Synergistics Limited

The Circuitous Path to Electrification of China's Automotive Industry

2012-02-17T05:54:00.000-08:00

Booz & Company Viewpoint, February 2012

The paper suggests a need for cross-value chain collaboration and that new business models are essential to achieve broader acceptance of electric vehicles.

The Circuitous Path to Electrification of China's Automotive Industry

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With petrol prices hiked, diesel ain't a bad option!

2012-02-05T01:05:00.000-08:00

The Economic Times of India, September 18, 2011

While it has always been far more efficient fuel giving higher mileage compared to petrol - a reason why heavy users like commercial vehicles use diesel - its use in the passenger vehicle industry was restricted for two reasons. One, diesel was relatively more polluting - releasing higher levels of particulate matter and harmful oxides of nitrogen and sulphur.

The past two decades saw increasing awareness and stringent curbs on vehicular emissions in different parts of the world. Led by California in the US, many other states and countries have regulated usage of diesel due to its polluting nature. In the US, availability of diesel at retail gas stations too is an issue. In India, Delhi took the lead by replacing diesel with CNG in public transport.

But there was another more important reason why diesel was not popular among passenger car industry. Diesel engines were bulky, noisy, more difficult and costly to maintain. Petrol, on the other hand, is smoother, more refined and has a higher throttle. "All this helped the case of petrol engines through the 1990s," says Deepesh Rathore, director (India) IHS Global Insight, a research firm. Most car companies - American, European and Japanese - focussed on building petrol cars.

The push for change for diesel began in the 1990s when Europe's mileage-driven thrust nudged its car manufacturers to spend more R&D dollars on diesel technologies. So today, while the US and Japan - the two big hubs for car manufacturers - continue to be petrol-driven markets, Europe leads the world in diesel engines and diesel technologies.

It is exactly for this reason that Europe-focused manufacturers - Fiat, VW, Mercedes Benz and even American auto companies like Ford and Opel who have a strong presence in Europe - have a good line-up of diesel engines. Japanese companies like Honda, Toyota, Suzuki, Nissan and even Koreans like Hyundai have lagged behind. In India, Fiat's small diesel engine is being used by Tata Motors, Maruti and GM.

China, the new 600-pound gorilla of the car club, should have been setting the new trends on fuel usage. But it too swings the petrol way for multiple reasons even as it bets big on electric vehicles. One, China's car market offers very limited options in diesel vehicles. This constrains demand. Two, many Chinese cities do not allow registration of diesel vehicles. Three, legislation norms in China requires lower amounts of sulphur in diesel and that variant is in limited supply. But the big reason is that "Chinese government does not favour diesel as the local industry lacks experience in developing advanced diesel power trains," says China-based Bill Russo, senior adviser, Booz & Co, a consultancy.

Cleaner, Smarter Diesel

But other governments have been pushing for cleaner low-sulphur diesel for years. Last year, India joined in with Delhi and 12 other Indian cities introducing low-sulphur diesel. All this comes on the back of technological innovations brought about by car manufacturers to improve diesel engines - on both emission and performance counts. The first game changer was Bosch's (common rail direct injection (CRDi) technology that made diesel engines run faster, quieter and smoother almost like the petrol one while boosting its efficiency by 25% or so. VW, with aspirations to lead the auto world, is betting on TDi - turbo-charged direct injection.

Soon-to-be-implemented Euro V norms in India will help diesel as these engines are installed with catalytic converters which have lower carbon monoxide emission.

This will greatly increase the attractiveness of diesel engines in future, say auto pundits. But some stubborn mature markets like the US and Japan are finding it difficult to shift preferences. "Diesel gives me 30% more fuel economy. These engines have changed so much in the recent past that when you sit inside the car you won't know the difference. Still, Americans' perception of diesel - of loud, rumbling engines that do not start in winter - continues," says Rebecca Lindland, US-based auto analyst with IHS Global Insight.

The India Playfield

Which way will India swing? Though minuscule now, India could be the next big frontier for diesel engines. It is tipped to be the world's third largest passenger vehicle market by 2020.

The historical price-skew favours diesel over petrol big time. For many Indians, still buying their first cars, operating costs are a critical factor under consideration. "The petrol-diesel price differential will always be there. And diesel with better technology, more power, more fuel efficiency and better environment - I see a big growth for the next four to six years," says Neeraj Garg, director, Volkswagen (passenger car) India.
While diesel cars are more expensive than their petro counterparts, it is the running cost that gives them an edge.

Fuel efficiency is among the top three criteria that Indian customers benchmark their cars before purchase. "Repair and maintenance costs of diesel engine are typically 14% of total operating costs per km as against 8% for petrol engine," says Singapore-based Mohit Arora, executive director, JD Power, a research firm. "That 6% differential is more than offset by the huge price differential (38%) that the two fuels have in India," adds Arora.

The thumb-rule till recently was that if a car owner clocks around 11,000 km annually, the benefits of a diesel car begins to far outweigh its higher costs. That threshold should now have lowered a bit with the new round of petrol price hikes.

Most importantly, diesel's prospects in India are also boosted by the fact that more automobile companies are now launching new cars in diesel variants to woo customers. So far, diesel engines have largely come in bigger vehicles, above 1200 cc.

The smallest that was available till recently was 1200 cc Fiat engine. GM has launched a 936 cc diesel variant of its Beat model. The engine was specially developed for Indian customers. "Our R&D will continue to look at smaller engines [diesel]," says Michael Boneham, Ford India MD. Honda-SIEL, the company that stayed firm on petrol so far, is expected to launch diesel variants of City and Jazz in India by 2013. Hyundai is expected to launch diesel variants of i10 and Santro in future. Maruti Suzuki is developing a sub 1,000-cc engine for India even as VW is likely bring in the diesel variant of the smaller Up in the near future.

Says JS Chopra, head, Delphi-TVS Diesel Systems, a supplier of diesel engine component to M&M and Tata Motors: "Diesel option is compulsory now for every model. For a car manufacturer, its range is not complete without a diesel option." Many like Ford, GM are setting up flexible engine plants that can easily swing between petrol and diesel to cope with this shift.

All this will mean a country that was once on a path to shunning diesel may well be embracing it. Some like Gulshan Ahuja, secretary general, FADA are backing diesel all the way. "Even if there is price parity between petrol and diesel, I would bet on diesel as the fuel of the future," says Ahuja.

Engines: know your diesel from petrol

Firing The Engine
Petrol engines get fired up with a spark plug. Diesel engines use direct fuel injection method in which the highly compressed hot air is used to ignite the fuel. During harsh winter, when the air isn't hot enough to ignite the engine (unlike petrol which gets ignited with a spark) diesel vehicles of the past have had starting trouble. But a new generation of diesel engines takes care of this problem.

Fuel Efficiency
Diesel gives more km per unit than petrol - because it has higher energy density and hence produces more energy per given unit. Diesel engines also use lesser fuel when idle as against petrol, by some account, just 1/3rd.
Example: Skoda Octavia (petrol) gives 8.1 km/l in the city as against the diesel which gives 10.7 km/l

Performance
Reaction to accelerator pedal, pickup for a petrol engine is faster and smoother. Diesel cars (without a turbo) have a slight lag in responding to the demand from the accelerator. But the latest CRDi engines with turbo chargers puts it neck-to-neck with petrol.
Example: Skoda Octavia (petrol) does 0-100 km in 9 seconds but the diesel takes 13.6 seconds

Power Factor
Diesel engines have a higher torque or turning power vis-a-vis the petrol ones. So when driving uphill on a lower gear, a diesel car will take lesser effort to drive up due to diesel's higher thermal efficiency and higher torque. This is the reason why heavy vehicles typically have diesel engines. But petrol engines give a far smoother, peppier ride
Example: Skoda Octavia (petrol 1.8) gives a maximum speed of 215 kmph as against diesel (1.9) that gives 175 kmph

Weight & Wear-Tear
Due to high compression ratios and high cylinder pressure, diesel engines must be built to withstand more wear and tear than petrol. As a result, critical car/engine components like crankshaft, cylinders have to be thicker and heavier. This makes them heavier and pushes up the sticker price.
Example: Octavia (diesel) gross vehicle weight is 1,855 kg as against petrol variant 1,810 kg

Why Diesel Makes More Sense

Better Mileage
Latest diesel engines are at least 25% more fuel efficient than petrol

Cheaper Commute
Diesel cars, though costlier, make sense if it clocks 11,000 km plus annually

Costlier Upkeep
Maintenance costs per km of diesel engine is 14% against 8% of petrol

Less Polluting
Cleaner fuel, latest tech and catalytic converters means diesel is no longer dirty

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"Competing For The Global Middle Class" Is Most Read Among Thought Leaders

2012-02-03T05:27:00.000-08:00

White Space Newsletter, Issue 21, February 2012

Click here to view the newsletter

So what do clients read?

A little while back we told you about our latest thought leadership digests - quarterly summaries of the best research and ideas from consulting firms for leaders in six different functions. The latest editions have been in the hands of our target audiences for at least two weeks now and, thanks to the URL shortening service 'bitly', we've tracked what has been read.

Cue drumroll...

Unable to maintain the suspense, we're forgoing reverse order and starting with the winner this quarter - Booz & Company. Its report Competing for the global middle class has been opened over twice as many times as any other - an impressive result. However, in some ways not a surprising one. From our other research strands, we know that clients are seeking to better understand what the changing demographics of emerging and developing markets mean for them. And what this article does well is focus on the issues relevant to businesses - product and service lines and operating models - rather than put forward yet another generic economic discussion. Although not quite in the same league, Booz & Company's article Managing the global enterprise in today's multipolar world also received a significant number of hits, particularly from the readers of our strategy digest.

The second theme that was popular with our readers this quarter was decision making. Yet again, Booz & Company came out top with The decision making flaw in powerful people tapping into broad concerns about the effectiveness of decision making and, we suspect, the desire in many of us to have some evidence to support our sneaking suspicions about those in charge. Our operations digest readers were also keen to click through to the Bain article on this theme: How organisations make great decisions.

