1. Introduction
The economic development process of various countries in the world shows that vehicle ownership gradually increases with the development of economy, especially GDP per capita [
1]. Although the automobile manufacturing industry increased rapidly in China, automobile maintenance industry less developed compared with developed countries and has not received enough attention [
2]. The auto care industry is developing quickly in the United States in recent years. According to the data of Auto Care Association, the number of people employed in the auto care industry is 4.6 million, and the number of automobiles in operation is 278.6 million in early 2018, and the average annual sales value of auto care industry is now 381 billion. Chain operation mode, which has been developed rapidly in 30 years, was adopted in automobile after-sales service companies in the United States [
3]. The supply chain not only includes the automobile manufacturer, but also the after-sales service market of auto parts supply and an integrated maintenance service provider [
4]. This pattern not only makes the price of service more transparent, but also can integrate the auto parts resources of each brand and break the vertical monopoly [
5].
The situation of auto care is less encouraging in China. According to the China Automotive Aftermarket Blue Book (2013–2017) [
6], the average annual growth rate of China’s automotive aftermarket will exceed 30% in the future, and the market size is expected to exceed one trillion Yuan after 2018. According to the news of research and markets [
7], Chinese automotive aftermarket revenue is expected to record a compound annual growth rate of 7.7%, increasing from
$290.44 billion in 2017 to
$523.80 billion in 2025. During this period, the vehicles in operation for Chinese passenger vehicles are expected to grow from 185 million units to 401.7 million units. However, the development of automotive aftermarket is not sufficient to satisfy the increasing demand for automobile maintenance service in China. 4S stores (store for automobile sale, spare parts, service, and survey) is the leading form of after-sales service market in China [
8], and it needs a large investment to develop well. However, many of them with limited sales in the market are unable to cover their costs with intense competition and the gradual increase of investment [
6]. The development of domestic automobile maintenance enterprises in the initial stage will also be impacted by the external competitive environment because foreign enterprises bring more new technologies and new business models when they enter the market.
The ignorance of maintenance and service will have a negative impact on the automobile industry, which is not conducive to the sustainable development of the automobile industry. Firstly, the quality and development of auto maintenance industry will affect customer loyalty, which has been paid attention by the American automobile industry [
9,
10]. There are a large number of single stores and brand chains providing high-quality maintenance and customer service in the United States, and automobile service is insurance of financial and strategic advantages to help the company survive in this highly competitive industry [
11,
12]. Secondly, from the perspective of market sustainability, automobile maintenance will satisfy and promote the development of new kinds of vehicles. The market share of shared vehicles, electric vehicles and autonomous driving is increasing, and maintenance process of these kinds of vehicles is different with the conventional ones, for example, the annual maintenance cost of vehicles will increase as the annual mileage of shared cars increases. In addition, customers’ expectations and requirements on the automotive maintenance industry are also constantly rising with the development of economy, science and technology. So it is necessary for the automotive service industry to constantly improve its development mode and introduce new technologies, which presents challenges and opportunities for the whole industry. Thirdly, lack of attention to maintenance will make China’s maintenance industry lag behind in the Internet era. Nowadays, the popularization of the internet brought business opportunities for shopping and O2O (Online to Offline) service industry [
13,
14], and the automobile maintenance industry should also grasp the opportunities of the internet era and realize the transition of traditional industries. Finally, from the perspective of sustainable regional growth, the diversity of aftermarket growth in different regions reflects the market maturity to a large extent. The growth rate of emerging markets will exceed that of mature markets, and the rapid growth of China’s vehicle ownership will drive the share of Asia in the global aftermarket. According to the experience of North American and European markets, the more developed the post-market is, the higher the degree of integration in the transaction level of the industry is. Therefore, it is of great significance to understand the reasons of the slow development of the automobile maintenance industry in China and to make the automobile maintenance and automobile manufacturing industry develop and integrate in a balanced way. What’s more, automobile maintenance industry is an important part of the service industry, which is critical to national competitiveness and industrial structure [
15,
16]. The appropriate industrial structure adjustment will promote economic growth because of the “structure bonus” brought by the movement of production factors in different sectors [
17,
18], especially for developing countries [
19,
20]. Although it’s right to develop the automobile manufacturing industry more than the automobile maintenance industry in the initial phase of the development of the automotive industry, China should pay more attention to the balanced development of the two industries after passing this first phase.
