Abstract: Fragmentation of production make China‘ s automobile industry scarce of efficiency. Based on the revised model of Tcha and Kuriyama(2003),We think the reason is that China‘ s automobile industry has some degree of monopoly under protection policy, which leads to the automobile industry without scale economy and the automobile firms without enough sensitivity to the price signal. The increase of China‘s automobile industry depends partly on the investment impulse. So we should use the opportunity of China‘s entering into WTO, cancel the tariff barriers and NTBS of automobile trade as soon as possible and promote the trade liberalization of China‘ s automobile industry. Thus, in order that China‘ s automobile industry can develop healthfully and quickly after entry into WTO, technology innovation has to bestrengthened and market openness, market competition, market sensitivity and scale economy need to be improved respectively at the same time.