Honourable mentions must also go to Roland Berger for whom The trend compendium 2030 proved a hit with marketing folks and KPMG'sThe price isn't right which was well received by finance. HR readers liked the look of PwC's Recruiting and managing the millennial generation. As far as our IT readers are concerned, they are apparently still open to reading new material on the cloud and KPMG's Clarity in the cloud hit the spot for many.

Obviously, whilst we know which articles have been most opened, we don't know from bitly which of these articles have been read through to the end. However, our White Space quality ratings, coming out next month, consider all aspects of thought leadership not just immediate appeal and will give a perspective on who is most likely to keep readers engaged.

Gordon Chang, Shaun Rein – Two Sides of the Same Coin- Someone Get Fallows In Here

2012-01-30T21:04:00.000-08:00

Technomic Asia, January 2012

Click below to read the post at Technomic Asia blog:

Gordon Chang, Shaun Rein – Two Sides of the Same Coin- Someone Get Fallows In Here

Excerpt:

The smartest writers, pundits, business people and academics I know all see that China can be all of the above, none of the above and everything in between.

Read James Fallows of The Atlantic, Stan at China Hearsay, Andrew Hupert, Ian Bremmer, Ann Lee, Janet Carmosky, Malcom Riddell, Bill Russo, Richard McGregor, Avery Booker, Bill Dodson, Charles at China Geeks, James McGregor, Peter Hessler, Kent Kedl, Tom Lassiter, Ben Shobert or Dan Harris at China Law Blog for starters. All voices who I owe a great debt to for having taught me so much about China and who consistently provide balanced views.

Can GM Leverage China as a Global Platform for Growth?

2012-01-29T21:05:00.000-08:00

Investor Conference Call, Thursday, February 2, 2012, 10AM EST

About The Call

GM sold 2.55 million vehicles in China during 2011, an increase of 8.3% over the previous year in its largest global market. Impoortantly, GM outperformed the industry growth of 2.5% by leveraging a business model that is designed to deliver products well suited to the needs of the market. The country represents huge potential for the OEM and importantly, a solid platform into the rest of Asia. Clearly, the SAIC-GM JV is working, effectively combining local market knowledge with world-class technology and design. Looking forward, GM’s ability to offer a wide range of products for its Chinese customers, from premium, high-end Buicks to mid-market Chevrolets and entry-level cars like the Baojun 630 Sedan is likely to fuel continued success for years to come.
With our expert, William Russo, we’ll explore how GM has successfully established itself in China and its road-map for the future to include brand, product, business and globalization strategy. We’ll evaluate demographic shifts in China and the OEM’s ability to meet consumer needs through a broad showroom lineup, addressing both price and image concerns. We’ll assess the competitive landscape in China relative to foreign and domestic players and conclude with a near to mid-term outlook for GM’s performance.

SHABNAM BOETTLE

VP & Senior Director
Global Research Intelligence
646-695-3283

MICHAEL COHEN

Director
Global Research Intelligence
646-783-6052

CARLA SISON

Director

Global Research Intelligence
646-695-3281

General Motors in China 2012

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"Competing for the Global Middle Class" Selected Among Best New Research and Ideas

2012-01-21T00:38:00.000-08:00

Thought Leadership Digest, January 2012

Ron Haddock, Bill Russo and Ed Tse’s article "Competing for the Global Middle Class" was featured in this January 2012 digest of the best new research and ideas for strategy leaders.

The purpose of our digests is to make it easier for business leaders to find the best research and ideas. Every month, we

trawl the websites of about 30 of the world’s leading consulting firms looking for the latest thought leadership. What we

find, which now totals over 20,000 articles, we categorise by sector and service line, and make available – with supporting

analysis – via a searchable database which we call White Space. In the process of doing so, we get a very good sense of

what’s being said in any particular business area, and which the best quality pieces of thought leadership are. This allows

us to present time-pressed managers with a summary of the things that really merit their attention.

Competing for the global middle class Booz & Company

They say: In a variety of industries, corporate leaders are discovering that they must rethink their product and

service lines, go-to-market strategies, and operating models to build a presence in emerging economies.

We say: A good starting point for the conversation all boards should surely be having about the large and growing

middle-class market in emerging economies.

Source Thought Leadership Digest - Strategy - January 2012

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Competing for the global middle class

2012-01-16T16:16:00.000-08:00

Business Intelligence Middle East, January 16, 2012

Source: Booz & Company , Author: Ronald Haddock, Edward Tse, Bill Russo, Karl Nader

Posted: Mon January 16, 2012 10:50 am

UAE. The time has come for senior executives to take the plunge and override their hesitancies about the idea of joining the race for the global middle class market share; without the loyalty of this key segment, they may be left out in the cold as their competitors vie for industry leadership. Thought leader Booz & Company explores the options.

In 2011, the worldwide economic phenomenon that is known as the global middle class included between 700-900 million people, all of whom had the purchasing power to become consumers of manufactured goods and services.

There is one common denominator across each country in which this demographic can be found: they are all recovering from the global recession with an increasingly urbanized lifestyle.

The value chain of companies that provide this population with goods, services and infrastructure is becoming known as the global middle market. Competing for their share are three different types of company - the local upstarts who are migrating into the domestic middle market as their customers become more prosperous; the global aspirants, who have already developed products for their domestic middle market, and who are looking to expand into the global equivalent, and the multinational incumbents intent on adapting their existing product lines to capture the attractive growth opportunities in emerging middle markets.

“An intelligent approach will allow local upstarts and global aspirants to move up in the corporate chain. Transitional moves, such as joint ventures and regional expansion, aid their advancement by proffering the experience required to compete on a larger scale,” commented Ronald Haddock, a former partner at industry management consultancy, Booz & Company.

No matter which of the three categories they fall into, companies looking to tap into the lucrative global middle market can draw inspiration from Alfred P. Sloan Jr’s reorganisation of General Motors Company in the 1920s; by targeting the consumers in the middle finance-zone (those who were unable to afford luxury vehicles but wanted an option other than the ‘any colour so long as it’s black’ Model T Ford), he propelled GM past the competition to take the leadership spot among carmakers and held that position for the rest of the century.

Recognising the pace of development in the target markets is the first step towards claiming a stake and taking that all-important step up onto the leadership ladder. All industrialising countries follow an ‘arc of growth’, an evolutionary path of economic change that takes them from nascent to mature, with a critical stage of urbanisation and economic momentum in between.

Countries in the ‘momentum phase’ have large, relatively young populations and high economic growth rates, making them the seedbed of the emerging middle-class markets.

“The buying power, needs and desires of the middle class varies dependent upon nation and region, so obtaining a full understanding of the local requirements in desired territories will prove highly beneficial to anyone wishing to successfully harness capital in that specific market,” said Edward Tse, senior partner with Booz & Company and the firm’s chairman for Greater China.

“Identifying the attributes that the targeted consumers value and adapting the product to meet them – or culling undesirable traits from the existing merchandise – is essential to winning customers.”

Considering the huge, indispensible source of sales volume presented by the global middle market, it’s no surprise that competition is already intense. Despite the number of active companies competing for consumer spending, several would-be contenders are being put off by myths that throw a negative light on the situation.

“There’s talk that it’s too early to enter the middle market in emerging economies, when the reality is that it may already be too late as some industries are already becoming saturated with competitive rivals,” explained Bill Russo, a senior advisor with Booz & Company, based in Beijing.

“Other companies claim that they can’t make money from emerging economies, but they have to consider that while prices are up to 40 percent lower than in developed nations, sales volume is potentially up to three times greater than in mature markets.”

This explains the motivation of Adidas to develop training shoes under the Reebok brand to sell for as little as 1 dollar across rural India, said Karl Nader, Principal at Booz & Company.

This is the case in the GCC, where multinationals that have been late in the game, face stiff competition from local brands as well as from established international competitors deeply rooted in the local market. These multinationals either fold or resort to inorganic growth options to bridge this gap.

This is evidenced, by Carrefour’s challenges to compete effectively against Panda and Al Othaim in Saudi Arabia, and Coca Cola’s recent acquisition of a 50% stake in Aujan, a significant investment to bridge the gap with PepsiCo, added Nader.

Russo goes on to explain that the attitude of assuming that success will come from the education of consumers, rather than the adaptation of products, will not bear fruit. No matter how valued or desirable the merchandize is, most newly-minted middle-class customers will not be able to afford them.

The final myth laid to rest is that entering the global middle market will be too disruptive to operations, to which he simply says that companies need to develop a business model that is suited to the task in order to succeed.

It may be that an alteration in the mind set of more conventional multinational corporation executives is required, in order for them to compete for the position of industry leader by cashing in on the benefits of the middle-class market. The opportunities in the global middle market may require additional effort in order to successfully reap the rewards on offer, but they’re most certainly worth it at the end of the day.

Click here to download the pdf report by Booz & Company. Registration required.

More reports and whitepapers are available on the Booz & Company website.

About Booz & Company
Booz & Company is a leading global management consulting firm, helping the world’s top businesses, government ministries, and organisations. Our founder, Edwin Booz, defined the profession when he established the first management consulting firm in 1914. Today, with more than 3,300 people in 60 offices around the world, we bring foresight and knowledge, deep functional expertise, and a practical approach to building capabilities and delivering real impact. We work closely with our clients to create and deliver essential advantage.

For our management magazine strategy+business visit www.strategy-business.com.

For the Ideation Centre, Booz & Company’s leading think tank in the Middle East, visitwww.ideationcentre.com

For more information, please visit www.booz.com and www.booz.com/me

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China car sales slow as US bounces back

2012-01-15T17:57:00.000-08:00

China Economic Review, January 13, 2012

Car sales in China grew by only 2.5% last year as the government removed stimulus measures, while the US emerged to become the world's fastest-growing car market, the Financial Times reported. Car and light truck sales in the US grew by 10%, but sales of 12.8 million units were still far below the 18.5 million sold in China.

Analysts believe the slowdown in China sales was largely due to the withdrawal of tax incentives introduced in 2008; auto sales in China grew by 46% in 2009 and 32% in 2010. Foreign carmakers did better than average, with General Motors (GM.NYSE) posting a 8.3% rise, and Ford (F.NYSE) a 7% increase.

