In the twenty-first century, the role that Foreign Direct Investment (FDI) plays in the Chinese automobile industry is getting more and more important. The rapid development of the Chinese automobile industry is mainly reflected by the rapid increasing exports of automobile and the growing car ownership. It can be said that the automobile industry is growing up as one of the pillars of the Chinese economy. This thesis has two purposes which are 1) identifying the current situation of FDI in the Chinese automobile industry and 2) analyzing the impacts of FDI has on the Chinese automobile industry and figure out the way it affects. From the quantitative point of view, FDI increased a lot especially after China joined WTO and reached the peak in 2005. From the source point of view, it also changed a lot; HongKong and Korea take more important position than before. Furthermore, FDI are more diversified which not only more investment is made in finished car manufacture industry, but also in the factories that are processing vehicle parts. It also explains the impacts that FDI has on the automobile industry from seven different angles. It shows that FDI does have some positive impacts on the Chinese automotive industry, especially on the enlargement of scale, market competition and promotion of technology, service industry and human resources. However, there still remained some problems because MNCs do not want to potentially help host countries for development.