As an important part of the service industry, there are some reasons why China’s automobile maintenance industry has not developed enough. Firstly, the imperfect investment and financing environment lead to the fact that most maintenance firms lack external financial support and the investment is far away from enough for development. Secondly, China is still in early stage of vehicle ownership development process, and the ratio of vehicle ownership per thousand people is only 172 according to the data of World Road Statistics dataset (WRS) [
21]. This number is far away from saturation level, 807, according to Dargay and Sommer [
22], and there is still a lot of space for the automobile industry to develop. Thirdly, some researchers believe customer recognition is the most serious barrier at present in the external environment [
9,
10]. Most of China’s automobile maintenance businesses do not pay sufficient attention to information resources, and they have not yet formed a unique business model that is closely connected with the market [
6]. What’s more, some market factors that affect industrial structures, such as the change of demand, technology improvement, endowment and trade [
23,
24,
25,
26], can affect the automobile maintenance industry as well. According to the theory of development economics, industrial structure changes with economic development; however, the industrial structure varies in countries that share similar development stages. Although the economy grows rapidly, industry accounts for the largest share of GDP for years until 2015 in China, and the ratio of the service industry is still far away from that of developed countries, even some developing countries. According to the data of Statistical Yearbook of the World [
27], service sector accounts 70.9% on average all over the world, 74.3% in the high-income countries in 2010, and 55.6% in middle income countries, 55.5% in low income countries, while, it is only 44.6% in China. So, are there any other reasons that can explain these facts?
Since the marketization degree in China is not very high, and the government plays a great role in the economy, we think that government intervention is another important factor that can affect industry structure in China. Some researchers proposed that in early stage of economic development, industrial policies may accelerate the industrial structural change and improve resource allocation [
28,
29]. It is also found that the industrial policy can enhance competition among enterprises and promote the growth of enterprises [
30]. Local governments are important participants in promoting China’s economic development in the process of China’s industrial transformation. Therefore, in addition to the natural evolution of market behavior, the industrial structure is also subject to government intervention. We try to explain the problem from the perspective of government incentives and provide a logical framework for analyzing the industrial structure. Some researchers proposed incentives for self-interest and for electoral success in public choice theory [
31,
32]. Some researchers believe that local governments have fiscal revenues, GDP and promotion incentives under the centralized political and decentralized fiscal institute in China [
33]. Thus, many stimulus measures are adopted to boost economies [
34,
35] and then affected industrial structure [
36]. However, the mechanism of the process has not been systematically studied because existing researches pay more attention to the evaluation of policy effects. Therefore, we try to explain the mechanism of the impact of the government incentives on automobile industrial structure.
The government can use different kinds of interventions, which take many forms, including explicit subsidies and bonus, such as research and development subsidies [
37,
38,
39], but more of them are invisible, such as granting loan guarantees and loan preferences to enterprises to reduce their capital costs and financing constraints [
40]. Another example is effective tax rates, which can be affected by tax preference and taxation intensity so that a firm’s tax burden can be affected as well, although the tax rate is legal [
41,
42]. This kind of intervention changes with government incentives and varies in different enterprises.
We found both theoretically and empirically that the governments’ GDP incentive induced the biased intervention policy on automobile manufacturing and maintenance industries. In the theoretical model, the government’s GDP incentive leads to the more patience of the government than the consumer. The government doesn’t care about current consumption, but care about whether enough investment and capital can be generated to promote economic growth. Thus, the enterprises of different industries that have different contributions to investment and capital accumulation will inevitably be subject to different government intervention. More preferential subsidies are given to automobile manufacturing firm whose production serve as intermediate goods and capital. Moreover, the greater the government’s GDP incentive, the more biased the intervention will be. Then we test the differential impacts of GDP incentive on tax avoidance of the two kinds of firms empirically. The empirical results show that the government GDP incentive induced more preferential treatment to automobile manufacturing enterprises, and thus, increased their tax evasion compared with automobile maintenance firms.
