile manufacturing enterprise is not high. The average of the ten years is 0.74. During 2000 to 2009, China automobile manufacturing technology efficiency showed fluctuating trends. It was high in 2003 and 2004, dropped significantly in 2005 and 2006, rebounded in 2007, dropped to the lowest in 2008 because of the financial crisis, and finally received a rapid growth in 2009.Among the different product categories of producers, bus, heavy truck producers achieved the highest technology efficiency, followed by passenger car producers, light truck, while agricultural vehicle producers were lowest. Among the different locations of producers, producers in the eastern region achieved higher technical efficiency than those in central and western.When it came to the factors affecting the technical efficiency, it analyze from two aspects, the operation and governance. From the operation aspect, high inventory reduced the level of technical efficiency; too many R&D staffs did not make improvements in efficiency levels; producers who wants to achieve economies of scale and to expand car production led to reduction in the level of technical efficiency; strengthening relationship with upstream suppliers and downstream customer, can improve the level of technical efficiency. From the governance aspect, the proportion of state-owned shares, the proportion of the largest shareholder's shares, the size of the board, and the dual working syncretism have significant negative correlation with the technical efficiency. Meanwhile, the proportion of the tradable shares and high pay to the executives have positive correlation with the technical efficiency. In addition, it gives several policy suggestions based on the technical efficiency analysis of the China automobile manufacturing enterprises.