Analysts believe the auto market will rebound this year, though likely not to 2009 and 2010 levels. "Continued growth of the urban middle class, along with continued investment in China’s transportation infrastructure, will continue to fuel demand growth for the foreseeable future," said Bill Russo, head of Synergistics auto consultancy.

Click here to read this article at www.chinaeconomicreview.com

US beats China in vehicle sales growth in 2011

2012-01-12T20:33:00.000-08:00

The Global Post, January 13, 2012

US beats China in vehicle sales growth in 2011 | GlobalPost
http://www.globalpost.com/dispatch/news/regions/asia-pacific/china/120112/us-beats-china-vehicle-sales-growth-slowdown

A crowd gathers to admire a gold-plated Infiniti luxury sports car on display outside a jewelry store in Nanjing in China’s Jiangsu province on March 31, 2011. (STR//AFP/Getty Images)

Growth in vehicle sales in China in 2011 lagged behind growth in US auto sales for the first time in at least 14 years, Bloomberg Businessweek reported.

Total vehicle sales, which include cars, trucks and buses, rose only 2.5 percent, according to data released by the China Association of Automobile Manufacturers today, Bloomberg Businessweek reported. Meanwhile, US vehicle sales increased 10 percent, the Associated Press reported.

Auto manufacturers still sold millions more vehicles in China than in the US, delivering 18.5 million vehicles to Chinese buyers in 2011 while US sales were 12.8 million, the AP reported. China became the biggest market in the world by number of new vehicles sold in 2009, according to the AP.

According to the Financial Times:

Most Chinese auto analysts believe the main reason for the slowdown was the withdrawal of tax incentives introduced by Beijing as part of a 2008 economic stimulus package, which helped boost total vehicle sales 46 per cent in 2009 and 32 per cent in 2010. Those incentives, for small engine cars and mini commercial vehicles, were withdrawn completely last year.

Higher interest rates and restrictions on new vehicles in Beijing also kept Chinese consumers from buying cars, Bloomberg Businessweek reported.

“This data was what we expected,” said Jia Xinguang, managing director of the China Automobile Dealers Association, told the AP.

While analysts don’t expect a return to the rapid growth of 2009 and 2010 this year, they said they expect the Chinese market to continue expanding, the Financial Times reported. Bill Russo, head of Synergistics auto consultancy in Beijing and former head of Chrysler in China, told the Financial Times that he expects vehicle sales in China to reach 20 million in 2012. “Continued growth of the urban middle class, along with continued investment in China’s transportation infrastructure, will continue to fuel demand growth for the foreseeable future,” he said.

The average estimate of 10 analysts surveyed by Bloomberg is that the US auto market will grow 5.6 percent this year to 13.5 million, Bloomberg Businessweek reported.

China car sales slow as US roars back

2012-01-12T17:59:00.000-08:00

The Financial Times, January 12, 2012

Click here to read the article at FT.com

Chinese vehicle sales grew just 2.5 per cent last year, as the withdrawal of government stimulus measures tamed the exuberance of the world's largest auto market.

By contrast, the US last year bounced back to become the world's fastest-growing big car market, with car and light truck sales climbing about 10 per cent. But at an estimated 12.8m units last year, US light vehicle sales were still far below China's 18.5m.

A decade ago, the US auto market was at least 10 times the size of China's. “Any relative comparison of the growth rates between then and now is rather irrelevant,” said Bill Russo, head of Synergistics auto consultancy in Beijing and former head of Chrysler in China.

Some Chinese car buyers may have held off purchasing cars because of credit tightening or fears of inflation, but few analysts see the slowdown as a bellwether of slower Chinese economic growth.

Most Chinese auto analysts believe the main reason for the slowdown was the withdrawal of tax incentives introduced by Beijing as part of a 2008 economic stimulus package, which helped boost total vehicle sales 46 per cent in 2009 and 32 per cent in 2010.

Those incentives, for small engine cars and mini commercial vehicles, were withdrawn completely last year. Car sales – a category that does not include small commercial vehicles that were hit hard by the incentive cancellation – rose 5.2 per cent to 14.5m.

Foreign-invested carmakers did better. General Motors last week said China sales rose 8.3 per cent last year, well below 2010's 29 per cent but significantly above an expected 4 per cent rise in sales for the total Chinese market, while Ford reported a 7 per cent year-on-year increase.

Analysts believe vehicle sales could rebound. “The times of disproportionate growth in 2009 and 2010 are definitely over,” said Klaus Paur, auto market analyst at Ipsos, the market research company.

But Mr Paur still expects 10-12 per cent growth in the car market this year, which "can be considered healthy and significant . . . in light of the long-term potential of the Chinese market".

Bill Russo, head of Synergistics auto consultancy in Beijing and former head of Chrysler in China, added: “Continued growth of the urban middle class, along with continued investment in China’s transportation infrastructure, will continue to fuel demand growth for the foreseeable future.”

He expects China to be a 20m total vehicle market in 2012.

GM sales buck trend for China slowdown

2012-01-09T16:49:00.000-08:00

The Financial Times, January 10, 2012

Click here to read the story at FT.com

General Motors, the biggest foreign automaker in China, defied a slowdown in the Chinese car market to reach record sales last year of 2.55m vehicles.

GM said in a statement on Monday that sales rose 8.3 per cent last year, well below 2010’s 29 per cent but significantly above an expected 4 per cent rise in sales for the total Chinese market, which is the world’s largest. Ford also announced its 2011 China sales yesterday, saying they increased 7 per cent.

Total market figures for last year are expected to be released within days by the China Association of Auto Manufacturers (CAAM), which has previously forecast sales would grow by less than 5 per cent in 2011, compared to 46 per cent in 2009 and 32 per cent in 2010. Auto market analysts attribute the decline to Beijing’s tightening of credit policy last year, and the withdrawal of tax incentives introduced after Beijing’s 2008 economic stimulus package.

Withdrawal of the incentives hit domestic car companies disproportionately hard, because they are strongest in the segments of the market favoured by incentives: small cars. This has allowed foreign automakers – including GM – to increase their market share at the expense of locals.

“The natural preference of the Chinese consumer is to buy as much car as they can afford. If they can afford to buy a multinationally branded car, they will”, says Bill Russo, of Synergistics auto consultancy in Beijing, former head of Chrysler in China.

Foreign market share, which was 69 per cent in 2010, may have risen by two to three percentage points last year – though the vast majority of foreign-branded cars are made in China, by joint ventures between foreign and Chinese companies.

“As the Chinese market develops, Chinese consumers are becoming more mature – and that is challenging Chinese auto brands, while benefiting US and European brands,” says Mr Zhang Junyi, of Roland Berger consultants in Shanghai.

Mr Russo says he expects GM to maintain strong sales growth this year. “If you look at the future, you have to be very bullish about GM in China. Their Baojun product line (the joint venture brand launched recently with partner SAIC) will give them a significant boost in tapping into growth in lower tier markets,” he said.

GM has repeatedly welcomed the slowdown in China’s overheated market. As Dan Akerson, GM chief executive, said in Shanghai in November: “You can’t have totally unbridled growth in a country evolving as quickly as China.”

Analysis of China EV Market Opportunities

2012-01-05T23:39:00.000-08:00

Seeking Alpha, November - December 2011

This four-part series drew several references to the recent analysis of China's EV market entitled "The Circuitous Path to Electrification of China's Automotive Industry".

Links to each are posted here:

Part 1:

Introduction of Kandi Technologies
China's EV market: history, present status and future outlook
International perception of China's huge EV market potential
Status of the current EV charging infrastructure

Part 2:

Disruptive technologies: Battery swapping versus EV charging

The Chinese utility providers' standpoint
The government, policy makers and Standardization Committees' Standpoint
The Manufacturers' Standpoint
The perspective of Chinese private car users

Part 3:

Zhejiang Province, Hangzhou and Jinhua: Establishment of an EV Industry Pilot Model

Part 4:

China's recent active efforts to establish a "New Energy Vehicles Industry"
Kandi's meticulously prepared plan to become a major player in China's EV market
Kandi's strategic alliances, market potential and our opportunity to participate and profit from these accelerating developments.

Bill Russo to Speak on China's Path to Electrification at AutoPlastCON

2012-01-05T22:57:00.000-08:00

February 27-28 2012, Shanghai, China

Click here to see the conference program

AutoPlastCON is an auto plastic conference that focuses on the latest automotive trends, technological advancements in automotive parts and emerging applications of plastic components in automobiles. The conference will bring together key executives of the Automotive Industry (including automotive OEMs, Tier 1 & Tier 2 automotive components manufacturers), Plastic Moulding, and Plastic sectors to explore new ideas and strategies to overcome challenges in the automotive industry in China.

You will hear from the Automotive OEM on their future directions and plans, strategies for light-weighting vehicles, electric mobility and green transportation trends, as well as from Plastic manufacturers on latest material developments and potentials, and from Plastic Mold Manufacturers on the latest developments in plastic injection molding for automotive.

AutoPlastCON brings you the latest updates on the automotive market and the rising use of plastic auto components in China!

AutoPlastCON - 2-day High Level Auto Plastic Conference in China
Convergence of Automotive OEM, Automotive Parts Manufacturers, Plastic Molding Companies & Plastic Manufacturers

** Conference conducted in English and Chinese with Simultaneous Interpretation **
** 会议备有中英同声翻译 **

In China, Power in Nascent Electric Car Industry

2011-12-31T09:13:00.000-08:00

The New York Times, December 26, 2011

by Keith Bradsher

GUANGZHOU, China — Three years ago, as part of its green-energy policy, the Chinese government set an ambitious goal: by the end of 2011, the nation would be able to produce at least 500,000 hybrid or all-electric cars and buses a year.

With only about a week to go, it is clear China will fall far short of that target. Despite dozens of electric-vehicle demonstration projects around the country, analysts put China’s actual annual production capacity at only several thousand hybrid and all-electric cars and buses.

“It’s pretty trivial at this stage — they hardly sell any,” said Lin Huaibin, the manager of China vehicle sales forecasts at IHS Automotive, a global consulting firm.

