6.09.2011

Video Interview: Bill Russo on Innovation in Asia

Focusing on mid-market innovation:



The Chinese vs. Western approach to innovation:



Delivering cost effective innovation:

India and China car sales hit by inflation

The Financial Times, June 9, 2011

By Mary Watkins in Mumbai and Patti Waldmeir in Shanghai

New car sales figures from India and China have highlighted the damaging impact of high fuel prices, inflationary pressures and supply bottlenecks on consumer spending in the world’s two largest emerging economies.

The Society of Indian Automobile Manufacturers (SIAM) said that sales of cars in India in May rose 7 per cent to 158,817 compared with 148,425 the year before – the slowest rate of growth in two years.

The deceleration shows how a combination of rising interest rates on car and home loans, as well as the higher cost of fuel and other essential items, is encouraging some Indian consumers to postpone discretionary purchases.

India has raised interest rates nine times in just over a year as it tries to curb inflation. Petrol prices, meanwhile, rose nearly 9 per cent last month.

In China, data released on Thursday showed that May car sales slipped 0.1 per cent year on year, confirming the substantial slowdown evident in the world’s largest auto market since small-car tax incentives were removed at the end of last year. Sales in the first five months rose 6.1 per cent year on year, compared with last year’s full-year growth rate of 32 per cent.

“Given the headwinds present in recent months including rising fuel prices, limits on [vehicle] registrations in megacities, Japan earthquake supply shortages and the elimination of incentives, this is a actually a solid performance and indicates that the market is fundamentally strong,” says Bill Russo, head of Synergistics auto consultancy and former head of Chrysler in China.

Ivo Naumann, China head of AlixPartners, forecast recently that China light vehicle sales would grow 10 to 15 per cent this year despite the current slowdown, as more consumers become wealthy enough to own cars.

SIAM said that, based on the current performance, hitting full-year targets would be difficult. The Indian industry body is forecasting that overall vehicle sales could grow at just 15 per cent in the year to March 2012, compared with 30 per cent last year.

Jatin Chawla, an automotive analyst at IIFL in Mumbai, said he expected to see a slowdown in car sales in India in the next three to four months, adding that a strong pickup in the festive period from September onwards would be critical for carmakers.

Mr Chawla said that Maruti Suzuki could expect to maintain market share as consumers stuck with more conservative carmakers that produced tried and tested models. Maruti – which is currently trying to resolve a strike with workers at its Manesar plant in India who are trying to secure recognition for a new union – recently reported a slowdown in car sales.

Click here to read the original article at FT.com



6.08.2011

Overcapacity looms for Chinese automakers

Chinese Manufacturing News, May 30, 2011

The combined sales targets of China's largest automakers could exceed total demand by as much as 32 percent by 2015, as the pace of plant construction outstrips sales growth forecasts.

"The industry may face excessive capacity as early as next year," said George Yin, an analyst with BOCOM International Holdings Co. in Beijing.

Privately held Zhejiang Geely Holding Group Co., Great Wall Motor Co. and BYD Co. "are boosting their capacity more aggressively than joint ventures and state-owned firms and exposing themselves," Yin said.

China's auto sales fell 0.25 percent in April, the first year-on-year decline in 27 months, after the government phased out tax breaks and subsidies.

But automakers are expanding to gain more share in a market that has expanded tenfold in the past decade amid rising affluence and government stimulus policies.

Last year, industry sales in China totaled 18 million vehicles. But overcapacity may reach 3 million units next year, according to Yin.

Geely, BYD and Great Wall each plans to expand capacity more than 55 percent by 2015, Yin said.

Unbalanced supply and demand will affect Chinese automakers more than international companies such as Volkswagen AG and General Motors Co. Chinese consumers will trade up to foreign brands for their second cars, predicts Bill Russo, a Beijing-based senior adviser at Booz & Co.

Shanghai-based SAIC Motor Corp., which has partnerships with GM and Volkswagen, will be less exposed to sales and margin squeezes for the same reason, he said.

"This will drive the China automakers to more aggressively pursue selling these cars in emerging markets," Russo said. "Otherwise they will have underused their assets."

Click here to view article at EworksGlobal.com