Global & China Automotive Industry Report 2014-2018 Management System
GM, Ford, VW Dominate the automotive industry in China Why can t Chinese companies like SAIC, Dongfeng, Geely, and GAC Make Cars that people want to buy.
Guangzhou Automobile Group Co Ltd aka GAC Group, rolled into the North American International Auto Show in Detroit this January with three of his latest creations of a hybrid sedan with four-wheel drive, an all-electric SUV prototype, and a plug -In wide range concept car.
Well, saying GAC Group 2238 HKG rolled into the Detroit Auto Show is a bit exaggerated.
GAC sixth carmaker by sales last month in China, chose a space in the cavernous lobby of Cobo Hall, beyond the doors of the massive auto show itself the company put on a good show models women were airlifted from the mainland by hand on flutes crystal champagne and hors d colorful works, while auto journalists and business executives drive peering curiously under the hoods of the vehicles on display, is perceived in the Chinese domestic automotive market.
But it was impossible to ignore the obvious GAC perspective, as all Chinese automakers, is an outsider in the West None of his current crop of cars never touch American Blacktop, and it could be years before the Chinese car sells successfully in any developed market.
We must keep in mind that China is still a bit poorer than Japan was when he began to enter the US market, said Barry J Naughton, President Sokwanlok Chinese international business at the University of California San Diego it could be that this is just a step quite normal development, and we must recalibrate our expectations in China is so big and important and succeeded in so much - he just hasn t successful in this industry .
This is a strange situation for a country that in 2009 became the world's largest producer and consumer of passenger cars and light commercial vehicles in 2012, 19 to 27 million cars were manufactured in China, according to China Association of automakers or CAAM, up 4 3 to percent year over year in second place behind the Chinese is the United States when 10 3 million vehicles were manufactured.
For the first time, China's automakers - including most major Western brands - exported more than 1 million vehicles last year, against only 19,000 in 2001, while nearly 1 13 million cars produced abroad were imported into the country during the same period, an increase of 1 million the previous year, according to the Ministry of Industry and information technology.
Excluding commercial vehicles, Chinese consumers bought 15 5 million passenger cars and light trucks last year comparison, nearly 14 5 million cars were sold in the U S in 2012, according WardsAuto.
Despite a strong increase of 7 percent of Chinese auto sales last year, the domestic market share for Chinese brands continued to decrease, to 42 percent, a 0 4 percent decrease in previous year - and a sharp decline of just over 50 percent in 2010 according to CAAM estimates.
And while Chinese companies such as Shanghai-based SAIC Motor Corp Ltd SHA 600104 Wuhan and headquartered Dongfeng Motor Group Co Ltd. HKG 0489, the nation's two main carmakers excluding joint ventures with foreign companies, struggling to maintain their own Western multinationals such as General Motors Co NYSE GM, the best-selling in China the brand with 14 7 percent market share, and Volkswagen AG FRA vow, with 14 6 percent, have especially prospered thanks to agreements joint venture with the major domestic auto companies.
Chinese brands have suffered greatly at home due to quality problems and because foreign brands are perceived by the Chinese consumer to be of much higher quality, said Greg Anderson, political risk consultant for its Pacific Rim advisers based Los Angeles and author of How Foot Patrol China plans to dominate the global automotive industry.
Indeed, it's well-deserved perception When Brilliance China Automotive Holdings Ltd. HKG 1114, which has a joint venture with two Bayerische Motoren Werke AG FRA BMW and Toyota Motor Corp. TM NYSE, tried to export its BS6 sedan on the market European in 2007, the vehicle has won only one out of five stars for safety by the German automobile association Allgemeiner Deutscher Automobil-club, or ADAC, who claimed that the driver would have little chance of surviving a side collision.
Brilliance responded to these tests by redesigning the car, which added significantly to the cost, but that didn t help never fully recovered damaged the company's reputation - and in 2010, the company had avoided any immediate hope of selling on the western market.
Brilliance wasn t the only Chinese car to suffer from security issues In 2005, the X6 Landwind manufactured by Jiangling Motors Corp Ltd SHE 200550 also failed its crash test ADAC, as shown by this video on YouTube Similarly, Geely made by Zhejiang Geely holding Group and Chery Amulet made by Chery Automobile Co Ltd were also presented to poor results in the videos.
Indeed not sell in the West, Chinese automakers biggest customers are still on the underdeveloped markets last year, Algeria has been No. 1 importer of Chinese cars, and other major markets read like the kind of places where typical consumers wouldn t be able to afford high-quality imported machinery in Egypt, Iran, Iraq, and Russia were among them, and not a fully developed market entries in the list of 10 last year.
Brazil was the largest importer in 2011, until the government imposed stiff tariffs on vehicle imports to protect local manufacturers Now, some Chinese manufacturers looking to build factories there in the hope of take a piece of the lucrative market Chery automobile is building a facility of 400 million to Sao Paulo, to become the first Chinese automaker to South America and Anhui Jianghuai automobile of the Co Ltd SHA 600418 is also expected to break ground a factory in Brazil.
One of the few Chinese companies to make inroads in developed countries Great Wall Motors Co Ltd, a Chinese private car operation led by billionaire Wei Jian Jun Since 2006, the automaker has been selling cars in Italy, as shown by the OOYYO Network in 2009, he entered the Australian market, but sales are a tape of an already small number of total exports, for example, the most Chinese car sold in Australia last year was the great Wall series V double cab ute which is Australian for pickup, as described by It sold 7,490 units.
Just over a decade after US President Richard Nixon historic trip to China, the American Motors Corp. made the first inroads in the market in 1983 in partnership with Beijing Automotive Works, China's first national car company founded in 1953, to jeeps two years later, Volkswagen became the first foreign auto company to build a factory in China on its accession to the Shanghai automotive Co SAIC now, to build a sedan called Santana, which was based on the VW Passat.