Obstacles include continued technological hurdles, disputes over technology transfers by multinational automakers, and a broad wariness by the Chinese public regarding alternative-technology cars.

But it would be shortsighted to count out China’s electric car efforts just yet. Only a few months ago Prime Minister Wen Jiabao called for Beijing to create a new “road map” for energy-saving vehicles.

Unlike in other nations, where automakers are leading the push for electric vehicles, in China the effort is being led largely by one of the country’s most powerful industries — the state-run electric companies that operate the national power grid. With China expected to surpass the United States in the number of all vehicles on the road by as early as 2020, the government-run utilities see it as their job to provide an alternative to imported oil as a way to power several hundred million cars, trucks and buses.

This month in this sprawling southern industrial city, for example, the giant China Southern Power Grid company opened a sales and service center for electric cars.

The new three-story building, resembling a giant lizard egg of lime-green glass, is a showcase for technology supplied by Better Place, a start-up based in Palo Alto, Calif. Under the Better Place business model, customers not only recharge their electric cars but also periodically stop at an electric filling station to swap their nearly depleted batteries for freshly charged ones.

And just because there are no customers kicking the tires now doesn’t mean China Southern Grid, as it is commonly known, isn’t in the electric-vehicle game for the long haul. The power company and Better Place are in talks to sell electric cars to the Guangzhou municipal government and to taxi fleets, according to Shai Agassi, Better Place’s founder and chief executive.

The demonstration project showcases imported Renault Laguna sedans and Nissan Dualis crossover utility vehicles whose gasoline-fueled power trains have been replaced with electric motors and swappable batteries. But the companies are in talks with Chinese automakers to produce battery-powered cars, for which no price has been set.

In a separate bet, meanwhile, China Southern Grid has also built recharging stations in another big southern industrial city, Shenzhen, for electric buses and cars made by a Chinese automaker, BYD, which has Warren E. Buffett among its investors.

Though automakers in other countries have supplied charging equipment to be installed at homes and parking lots, China’s power industry has already made it clear that it wants to dictate when and how plug-in gasoline-electric hybrids and all-electric cars are charged, by owning the charging equipment and setting technical standards.

“It is more and more difficult to manage the grid; we need more flexibility,” by controlling how cars are recharged, said Zhang Diansheng, the deputy general manager of China Southern Grid.

After initially seeking to leapfrog Japan and the West by moving straight from internal combustion engines to cars powered only by batteries, Chinese policy makers are now paying more attention to hybrids that combine gasoline engines with electric motors. (As battery-fire problems with the Chevrolet Volt in the United States have recently indicated, technical problems still bedevil electric automotive technology.)

Even some of the Chinese companies like BYD that have bet most heavily on all-electric cars are now investing in plug-in hybrid cars that have gasoline engines as well as batteries.

“More and more companies are certainly going to do it like this,” Wang Chuanfu, BYD’s founder and chairman, said in an interview at his company’s headquarters in Shenzhen. But he quickly added, “there is still tremendous potential in the Chinese market for electric cars.”

Some of the obstacles that have slowed deployment of all-electric cars in China also exist in other markets. The cars’ range, less than 200 miles even under ideal conditions, falls steeply in cold weather, if the air-conditioner is turned on or if the car was not fully charged overnight.

“I’m not interested in them — I worry I’d run out of electricity and get stuck,” said Mu Zhongbao, a 31-year-old businessman who paid the equivalent of $130,000 for an Audi Q7minivan on a recent afternoon here at one of the many dealerships near the Better Place site.

Southern China Grid’s Better Place demonstration project indicates that powerful interests in China still back the development of all-electric cars.

“I see the Chinese fully committed on a path toward electric vehicles — the time frame may shift, the volume numbers may shift,” said Raymond Bierzynski, the executive director of electrification strategy at General Motors China.

Some executives say that China has fallen behind its schedule for hybrid and all-electric cars because it has put heavy pressure on multinationals to transfer technology to their Chinese partners to be eligible for generous subsidies for the sale of alternative-energy vehicles in China. Some foreign manufacturers have responded by withholding some of their latest models from the Chinese market — as Nissan has with the electric Leaf.

G.M. has put the Volt on sale in China, despite the Chinese government’s decision to make it ineligible for renewable energy subsidies of up to $19,300 per car. That is because G.M. has not transferred enough of the technology to satisfy Beijing, although G.M. did agree this autumn to share some electric technology in the coming years.

“By forcing foreign technology sources into a junior role, that’s going to significantly slow the development of the technology in China,” said Bill Russo, a former auto executive who oversaw the Chinese and Korean markets for Chrysler and is now an industry consultant in Beijing.

But the betting in China is that China Southern Grid and another big grid operator, the State Grid Corporation, and their allies among the country’s five main electricity generation companies have much more influence in Beijing than the auto industry.

The Chinese auto industry was tiny until the last decade, and very few of its executives have wound up in senior government positions. By contrast, specializing in electric power has long been a path to the top of the Chinese Communist Party for leaders like Li Peng, the former premier.

And as long as the electric companies are influential, all-battery cars may hold the political edge over hybrids.

But what is not clear is which of three experimental approaches to recharging will eventually dominate the field: the so-called fast charging of vehicle batteries at recharging centers; overnight charging options at homes and parking lots; or battery swapping à la Better Place.

Meantime, World Trade Organization rules are also influencing how China approaches electric cars, said a Chinese official close to the decision-making who insisted on anonymity because he was not authorized to publicly discuss transportation policy.

The government wants to build an electric car industry that can export vehicles all over the world. But it does not want to someday face W.T.O. trade complaints from other countries that might accuse China of violating free-trade export rules by subsidizing the industry’s development. With China having raised trade tensions with the United States earlier this month by slapping additional tariffs on a range of American imported autos, Beijing may need to tread more carefully than ever.

The most promising trade strategy for China to avoid legal pitfalls might be for the government first to subsidize the development of a network of charging stations for electric buses and other municipal vehicles, the Chinese official said. Mass transit subsidies are hard to challenge at the W.T.O. because they involve an almost purely domestic government service.

The bus recharging stations, and the lessons learned in building them, might then be used in a more extensive network of electric car recharging stations. Subsidizing the charging stations could help make electric cars more affordable, and in turn help Chinese automakers achieve economies of scale in their home market that would help them build up an export business.

Already BYD is expanding its annual capacity to manufacture all-electric buses — 1,000 this year, up from 500 last year and with a target of 5,000 next year.

Mr. Agassi of Better Place predicted China would become a large-scale maker of electric cars and then start exporting them. “This is the fork-in-the-road moment” for China, Mr. Agassi said. “You get to a trade deficit on oil imports, or you get to a trade surplus with a lot of car exports.”

Click here to read the article at www.nytimes.com:
http://www.nytimes.com/2011/12/27/business/global/chinas-push-for-electric-cars-flows-through-grid-operators.html?pagewanted=1&_r=1

China Auto Industry: Recent and Future Trends

2011-12-21T23:09:00.000-08:00

Laowaiblog.com, December 20, 2011

See full text of the interview here:
China Auto Industry: Recent and Future Trends

Lior Paritzky from Laowaiblog and Mr. Bill Russo, China auto industry expert, discuss recent trends in China's auto industry market.

In times of financial uncertainty, how do foreign car manufacturers, which have become accustomed to China being the biggest auto market in the world, cope with slowing economic growth? Has the potential of the Chinese auto market been fully appreciated? And what type of cars can we expect to see on China's roads in the next few years?

VW’s path to the top lies in east and west

2011-12-20T10:02:00.000-08:00

The Financial Times, December 19, 2011

Click here to read the article at ft.com

Duringthe Frankfurt auto show in September Martin Winterkorn was seen circlingHyundai’s new i30 hatchback, probing every inch of the South Korean car’sfittings with a tape measure and miniature flashlight.

With aretinue of anxious underlings in tow, Volkswagen’schief executive tested the release of the car’s steering-wheel. When it changedposition soundlessly something seemed to snap in VW’s chief executive.

“There’snothing rattling,” he barked at his chief designer. “We can’t do it, BMW can’tdo it – why can they do it?” The moment was captured on camera and soon became a viral hit on YouTube.

Theincident underscored both VW’s obsessive attention to high-quality engineeringand the carmaker’s acute awareness of the threat posed by its main competitors.

Industryconsultants will this year crown VW as the world’s biggest carmaker, but theGerman company must fight hard to fend off Toyota,General Motors andHyundaiin order to keep the title in the years ahead.

Thebattle for the number one spot may well be decided in the world’s two largestcar markets: China and the United States. For VW, however, these countriesrepresent markedly different challenges.

VW was apioneer among western carmakers in building local production capacity in Chinaand is now the market leader there.

Incontrast, VW has struggled in the US with quality, pricing andbrand-positioning issues, and has for years trailed rivals and lost money. Toturn this round, it needs to convince Americans that it its cars offer the samevalue for money as those offered by the market leaders, GM, Ford Motor andToyota.

In May VWopened a newultra high-tech plant in Chattanooga, Tennessee, its 62nd around theglobe, but its first in the US since its withdrawal in the late

1980s.

“Successin the US is an important component of our overall 2018 strategy to become theworld’s leading automotive company,” Jonathan Browning, head of VW in the UStold the FT recently. “The most tangible evidence of this is very much inChattanooga.”

VW, whichin the past confused American carbuyers who were unsure whether it was apremium or a mass-market brand, is pinning its hopes on a modified version ofits Passat saloon.

Whereasthe prior generation Passat was priced higher than most of its competitors andcovered only 8 per cent of the midsize segment, the new model made inChattanooga comes with a variety of trim levels, engine packages and pricesthat cover 80 per cent of the midsize car segment, VW says.

“It’s afundamental shift in how we’re able to participate in the US marketplace,” MrBrowning says. “It allowed us to get this message out that VW is affordable,more accessible, with the same VW qualities, but in reach of a broaderpopulation.”

Thecarmaker’s renewed assault on the US has been backed up by a canny marketingpush. Last year VW presented 275 audience members of the Oprah Winfrey showwith a yet-to-be-built new Beetle. During this year’s Super Bowl, VW debuted awell-received advert starring a child in a Darth Vader outfit attempting toharness “the force”.

