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I. Why is China’s Automobile Industry Not Competitive? Of the many industries in China, auto industry does not develop fast and is not competitive. There are many reasons that lead to this situation. But the main reason is that it has not experienced a complete process of market opening and competition. This will be clearer after being compared with the development of other industries. Since the reform and opening-up, China has seen some fast-developing industries, especially the household electrical appliance industry. In spite of many problems, they are generally healthy and dynamic, and outperform other industries in product upgrading, technological progress, quality, service and guaranteeing consumers’ rights. They will be most competitive even after China’s entry into WTO. The sound development of these industries should be mostly attributed to the fact that they have experienced a process of market opening and intensive competition, thus solving the three key problems crucial to the development of an industry: First, the “discovery” of advantageous enterprises. The advantageous enterprises are not born by nature, self-styled or designated by the government. They must experience a process of being “screened” through competition before being “discovered”. Any individuals or organizations including the governments cannot foretell which enterprises are advantageous enterprises. Today’s advanced enterprises were once not sure whether they would surely succeed today. This is determined by the competition on the market. Second, the learning and training of enterprises’ competitiveness. “Competitiveness can only be acquired through competition” is a basic tenet. An enterprise’s marketing, management, R&D and financing abilities can only be acquired and accumulated from the twists and turns in the course of competition, and consequently, the organization, mechanism and system of an enterprise can be gradually improved as well. The scale and competitiveness of an enterprise are not only a technical concept. More importantly, it is related to system and mechanism. Third, the exploration and use of market potentials. Competition helps enterprises reduce costs and prices, raise product quality, improve services, promote new products and turn great potential need to realistic demand. Automobile and electrical appliance industries, both belonging to processing, assembling and manufacturing industries, are similar in terms of technological and market structure, for instance, they both have a high demand for scale economy and develop into highly industrial concentration as a result of competition. However, auto industry has not shown the active development momentum and competitiveness like household electrical appliance industry. This is largely because the former has not experienced a full process of market opening and competition. From the view of policy, we should, in particular, reflect on and examine the strict policy on market access and the restrictive consumption policy. Due to strict limitation on marke