Prices staged for a series of joint ventures supported by the Chinese government between Western and Chinese automakers now virtually all the major manufacturers of American cars, Asian and European works with one or more Chinese counterparts.
The leader of the GM market has formed its first joint venture with SAIC in 1994, and the first GM car, the Buick Century, began to roll on the assembly line in 1998 and in the showrooms a year later in 1999, this partnership now known as SAIC-GM -Wuling Automotive, was the production of the Buick GL8 minivan in 2005, the Chinese team GM started making the Chevrolet Sail, which costs about 15,000 and is the first compact family sedan specifically targeting the families of the Chinese middle class 30,000 units sold per month, sailing is one of the most popular brands in the Chinese market, as well as the VW Passat and BYD F3 sedan.
The policy joint venture - in which China allows foreign manufacturers to work with one or two Chinese auto companies - is designed as a way for Chinese automakers learn from their more established global competitors, and it is an offer to businesses West can not possibly turn down, given the vast potential of the base of Chinese consumers, however, this arrangement did little to help Chinese manufacturers to overcome the enormous obstacles that stand in the way of their competition in the world, or even at home.
These challenges begin with a Chinese automaker incredibly crowded field, which made it virtually impossible for individual companies to create homegrown one consistent identity consumer loyalty.
In addition, to be profitable car companies can not just make good cars, something China still hasn t They control also have to scale production to meet the huge capital and brainpower necessary simply to create the latest car or truck's ability to scale - sell enough cars to enjoy the same thin yields - is virtually impossible for Chinese automakers, most of which are relatively young and not approved and are competing against dozens of companies for customers.
In 1985, there were 114 Chinese automakers native or 2011 automotive-related companies, there were 115, in spite of efforts reported by the Chinese government to bring the sector down to a few big players, competing well with the Japanese auto industry, which has built a worldwide reputation for quality and engineering around only a handful of companies.
The Chinese government has started talking about consolidation in the 1980s and they even picked three large companies and three small businesses they wanted to consolidate all of the industry, said consultant political risk Anderson Each manufacturer they manage to kill the other appears.
China has neither Lee Iacocca or Soichiro Honda.
But even if Beijing had realized his plan to consolidate the industry, it is doubtful that the other Chinese players have been very successful, largely because of their organizational structure All major automakers - as SAIC, Dongfeng Motor, China FAW group Corp. Beijing Automotive industry holding Co and a Chang automobile group Co Ltd - are SOEs This means that the Chinese auto industry focuses on production volume on profits, quality and competitive designs vehicles and brands are dictated by the above backroom -down decision, led not by innovators, but by politicians.
If these constraints exist in the West, it is difficult to imagine that GM would have produced the Corvette in 1953, when Harley Earl and Robert McLean engineers went against the grain company to come up with the idea of a vehicle high performance at a price -for same family, there would not have been possible a creative genius like Carroll Shelby, the automotive designer delay that has made a name for itself change the sports car to produce vehicles pioneering extraordinarily powerful, like the Shelby GT350-based Ford Mustang or the legendary AC Cobra.
The Chinese government aggressively intervening to support certain types of businesses probably ends hinder the kind of eccentric inventiveness and entrepreneurship bare knuckled that makes a difference in the automotive industry, said UC -San Diego s Naughton .
Indeed, the global automotive industry has always been driven by great personalities with ideas of transformation In 1980, Chrysler Corp. CEO Lee Iacocca - who had already developed the Ford Mustang - famously used his personal charisma, determination and pure will plead with the public and Washington to save his business near bankruptcy and Soichiro Honda, not well liked among his peers or bureaucrats who seek to consolidate the Japanese auto industry in the 1960s, managed in less than 20 years to turn a motorcycle company in a major international player, particularly in the US auto market.
However, running a car company or any business in strategically important Chinese industries, including airlines, railroads and telecommunications, is a good way for faceless bureaucrats to advance their career They do not need to answer to shareholders or worry about being inventive head of the favored industrial companies, they benefit from a steady flow of investment capital controls the government and the public sector more, while they spend some years in industry, they aim to climb higher on the political level.
Take Zhu Yanfeng In 2007, Zhu was appointed general manager of FAW Group, China's largest automaker - hence the name First Automobile Works - and the second largest producer of vehicles in China with a production of 3 6 million units last year Soon after, he left the industry to become deputy governor of northern Jilin province, where the company is based, and a member of the powerful central Committee of China.
Or Meng Xuenong The 63-year-old spent much of the 1980s as part of high-ranking Beijing Automotive Industry Co before moving into politics as vice mayor of Beijing and later governor of Shanxi Province .
Companies owned by the Chinese state does not promote entrepreneurship and risk-taking, said Lei Guang, founding director of the China Program of the 21st century at UC-San Diego leaders are appointed because " they're good bureaucrats they must watch their political future, to determine how best to move into the political level within the party.
This desire to maintain short leash automobile industry could be good for short-term interests of mayors and provincial governments, but it comes at a global automobile sales prices gained 5 2 percent last year nearly 82 million units, led by double percentage growth in North America in numbers and in the Asia-Pacific region and the turnover is expected to reach 96 million by the end of 2015.
But China should not play a very important role in this large international basin While Chinese automaker exports have increased from zero to a million in less than two decades, that's little consolation for a country that aspires to Honda but instead imitates Lada.
And trying to woo car enthusiasts with electrical boxes relatively uninteresting on the sidelines of the Detroit auto show will not do much to change that.
To learn more about the appearance of GAC 2013 Detroit Auto Show, read the IBT coverage here.
GM Ford VW Dominate the automotive industry in China Why can t SAIC as Chinese companies Dongfeng, Ford, dominate, porcelain.