Itsefforts may be starting to pay off. Volkswagen’s US sales were up 23 per centto almost 400,000 units in the first 11 months of the year.

However,Mr Browning must maintain this momentum if VW is to achieve a company target ofat least 800,000 US car sales by 2018 and fulfil VW’s goal of returning toprofitability in the US by 2013.

Thechallenges that VW faces in China are of a very different order: holding on tothe top spot as the country’s largest foreign car brand.

Afterentering the Chinese market before its major rivals in 1984, VW hasconsolidated its position through its successful, highly profitable jointventures with domestic carmakers SAIC andFAW.

“Asignificant part of VW’s margin is generated through royalty payments and partsales in China – they’re really making money there,” says Max Warburton atBernstein Research. “VW uses these profits to subsidise the VW brand inEurope.”

VW hasover time moved from selling stripped-down, basic cars such as the Santana, theworkhorse of Shanghai’s taxi fleet, to sophisticated models designed expresslywith Chinese tastes in mind, such as the VW Lavida and the long wheelbase AudiA6.

“They’vetransitioned from selling what’s on the shelf to adapting products to theunique needs of the market,” says Bill Russo of Synergistics, a China-basedautomotive consultancy. “That’s proving a solid formula for success.”

VWdelivered 2.1m vehicles to Chinese customers in the first 11 months of theyear, an increase of 15.5 per cent on the same period a year earlier, cementingChina’s position as VW’s largest market.

Thecompany will invest €14bn in 2012-2016, in an attempt to double productioncapacity to 3m units by 2015 and increase its presence in the south of the

country.

Manybelieve Karl-Thomas Neumann, head of VW’s China operations, could succeed MrWinterkorn as group chief executive, if he succeeds.

Still, VWlacks a model to compete in the increasingly important ultra-low cost segmentin emerging markets such as China and India. Although such cars tend not be tovery profitable, they are set to become a significant source of industry volumegrowth in the coming years.

VW’sforged an alliance with Suzuki in2009 that it hoped would give it access to the Japanese’s small-car expertise.But these plans were left in disarray after Suzuki requesteddissolution of the tie-up following huge cultural differences.

Thecarmaker is now said to working on a stripped down version of its new smallcar, the Up!. “VW needs to develop a really cheap car if it wants to maintain adominant role in the global car industry,” says professor Ferdinand Dudenhöfferat the centre for automotive research at the university of Duisburg-Essen.

American automakers prepare for China tariff

2011-12-20T09:48:00.000-08:00

China Daily, December 19, 2011

New taxes on US cars may not make big dent, analysts say

NEW YORK - While American politicians have lashed out against China's new two-year tariff on imported cars from the United States, business analysts don't expect them to have that much of an effect on the industry.

China's Commerce Ministry said on Wednesday duties between 2-21.5 percent would be imposed starting on Thursday on large cars and SUVs with 2.5-liter engines and above.

Chinese authorities, citing that US imports were "damaging the local car industry", listed the following companies required to pay the tariff: General Motors Co, Chrysler Group Ltd, Mercedes-Benz US International Inc, BMW's factory in Spartberanburg, South Carolina, and Honda of America Manufacturing Co.

The ministry noted that GM and Chrysler were bailed out by the US government in 2009 and the others have received local government tax credits and other subsidies to support production in the US.

Growth of car sales in the world's largest automobile market has hit a 13-year low, hurting Chinese producers more than foreign automakers.

For some analysts, this appears to be a "retaliatory measure" by China in response to the World Trade Organization rejecting its appeal of a ruling in favor of US duties on imported Chinese tires.

This action, which "reflects the rising tensions between China and the US on trade matters", will have only a small impact on the industry, said Bill Russo, founder and president of Synergistics Ltd, an international advisory firm.

"The impact on GM is very limited. GM imports less than one-half of 1 percent of its Chinese volume, and the imported vehicles in GM's lineup, such as the Cadillac SRX and Buick Enclave, are sold to customers who are less sensitive to prices," Russo said.

JP Morgan analyst Himanshu Patel agrees that China's tariff - 8.9 percent anti-dumping duty and 12.9 percent anti-subsidy duty - won't hurt GM's profits in China much.

Patel, in a research report to address China's import tariffs, cited that GM sold fewer than 32,000 imported vehicles in China, compared to its total of 2.4 million car sales in China.

Ford imports just one model to China and is not likely to be affected. Chrysler, on the other hand, is completely reliant on imports.

"The tariff impacts Chrysler significantly since they import about 24,000 vehicles, and have no local partnerships after the separation from Daimler. This action will have a significant impact on pricing for models like the Wrangler and Grand Cherokee," Russo said.

Chrysler plans to localize production through its majority shareholder Fiat SpA's partnership with Guangzhou Automobile Group, according to Russo.

To account for the new tariff, carmakers will either pass on the higher price tag to consumers or absorb the added cost, which will impact their profit, said Russo. But in the long term, they need to "shift to a localized business model to mitigate such trade risks" he said.

Patel projects China's tariff will motivate GM to produce cars in China. Klaus-Peter Martin, GM spokesman, told Bloomberg in an interview that the company's goal is to build where it sells.

German carmaker BMW leads the pack in "material exposure" to the tariff, with about 25,000 vehicles imported from the US, Itay Michaeli, a New York-based analyst for Citigroup Inc, wrote in a note to clients.

Washington-based US-China Business Council (USCBC), said in a statement that motor vehicles affected by the tariff represents about 3 percent of all American exports to China.

In 2010, the US exported about $3.5 billion worth of motor vehicles to China and this amount is projected to increase to almost $4.5 billion this year.

"The ability for American companies to export and sell cars to China is important," USCBC President John Frisbie said in a statement.

Dongfeng: 30b yuan for own brands

2011-12-20T09:21:00.000-08:00

China Daily, December 19, 2011

Ambitious expansion plan by No 2 automotive group

BEIJING - Dongfeng Motor Corp, the second-largest automaker in China by sales, recently announced it will invest 30 billion yuan ($4.7 billion) in its own-brand vehicles over the next fiveyears.

Aspiring to become the top domestic automaker and a first-class international producer, its goal is to sell 3 million of its own-brand vehicles in 2016, up from about 1 million this year.

The automaker based in Central China's Hubei province said a third of the 3 million units will be commercial vehicles. It plans to develop 14 new platforms in the sector in the next five years.

Wholly owned

Another third will be passenger vehicles carrying the nameplates of Dongfeng's wholly owned brands Fengshen and Xiaokang, according to the recently announced plan.

The company said it will introduce 18 new models - cars, SUVs and MPVs - as well as three minivan series before 2016.

Its Fengshen A60 sedan rolled off the production line earlier this month and will go on sale next year. It is the fourth model under the Fengshen brand following the S30, H30 and H30 Cross.

The remaining 1 million vehicles will include cars made at its joint venture with Taiwan's Yulon Motor Co and new local brands developed at its partnerships with Nissan and Honda.

Dongfeng plans to introduce 20 new passenger cars and one family of microbuses as jointventure-built models in the next five years.

Zhu Fushou, managing director of Dongfeng, said the company will fight "on two fronts" - with joint ventures and its own-brand businesses.

The company said it aims to increase the ratio of R&D investment to 3 percent of revenues, upfrom the current 2.36 percent.

Slow to develop

Along with boosting sales, industry observers said the ambitious plan is designed to respond to criticism that State-owned automakers have long been slow to develop homegrown brands, instead relying on foreign partners to generate sales and improve technology.

Dongfeng has joint ventures with Japanese carmakers Nissan and Honda, South Korea's Kiaand France's PSA Peugeot Citroen.

Other large State-owned carmakers - SAIC Motor Corp, FAW Group, Chang'an Automobile Group, Beijing Automobile Group and Guangzhou Automobile Group - all have lucrative Sino-foreign joint ventures, but generally lack competitiveness with their wholly owned brands.

Dongfeng sold some 2.8 million vehicles in the first 11 months of this year - an increase of 12 percent from a year ago - and is expected to break the 3-million-unit benchmark in full-year sales. But only 300,000 - or 10 percent - are its own-brand cars.

Domestic drop

The market share for domestic-brand cars was down 1.5 percentage points to 29 percent inthe first 11 months, according to China Association of Automobile Manufacturers. As well, most domestic brands compete in the medium and low-end segments, which have thin profit margins.

Zeng Zhiling, director of JD Power-LMC Asia Pacific Forecasting, said that the decline in share for domestic brands was mainly due to the expiration of government subsidies on small engine vehicles that over-stimulated customer demand over the previous two years.

He predicts their share will bounce back to more than 30 percent next year on favorable government procurement policies and a resurgent overall market.

Domestic carmakers are also working hard to improve competitiveness.

SAIC Motor Corp, the largest automaker in the country, announced earlier this year that it will invest 22 billion yuan in its wholly owned brands Roewe and MG between 2011 and 2015.

Beijing Automobile Group rolled out its first own brand car at the end of 2010 and plans to introduce more than 20 new models over the next five years, including cars based on the Saab technologies it acquired. The company's goal is to reach annual sales of 700,000 own brand vehicles in 2015.

Guangzhou Automobile Group unveiled its first own-brand car last year carrying the badge Trumpchi. An SUV from the new brand made its debut at the Guangzhou auto show in November.

Fierce market

But domestic brands will be battling in the world's fiercest market. China now has the most carbrands on sale than any other country and already successful, global brands are racing to greatly expand production.

Local products will struggle for the foreseeable future in such a crowded, hyper-competitive market, said Bill Russo, senior advisor at consultancy Booz & Co.

As well, a significant number of used cars will add additional competition, as many consumers prefer a foreign-brand used car as a reasonably priced alternative to a new Chinese model, he said.

Click here to read the article at chinadaily.com

China hits back at US car imports

2011-12-16T03:14:00.000-08:00

The South China Morning Post, December 16, 2011

Beijing slaps punitive duties in move seen as retaliation for sanctions on Chinese tyre exports

by Neil Gough

Beijing's decision to impose anti-dumping duties on cars imported from America appears to be politically rather than economically motivated, but that will have minimal impact on the US car industry, say analysts and industry executives.

