Since it is impossible to discuss the diversity of Chinese economy and draw the overall picture of Chinese auto industry, this paper will focus on the character of China's car market, system of car manufacturing, and outline of localization policies. Based on the field surveys, the paper will compare and examine the differences in their localization strategies and production systems between Shanghai-VW and Tianjin Daihatsu. By doing so, we intend to establish a base for further research and survey on the future Chinese auto industry.Working Paper for the MIT 1996 IMVP Sponsors Meeting Sao Paulo, Brazil 9-12 June 1996