The Financial Times, April 22, 2012
China reintroduces historic car brands - FT.com
http://www.ft.com/intl/cms/s/0/e693d1ac-8ada-11e1-912d-00144feab49a.html#axzz1srazYCSe
China reintroduces historic car brands - FT.com
http://www.ft.com/intl/cms/s/0/e693d1ac-8ada-11e1-912d-00144feab49a.html#axzz1srazYCSe
Several of China’s leading carmakers are relaunching brands from the past, including Mao Zedong’s famous Red Flag limousine, in a bid to capitalise on nostalgia for an era when China made very few cars – but those they made were grand ones.
But there is scant evidence that Chinese car buyers are hankering for the good old days when state-owned manufacturers made cars named after Beijing, Shanghai, or the red flag of communism. China may be the world’s largest car market, but China has yet to build a car industry to be proud of. Foreign carmakers dominate the market, and the local industry is losing more market share all the time.
Chinese manufacturers are hoping to reverse that trend by unveiling a range of bigger, glitzier, sportier and more innovative models at the Beijing auto show, which opens on Monday. Analysts say it could be a critical moment for the Chinese industry, which has less than 30 per cent of the local market share.
Three decades after Beijing set out to build a world class car industry – signing landmark joint venture agreements with Volkswagen and General Motors to partner state-owned manufacturers – brands owned by VW and GM still dominate, while Chinese brands remain stuck in the hyper-competitive low end of the market. In general, foreign branded cars are seen as more reliable, more stylish, more impressive, and better all-round value for money than Chinese branded models, which continue to compete almost entirely on price.
In the past year, Beijing has taken several steps to reverse the decline, banning most official fleet purchases of foreign brands and forcing overseas makers like GM and VW to develop indigenous brands with their joint venture partners in a bid to ensure a more rapid transfer of technology. Nissan will launch Venucia, its own brand with joint venture partner Dongfeng Motors, at the Beijing auto show, for example. But most industry analysts say those measures are likely to provide only a small boost to local carmakers’ market share – or could depress it even further.
Klaus Paur, car industry analyst at Ipsos in Shanghai, says: “In the past few years we have seen a dramatic loss of market share for Chinese branded vehicles, while international carmakers have done a very good job of penetrating the lower end of the market.
“Sometimes international car manufacturers understand Chinese consumers better than Chinese manufacturers do,” he adds.
Western carmakers are increasingly adapting their cars for the Chinese market: BMW, for example, will launch a new long-wheelbase version of its ever-popular 3 series, especially for the China market where many cars are chauffeur driven. Chinese carmakers like Geely, Great Wall and SAIC – the three strongest – are working hard to enter the middle to upper segments of the market, and many are launching sports utility vehicles to capture a trend toward more individualistic purchases by younger buyers. “But they are always running a little bit late,” says Mr Paur.
Ivo Naumann, head of Alix Partners in Shanghai, says: “The product still has to improve to be really on par with international brands.
“At the end of the day, I think it’s a question of scale. None of the independent Chinese carmakers has a scale that could truly compete with large global carmakers,” he adds, noting that even Geely – which also owns Volvo – produces less than 1m cars a year while the global market leaders produce several multiples of that.
Meanwhile, prevailing winds increasingly favour global carmakers, analysts say. As China gets richer, car buyers often want to upgrade to foreign models, and as the first big wave of car buyers replaces their first car, many are increasingly willing to pay for foreign reliability, not to mention resale value. Even Beijing’s decision to force foreign carmakers to create indigenous joint venture brands could cannibalise demand for independent Chinese brands, says Bill Russo of Synergistics consultancy, who is also a former head of Chrysler in China.
Kevin Wale, head of GM in China, told the Financial Times: “It’s tough to establish a global reputation … and once you have done that it tends not to go away
“The Japanese and Koreans built up global reputations but it took them 20 or 30 or 40 years – and that still did not erode the global advantage of those that existed before. I think our reputation [in China] will last for an incredibly long time.”
But there is scant evidence that Chinese car buyers are hankering for the good old days when state-owned manufacturers made cars named after Beijing, Shanghai, or the red flag of communism. China may be the world’s largest car market, but China has yet to build a car industry to be proud of. Foreign carmakers dominate the market, and the local industry is losing more market share all the time.
Three decades after Beijing set out to build a world class car industry – signing landmark joint venture agreements with Volkswagen and General Motors to partner state-owned manufacturers – brands owned by VW and GM still dominate, while Chinese brands remain stuck in the hyper-competitive low end of the market. In general, foreign branded cars are seen as more reliable, more stylish, more impressive, and better all-round value for money than Chinese branded models, which continue to compete almost entirely on price.
In the past year, Beijing has taken several steps to reverse the decline, banning most official fleet purchases of foreign brands and forcing overseas makers like GM and VW to develop indigenous brands with their joint venture partners in a bid to ensure a more rapid transfer of technology. Nissan will launch Venucia, its own brand with joint venture partner Dongfeng Motors, at the Beijing auto show, for example. But most industry analysts say those measures are likely to provide only a small boost to local carmakers’ market share – or could depress it even further.
Klaus Paur, car industry analyst at Ipsos in Shanghai, says: “In the past few years we have seen a dramatic loss of market share for Chinese branded vehicles, while international carmakers have done a very good job of penetrating the lower end of the market.
“Sometimes international car manufacturers understand Chinese consumers better than Chinese manufacturers do,” he adds.
Western carmakers are increasingly adapting their cars for the Chinese market: BMW, for example, will launch a new long-wheelbase version of its ever-popular 3 series, especially for the China market where many cars are chauffeur driven. Chinese carmakers like Geely, Great Wall and SAIC – the three strongest – are working hard to enter the middle to upper segments of the market, and many are launching sports utility vehicles to capture a trend toward more individualistic purchases by younger buyers. “But they are always running a little bit late,” says Mr Paur.
Ivo Naumann, head of Alix Partners in Shanghai, says: “The product still has to improve to be really on par with international brands.
“At the end of the day, I think it’s a question of scale. None of the independent Chinese carmakers has a scale that could truly compete with large global carmakers,” he adds, noting that even Geely – which also owns Volvo – produces less than 1m cars a year while the global market leaders produce several multiples of that.
Meanwhile, prevailing winds increasingly favour global carmakers, analysts say. As China gets richer, car buyers often want to upgrade to foreign models, and as the first big wave of car buyers replaces their first car, many are increasingly willing to pay for foreign reliability, not to mention resale value. Even Beijing’s decision to force foreign carmakers to create indigenous joint venture brands could cannibalise demand for independent Chinese brands, says Bill Russo of Synergistics consultancy, who is also a former head of Chrysler in China.
Kevin Wale, head of GM in China, told the Financial Times: “It’s tough to establish a global reputation … and once you have done that it tends not to go away
“The Japanese and Koreans built up global reputations but it took them 20 or 30 or 40 years – and that still did not erode the global advantage of those that existed before. I think our reputation [in China] will last for an incredibly long time.”
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