Starting yesterday, the Ministry of Commerce began slapping punitive duties of between 2 per cent to 21.5 per cent on exports of United States-made big-engine cars and SUVs to China.

That is in addition to the 25 per cent tariff it currently assesses on imported cars, the maximum allowed under the terms of its World Trade Organisation entry agreement.

The move appears to be Beijing's retaliation after China lost its final appeal to the WTO in September against a 2009 US move to impose anti-dumping duties on tyres imported from China.

Nevertheless, analysts said the real impact of China's punitive duties on US carmakers would be minor.

"This appears to be a retaliatory measure taken by China which only strikes at the margins, since the import car market has a rather small share of the auto market," said Bill Russo, a senior advisor at Booz & Company and the former head of Chrysler's business in China.

"Normally, such actions are taken in order to help local manufacturers. However, this makes little sense in this case, as no local manufacturer directly competes in the price segments where imported cars are positioned."

General Motors, Ford and Chrysler collectively sold 1.37 million cars in China in the first 10 months of this year, of which more than 95 per cent were made in China, according to data from JD Power and Associates. About 58,000 of those cars were imported, and not all from US plants.

"This looks like a case of killing the chicken to frighten the monkey," said Michael Dunne, president of industry consultancy Dunne & Company and author of American Wheels, Chinese Roads: The Story of General Motors in China.

"China wants to send a signal to Washington: `See how quickly we can move on your car imports? What if we decided to target Boeing instead?' Now, that would really sting."

Chrysler cars account for many of the low export volumes of US-made cars to China, as Chrysler does not have a production presence there.

The US car exports affected include Honda America's small-scale imports, a few models under General Motors' Buick and Cadillac brands, and high-end, US-made Mercedes-Benz and BMW SUVs.

"GM generally builds where we sell," Shanghai-based spokeswoman Dayna Hart said yesterday.

"In fact, GM's import volume out of the US is less than half of 1 per cent of its domestic production in China and is limited to selected Buick and Cadillac models."

Ford spokesman Trevor Hale said: "We don't export any vehicles from the US to China. Our entire China vehicle portfolio - except for the Edge [SUV], which is imported from Canada - is built locally."

US car exports to China tend to be high-priced, low-volume models whose buyers are wealthy.

"Luxury car buyers are typically more affluent and are not going to fret over this extra cost," Samsung Securities car analyst Steve Man said.

"We see little or no impact to demand for luxury cars as a result of these new duties."

Click here to read the article at scmp.com

China Imposes New Tariffs on U.S. Vehicles

2011-12-14T21:51:00.000-08:00

The New York Times, December 14, 2011

by Keith Bradsher

Click here to read the article at nytimes.com

GUANGZHOU, China — The Chinese government increased trade tensions with the Obama administration Wednesday evening by unexpectedly imposing antidumping and antisubsidy tariffs on imports of sport utility vehicles and midsize and large cars from the United States.

The new tariffs, totaling up to nearly 22 percent of the import prices, will probably have a mainly symbolic function, rather than reducing the already skimpy sales of such vehicles in China. Other tariffs and taxes already in place have limited sales of American imports by helping raise their retail prices by about three times what the same cars and S.U.V.’s sell for in the United States.

Still, firing a trade volley at American exports of automobiles, one of the most politically sensitive industries in international trade, can only escalate trade hostilities between China and the United States.

China’s move drew immediate criticism from the Obama administration.

“We are very disappointed in this action by China,” said Carol Guthrie, a spokeswoman for the Office of the United States Trade Representative. “We will be discussing this latest action with both our stakeholders and Congress to determine the best course going forward.”

The Commerce Ministry of China, which has conducted a two-year trade investigation of the American imports, gave no explanation for its decision to impose the duties. Ministry officials could not be reached for elaboration Wednesday evening.

The duties would mainly affect General Motors, which exports Cadillac S.U.V.’s and cars to China; Chrysler, which exports Jeeps; the BMW Group of Germany, which exports BMW S.U.V.’s from South Carolina; and Daimler of Germany, which exports Mercedes S.U.V.’s from a factory in Alabama.

Because of the high Chinese tariffs and taxes already in place, the vehicles are sold only in the thousands or even hundreds in China, and only to the most affluent. (A Jeep Grand Cherokee that begins at $27,490 at dealerships in the United States costs $85,000 or more in China.)

The White House announced last week that it would ask the World Trade Organization next Monday to open an inquiry into Chinese restrictions on imports of American broiler chickens.

More significantly, Chinese government agencies and companies have been furious about a current American investigation into whether Chinese solar panels exported to the United States might have received illegal subsidies or been dumped in the American market at prices below the cost of manufacturing them.

American officials have previously examined the methodology of China’s two-year-old antidumping and antisubsidy investigation of American-made automobiles and have found “significant problems,” said Ms. Guthrie, the United States trade spokeswoman.

One challenge for China, which recently celebrated its 10th anniversary as a member of the World Trade Organization, is whether Wednesday’s action will be allowed under W.T.O. rules.

The trade organization places many limits on a member nation’s ability to impose antidumping and antisubsidy measures, particularly on goods from countries that the W.T.O. has declared as having market economies, like the United States.

“Dumping” might be hard to demonstrate, given that the prices of the American vehicles — even before China’s tariff and tax markups — tend to be higher than in the United States.

The Chinese accusation of subsidies may be linked to previous comments by Chinese officials questioning whether the Obama administration provided too much federal assistance to G.M. and Chrysler two years ago during the global financial crisis.

China started the automotive trade case two days after President Obama imposed steep tariffs on surging imports of Chinese tires in September 2009. After an inquiry, the W.T.O. ruled this autumn that the American tariffs on tire imports had complied with international trade rules.

The new tariffs China imposed Wednesday will be antidumping duties of 8.9 percent for G.M. vehicles, 8.8 percent for Chrysler, 2.7 percent for Daimler and 2 percent for BMW.

The ministry separately imposed additional antisubsidy duties of 12.9 percent for G.M. and 6.2 percent for Chrysler.

The ministry’s statement said that all of the new duties would be calculated on vehicle prices that include China’s existing 25 percent import tariff for all family vehicles. So buyers will effectively pay the new antidumping and antisubsidy taxes on other Chinese taxes in addition to paying the new taxes on the value of the car.

China’s import tariff is much higher than those of other big auto manufacturing nations. The United States, for example, assesses a tariff of 2.5 percent on imported cars, minivans and S.U.V.’s.

The new Chinese duties will apply to sport utility vehicles and cars with engines of 2.5 liters or greater that are imported from the United States. The duties will be in place for two years, through Dec. 14, 2013, according to the ministry’s announcement.

BMW said that it anticipated little effect from the duties, Daimler said that it was studying them, and Chrysler had no immediate comment.

General Motors said in a statement that it was “working with relevant authorities to understand the impact of the Chinese government’s decision.” G.M. added that it would “seek a solution consistent with a constructive global trade environment, which we believe is important to both China and the U.S.”

G.M. is a leading producer of automobiles in China, through a series of joint ventures with Chinese partners. The company’s statement said that imports from the United States represented “less than half of 1 percent of its domestic production in China.”

By contrast, Chrysler’s sales in China are solely imports. The company was not allocated any factories in China when Daimler dissolved its merger with Chrysler in 2007.

As a result, Chrysler’s sales in China are tiny — only 13,686 Jeeps, 10,970 Dodges and 284 Chryslers in the first 10 months of this year, according to LMC Automotive, a British consulting firm.

Bill Russo, a former Chrysler executive who oversaw the company’s operations in China until 2008 and is now an industry consultant in Beijing, said in a telephone interview Wednesday evening that while some Chinese trade actions might benefit Chinese industries, it was unlikely that the latest move was done to help Chinese automakers.

Imported S.U.V.’s and cars cost so much more than Chinese models that “people are not shopping these on price,” Mr. Russo said. “No local company makes a product even close.”

Imported models already cost much more in China compared with their home markets because of steep Chinese tariffs, value-added taxes and a system of sales taxes that range from 1 percent on fuel-sipping subcompacts to 40 percent on large sport utility vehicles and sports cars.

The Chinese Commerce Ministry’s announcement on Wednesday was the latest in a series of zigzags on trade policy this autumn, as Chinese officials have struggled over how confrontational a stance to take now that the Obama administration has begun to challenge Chinese trade policies more aggressively.

Just three days ago, President Hu Jintao gave a conciliatory speech to observe China’s W.T.O. anniversary. Mr. Hu said that China would further open up its international trade.

But last week, the Commerce Ministry strongly criticized a recent preliminary decision by the United States International Trade Commission, which concluded that imports of Chinese solar panels had hurt American solar panel manufacturers. That decision moves the United States one step closer to imposing antidumping and antisubsidy duties on Chinese solar panels early next year.

China Passenger-Car Sales Rise at Slowest Pace in Six Months

2011-12-10T07:39:00.001-08:00

Bloomberg Businessweek, December 9, 2011

Click here to read the article at businessweek.com

China passenger-car sales rose at the slowest pace in six months, as monetary tightening and the removal of government incentives dented demand at Ford Motor Co. and Honda Motor Co.

Wholesale deliveries, including sport-utility vehicles and minivans, gained 0.3 percent to 1.34 million units last month, the China Association of Automobile Manufacturers said today in a statement. That compares with the 0.5 percent median estimate of five analysts surveyed by Bloomberg and is the slowest pace since May, when sales dropped 0.1 percent to 1.04 million cars.

China's vehicle sales have slowed this year from last year's record 32 percent expansion pace as inflation, higher interest rates and the end of a two-year stimulus plan deter purchases. Deliveries for 2011 may climb the least in 13 years, according to the auto industry group, adding to signs China's economy is slowing.

“The market is decelerating and coming down to a more sustainable pattern going forward,” said Bill Russo, a senior adviser at consulting company Booz & Co. in Beijing. Demand is still being affected by consumers pushing forward their purchases to take advantage of government incentives that have since expired and by capital constraints, he said.