Our study makes several contributions to the existing literature. First, we explained why China’s automobile manufacturing and maintenance industry is unbalanced from the perspective of government intervention and incentives. Some researchers analyzed government intervention instruments and their effects on economic variables, such as resource misallocation, total factor productivity and costs [
43,
44], but little literature involves the motivation of government policies. The literature on optimal policy [
30,
31,
32], which adds government policy in the general equilibrium model are more about the fiscal policy, monetary policy or tax policy on consumption or capital; little is about industrial policy in different sectors. Therefore, we investigated the impact of government incentive on industrial policy and industry structure, and provide a framework to study the interaction of government and the market, which also applies to other countries. Second, the growth rate of GDP is converging from the perspective of the development economics [
45], and since automobile industry has always been a pillar industry and in China, how to promote the automobile industry to develop in a balanced way is crucial to the sustainable development of the automobile industry and even the whole economy in the future. Although some researchers focus on sustainable district development [
46], balanced development of industry structure is also important. Finally, the research about China’s automobile industry mainly focus on the manufacturing industry currently, such as the prediction of vehicle ownership [
1,
47,
48], study on life cycle cost of electric vehicle [
49,
50,
51,
52], the bottleneck in the development of electric vehicles [
53,
54,
55], and research on the development and market scale of ride-hailing [
56,
57]. There is little literature on automobile maintenance industry; however, we need to fully understand the development of the automobile industry, including the maintenance industry to promote sustainable development.
The remainder of the paper is organized as follows.
Section 2 presents the theoretical model and the development of the empirical hypothesis.
Section 3 introduces the empirical model, variable definitions and data resources.
Section 4 provides the empirical evidence.
Section 5 provides several robustness checks to make sure our results are robust.
Section 5 concludes and presents policy implications.
6. Conclusions
The automobile manufacturing industry developed rapidly in China; however, the automobile maintenance industry less developed. In addition to the factors from the demand and supply side in the market, we tried to explain this fact from the perspective of government incentive and intervention in China. Firstly, we established a two-sector model with government incentives and government intervention, and then we analyzed the game between the government and market, and the optimal subsidy policy under the government’s GDP incentive is obtained. The results of the theoretical model show that the government gives more preferential policies to automobile manufacturing firms compare to firms in automobile maintenance industries under short term GDP incentive. That’s why the development of the automobile manufacturing and maintenance industry is unbalanced. Secondly, we use three indicators to represent the government GDP incentive under fiscal decentralization and test the differential impact of GDP incentive on tax avoidance of the two kinds of firms empirically. The empirical results show that the GDP incentive of the government caused by fiscal decentralization induced more preferential treatment to automobile manufacturing enterprises, and thus, increase their tax evasion degree, which proves the mechanism of government incentive in our theoretical model.
Understanding the incentive and implementation of industrial policy can help us understand the evolution mechanism of China’s automobile industrial policy and automobile industrial structure better. Well-developed automobile maintenance industrial can improve customer loyalty that can help the automobile manufacture company survive in this highly competitive industry; with the increase of new kinds of vehicles and customer’s requirements, it is necessary for the automotive service industry to constantly improve its development mode and introduce new technologies; and the balanced growth of automobile manufacturing and maintenance industry is one of the driving forces for market sustainability of automobile industry and sustainable regional growth. Based on these facts, we propose that, in an initial phase of the development of the automotive industry, the automobile manufacturing industry, which is upstream industry, should be encouraged to develop more than automobile maintenance industry, which is downstream industry, because the latter would have no reason to exist if the upstream industries did not exist. However, China may pay more attention to rebalancing the weight of the two industries after passing this first phase as economic develops. In this new phase, some measures,, such as reducing the short term GDP incentive of local government and making the performance evaluation more diversified, will lead to better policy that promotes the transformation and upgrading of the whole automobile industrial structure, even the whole industrial structure optimization and economic growth.