CAAM, which has cut its market forecast twice this year, estimates the number of vehicles delivered to Chinese dealerships to rise between 3 percent to 5 percent this year, after surging 32 percent in 2010 on the back of tax breaks and rebates for buyers in rural areas. That would mark the first time the Chinese market would expand at a slower pace than U.S. light-vehicle retail sales, based on CAAM figures stretching back to 1998.

Including buses and trucks, total sales in China fell 2.4 percent to 1.66 million units last month, according to the association. In the first 11 months of the year, they increased 2.6 percent, with passenger-car deliveries up 5.3 percent to 13.1 million units.

Minivans fell 9.5 percent last month in China, leading declines in passenger-car deliveries, according to CAAM numbers. That extends this year's slide to 9.8 percent.

Russo to Speak at European Union Chamber Of Commerce in China Auto-Components Working Group Meeting

2011-11-29T18:01:00.001-08:00

December 16, 2011, Shanghai, China

Invitation:

Date: 16^th December, 09:00 – 10:30 a.m.

Venue: European Chamber Shanghai Office: 333 Huai Hai Middle Road, Unit 2204, Shui On Plaza (22nd floor).

The European Chamber is delighted to invite you to 2011’s last Auto-Components Working Group Meeting, which will be held on 16^th of December 2011 from 9:00 – 10:30 a.m. at the European Chamber Shanghai office (see the addresses above).

At the meeting, we will have the pleasure to welcome Mr. Bill Russo, Senior Advisor from booz&co., to speak to members about“Leveraging the Rapidly Emerging Markets to Achieve Global Competitive Advantage”. The centre of gravity for many industries’ global business growth in the 21st century is now in Asia, and China and India have emerged as the most prominent among the rapidly emerging economies. Lured by the promise of these markets, along with the scale economies made possible by this and their respective cost structures, multi-national corporations are shifting their investments and organizational focus to these important markets. This presentation will suggest strategies aimed at leveraging the China-India demand-side and supply-side opportunities.

Tentative Agenda:

1. (9:00-9:45) Presentation on “Leveraging the Rapidly Emerging Markets to Achieve Global Competitive Advantage” by Bill Russo, Senior Advisor, from booz&co.

2. (9:45-10:00) Presentation on “Stakeholder Mapping for the Auto-Components industry in China” by Mike Yung, Assistant to the Working Group, the European Chamber.

3. (10:00-10:15) Discussion on Lobby Planning

4. (10:15-10:30) Any Other Business

Please register your attendance with Mr. Mike Yung at myung@europeanchamber.com.cn by Thursday 15^th of December 2011, 12:00 p.m.

Please let us know if you would like to raise a certain topic or add an item to the meeting’s agenda.

For any further information about the Shanghai Auto-Components Working Group or the European Chamber in general, please do not hesitate to contact Mr. Onur Yalcintas at 021 6385 2023 ext. 122 or oyalcintas@europeanchamber.com.cn

Leveraging the Rapidly Emerging markets for Global Competitive Advantage

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Russo to Address EU Trade Commission on "China moving up the value chain and the role of technology transfer"

2011-11-27T22:38:00.001-08:00

Brussels, Belgium, December 9, 2011

Seminar with China Watchers, Brussels

9 December 2011

Seminar and discussion will address the following questions:

How do you assess the future competitiveness of European industry in general and in these emerging industries, in particular, and how should Europe position itself? Is there sufficient evidence to remain cautiously optimistic, or are China's policies aiming to make its economy greener a blessing in disguise?
To what extent is technology transfer to China happening on a non-consensual basis, which endangers our companies’ competitiveness by creating the rise of future Chinese competitors in the same market segment?
How can European companies design creative solutions to minimize the risk to their intellectual property associated with technology transfers?
Are global production chain strategies, e.g. by making only parts of the puzzle in China, a sufficient protection against technology transfer? What trends can we see developing in China and the wider Asian region?
With much manufacturing and assembly already taking place in China, are we not risking a situation where 'innovation on the work floor' will also increasingly shift to China?
To what extent are EU companies considering partnering with Chinese companies to become more competitive on the Chinese market – but also to become stronger internationally on third markets?
How should the EU position itself (e.g. via research or education programmes) with a view to better integrating with, and tapping into, this huge innovative market that is in the making?

Advisors:

Ms Alicia García-Herrero
Mr Jean-Claude Deschamps

Confirmed experts:

Mr. Chris Strutt, Senior Vice President Government Affairs, Public Policy and Patient Advocacy, GlaxoSmithKlein
Mr Stephan Csoma, Senior Vice President, Umicore
Mr Peter Brun, Senior Vice President, Vestas
Mr Sandro Zero, Vice President and Export Control Officer, Areva
Mr Ulf Pehrsson, Vice President Government & Industry Relations, Ericsson
Mr Bill Russo, Senior Advisor, Booz & Company
Mr James McGregor, Senior Counselor, APCO
Mr Simon Cheetham, Lead Expert China IPR SME Help Desk
Mr Thomas Pattloch, Senior Counsel Taylor Wessing, former EU IP Officer Beijing
Prof François Godement

China Moving Up the Value Chain and Role of Technology Transfer

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China Pledges Fair Treatment Of Foreign Auto Firms In NEV Program

2011-11-22T15:36:00.001-08:00

Inside US-China Trade Newsletter, November 23, 2011

At the Joint Commission on Commerce and Trade (JCCT), China thisweek offered a number of confirmations and clarifications with respect toforced technology transfer and availability of subsidies that would mean fairtreatment of foreign auto firms as they seek to compete for market share andset up production facilities for electric vehicles, according to a fact sheetissued at the conclusion of the Nov. 20-21 meeting in Chengdu, China.

China is projected to manufacture five million of these new energyvehicles by the year 2020. An auto industry source said the statements in thefact sheet — if they are implemented as written — “on the surface” wouldseem to suggest that “Christmas done come real early this year.”

In the joint fact sheet, China “confirmed that it does not and will notmaintain measures that mandate the transfer of technology.” It also “clarified”that “‘mastery of core technology’ does not require technology transfer forNEVs,” according to the fact sheet.

The Chinese further confirmed that “the establishment of brands is acorporate decision and that the Chinese government does not and will notimpose any requirements for foreign-invested companies to establish domestic brands in China."

In addition, China pledged that “foreign-invested enterprises are eligible on an equal basis for subsidies or other preferential policies for NEVs with Chinese enterprises, and that these subsidies and preference programs will beimplemented in a manner consistent with WTO rules.”

The latter public confirmation may mark an advance over what has been explicitly stated in the past abouteligibility for NEV programs, according to Bill Russo, president of the Beijing-based automotive consultancySynergistics Limited. “While it was never stated who would be eligible for subsidies, it was never unambiguously stated whether foreigninvested joint ventures would be eligible, and this apparently clarifies that they are indeed eligible,” he said in a Nov. 21email. Russo noted, however, that the second part of the sentence that mentioned general consistency with WTO rules,“leaves room for future adjustments.”

According to another industry source, the test case for Chinese credibility on its JCCT NEV statements will beGeneral Motors’ Chevy Volt, which it can be expected to seek to import into China soon, possibly before the end of 201,even though GM has already agreed to produce a domestic brand NEV, the Baojun, in its joint venture with ShanghaiAutomotive Industry Company (SAIC).

China also affirmed at the JCCT that the “views of all stakeholders will be considered,” including those of the UnitedStates, as it develops “possible future NEV support programs.”

U.S. auto firms in the past complained that China’s National Development and Research Commission (NDRC) hasinformally been forcing technology transfer by not approving additional production capacity or new plants unless theforeign joint venture partner agrees to establish a domestic brand in the NEV space (Inside US-China Trade, March 16,2011).

As a result, nearly all major foreign automakers except Ford have already agreed to produce a domestic NEVbrand.

U.S. automakers also had been worried that draft regulations by NDRC and the Ministry of Industry and Information Technology (MIIT) implementing the NEV policy were aiming to force technology transfer by requiring that any NEV joint venture must demonstrate “mastery” of at least one of three key technology areas: electricbatteries, motors or control systems. Given the relative advanced state of foreign firms’ technology in these areascompared to that of potential domestic partners, the fear was that such technology would have to be provided by theforeign firm into the NEV JV.

Another JCCT outcome unveiled on Nov. 21 was a Chinese assurance that it will provide “a fair and level playingfield for all companies, including U.S. companies, in China’s newly emerging industries.”

Those industries include high-end equipment manufacturing, energy-saving and environmentally-friendly technolo-gies, biotechnologies, new generation information technologies, alternative energy, advanced materials, and NEVs,according to the fact sheet.

According to data provided by U.S. industry, China plans to invest $1.5 trillion in those sectors over the next fiveyears.

Other JCCT outcomes were announced with respect to medical devices, pharmaceuticals, smart grid technologies,standards and conformity assessment, telecommunications goods and services, and travel and tourism, The document alsooutlines a series of “cooperative activities” the two sides have agreed to pursue under the auspices of the JCCT IPRWorking Group, as well as under the JCCT Commercial Law Working Group and with regard to cloud computing andmotorcycles.

China Pledges Fair Treatment Of Foreign Auto Firms In NEV Program

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An Assessment Of The Development Of China’s Automotive Industry On The Tenth Anniversary Of WTO Accession

2011-11-16T16:18:00.001-08:00

Auto.Sohu.Com, November 16, 2011

Click below to read the article

in English

in Chinese (中文) : 罗威：入世十年中国汽车业未来任重道远

by Bill Russo

Since joining the WorldTrade Organization (WTO) at the end of 2001, the Chinese car market has grownfrom about 2 million vehicles to over 18 million vehicles sold in 2010, anincrease of nearly nine times. In fact, overthe past decade from 2001-2010, the compound annual growth rate of the Chinesecar market was an astonishing 34 percent. As the largest market in the world, China hastaken the center stage in the battle for dominance of the 21^stcentury automotive industry.

However,automotive companies in China today are finding themselves confronted witha different set of challenges from what they were facing just a few years ago. From the demand side, Chinese consumers arebecoming more selective and are making more diverse and personal choices:making their own individual choices, not just for their family. Meanwhile, demand growth is increasinglydriven by lower-tier (Tier 3 and below) cities more than large and megacities. The Chinese government has alsoreleased more restrictive regulatory requirements for safety, environmentalcare and foreign investment. From thesupply side, almost every international player has recognized China as theirlargest source of future profit and has thereby committed significantinvestment. Additionally, Chinese localbrands have never been so aggressive in fighting for market share thantoday. All these challenges are pushingglobal as well as local vehicle manufacturers to alter their thinking and adoptnew strategies to win in the China auto market.

In addition, there arenumerous structural problems in the China automotive industry. While light vehicle sales stand at historichighs, overcapacity and lack of scale remain major problems. This is true largely because of the highlyfragmented and scattered OEM landscape. China’s auto industry today includes over 100 registered automotivemanufacturers. This creates a significant challenge to the health of the manybusinesses that struggle to sustain operations in an environment where economicgrowth is by no means assured. Additionally, approximately 70% of passenger vehicles sold carry aforeign brand, which makes it very difficult for Chinese domestic brands togenerate sufficient volumes or profit margins to remain economically viable.

This fragmentation alsomakes it very difficult to focus and allocate resources to the development ofcritical technologies related to safety and fuel economy. This is an area of particular weakness forChinese OEMs who have relied on their foreign partners to lead the developmentof key component technologies.

The remarkable growth ofChinese car market was created in partnership among international and domesticcar manufacturers. Foreign manufacturersprovided funding, technology and managerial expertise to support thedevelopment of Chinese car manufacturers and suppliers. However, Chinese car companies remaindependent on international sources for technology innovation and product development.

The determining factor inwhether a car company can compete in the international markets is whether theyhave the capacity to meet local consumer as well as regulatoryrequirements. While Chinese firms havelearned very quickly how to assemble cars and develop supply chains, they arevery inexperienced at the vehicle development and synthesis process. An automobile is a complex engineered systemrequiring advanced technology and know-how in order to test and validate theachievement of benchmark targets in the areas of performance, fuel economy,safety and quality. It is in this areathat Chinese firms are weakest. Chinesevehicles, while improving rapidly, are still not up to the world-classstandards required to compete in the mature markets of the world.

Chinese automotive makers typicallylack the knowledge and experience of developing core technologies of importantvehicle components and doing sub-systems integration. Overseas car companies startedby developing and integrating core component technologies internally and haveonly recently been seeking external outsourcing partners. World-class vehiclemanufacturers retain the critical skills that define their brand identity inorder to deliver a unique value proposition.

The capabilities of localChinese OEMs have come a long way in a short time. This is, after all, a relatively new industryfor China and the Chinese firms will learn quickly as they grow their share ofthe domestic market. However, much workneeds to be done to gain acceptance of the Chinese consumer of Chinesemanufactured goods. This must be thefirst priority as it stands to reason that if it is difficult to convince aChinese consumer, it will be even harder to convince a foreign consumer toaccept a “Made in China” car. The factis that with the proper attention to quality management discipline and with thetransfer of critical know-how in the area of vehicle synthesis and development,it is indeed possible for Chinese firms to compete globally.

Several Chinese companiesare attempting to acquire these capabilities “inorganically” by acquiring the assets ofdistressed but well-known international manufacturers. Geely’s acquisition ofVolvo, and Pangda and Youngman’s bid to acquire Saab are recent examples. It stands to reason that such an approachcould significantly shorten the time frame for going global. However, such acquisitions are difficult andoften unsuccessful. For example, SAIC’s acquisition of Ssangyong ultimatelyfailed because the interests of both parties were not aligned. Those who daretake on such acquisitions are also wise to learn the lessons from others who havetried – and often failed – to use an acquisition to accelerate the process.

It is clear that China’sauto companies aspire to become leading global auto companies. However, for Chinese brands to successfullycompete in the global auto industry they must:

1. Strengthen their domestic base through consolidation

2. Determine the Chinese brand value proposition

3. Build critical vehicle development competencies required to achievebenchmark targets in line with their brand’s Unique Selling Proposition

And China’s policy makersmust help by accelerating the consolidation of today’s fragmented auto industryand eliminating the weak brands in order to ensure the survival of the strongerbrands.

China’s auto market remains buoyant

2011-11-16T03:08:00.001-08:00

The Financial Times, November 15, 2011

Eric Zhou needs a car, and he plans to buy one – despite the global financial crisis.

Mr Zhou, a 36-year-old engineer working in Shanghai, is typical of millions of consumers who are keeping the Chinese auto market relatively buoyant as the Chinese economy is slowing and sectors from property to steel are suffering from tighter credit.

Mr Zhou says he and his wife “didn’t consider the financial crisis” when they decided to buy a car to take their son to school. “In fact, we don’t feel the financial crisis is causing any impact on our lives at all,” he said.

The same cannot be said of China’s total automotive market – the world’s largest – which is slowing, partly due to credit tightening moves by the central government. Sales of Mini commercial vehicle – small vans used largely for business – are down 5 per cent year-on-year in the first 10 months of 2011 and manufacturers are feeling the strain.

The story for passenger cars is very different. They remain resilient even after the withdrawal of tax incentives to buy small cars.

Car sales increased by 6 per cent year-on-year in the first 10 months of the year, and a recent consumer survey showed continuing strong demand for cars, especially at the higher end of the market.

Mercedes-Benz’s sales have risen 36 per cent this year, and General Motors’ sales last month increased 10 per cent year-on-year, although GM had to slash prices on its mini commercial vehicles.

This year’s 6 per cent increase in car sales, however, looks anaemic compared with the past couple of years: passenger car sales rose 53 per cent in 2009 and 33 per cent in 2010.

In the west, such a dramatic decline in sales would be seen as very bad news for the overall economy. But in China, auto market executives, industry analysts and ordinary consumers tell a different story.

“Last year’s market was on steroids, driven by subsidies, but this year the government is trying to wean the market off those drugs,” says Bill Russo, head of Synergistics auto consultancy in Beijing and former head of Chrysler in China.

Early in 2009, Beijing introduced tax incentives for small cars, as part of a broader economic stimulus package that inflated car sales in 2009 and 2010. The tax cuts were withdrawn this year. As a result, the China Association of Automobile Manufacturers (CAAM) recently forecast total vehicle sales would rise by less than 5 per cent this year.

Mr Russo says that is not bad news for the Chinese car market: “I don’t think car sales are signalling that the fundamentals are weak at all. If anything, it is the opposite: 4 or 5 per cent growth coming on top of a blowout year last year is pretty solid,” he says.

Passenger cars, one component of total vehicle sales, could grow even more strongly, by 10 or 11 per cent this year, says Klaus Paur of Synovate, a Shanghai auto consultancy. “The fact that we had two tremendous years of growth has blurred our view of reality. The reality is we still have a growing market, just at a higher level,” he says.

Chinese consumers are much less affected by the pessimism that has beset shoppers in other countries. According to the latest annual survey of Chinese consumers by McKinsey, they are more optimistic than last year: 58 per cent think their income will rise in the next year compared with 39 per cent in 2010.

Shaun Rein, whose firm China Market Research Group interviewed 300 consumers in eight cities recently about their car purchasing plans, says “the economy is not stopping them from buying”.

As Dan Akerson, GM chief executive, said in Shanghai earlier this month: “You can’t have totally unbridled growth in a country evolving as quickly as China.” He predicted 7-10 per cent market growth this year, adding: “I think that’s very healthy.”

China’s auto market remains buoyant - FT.com
http://www.ft.com/intl/cms/s/0/e62cbe30-0f8e-11e1-88cc-00144feabdc0.html#axzz1dqaE48JR

Bill Russo to Conduct Analysts' Roadshow on Week of Nov. 21

2011-11-15T20:41:00.001-08:00

Singapore, November 21-22, 2011
Hong Kong, November 23-24, 2011

Over 20 meetings and group discussions with leading institutional investors will occur over a 4-day period. The briefing topic is:

An Assessment Of Trends And Opportunities In China’s Automotive Industry

Keeping Pace With Rapid Developments In The Battleground For Dominance Of The 21st Century Global Auto Industry

China’s Dash for Growth Slowed by Costs, Capacity Issues

2011-11-09T22:43:00.000-08:00

Ward's Auto World, November 8, 2011

SHANGHAI – After experiencing rapid development in the past decade, China’s auto industry now faces tough challenges: overcapacity, rising material costs and slumping sales.

That’s the consensus among experts attending the ninth annual automotive industry forum held here by the China Europe International Business School. Annual production and sales growth in China likely will drop 5%-10% this year and next, with some estimates as low as 5%, from previous highs of 25%, says Dong Yang, vice president- China Association of Automobile Manufacturers.

CAAM says industry sales reached RMB4.35 trillion ($684.4 billion) in 2010. But 2011 is proving to be difficult, with rising inflation and an appreciating yuan.

This is particularly the case for FAW Group, the third-largest auto maker in China, which has just revealed a third-quarter loss of RMB49 million ($7.7 million). FAW says its business was seriously affected by “tight monetary policy, inflation and the end of the government’s (vehicle-replacement) incentives program.”

Financing remains tight as Chinese banks are reluctant to lend, given the central bank has raised the 1-year deposit rate and lending rate by 25 points to 3.5% and 6.6%, respectively.

China’s consumer price index, which has been running high this year, rose 6.1% year-on-year in September. The Chinese government predicted the CPI would climb 5.5% this year from 2010.

What short-term succour exists for the Chinese auto makers comes with a green tinge: Local governments in six major cities – Changchun, Beijing, Shanghai, Hangzhou, Hefei and Shenzhen – now are offering subsidies up to RMB60,000 ($9,440) for consumers buying electric vehicles, sending a clear message that clean-energy cars should be the industry’s next big thing.

GM recently launched ’12 Buick LaCrosse with eAssist.

First in line, Shenzhen-based BYD launched China’s first all-electric passenger car, the e6 in October. The car is priced at RMB369,800 ($58,179) before local subsidies.

Foreign auto makers stress at the conference here plans to push into China’s EV market. Nissan Chief Operating Officer Toshiyuki Shiga notes his company’s electric Leaf, which is priced at about RMB208,356 ($32,780) in the U.S., recently received sales approval from the Chinese government.

EVs will not be the only alternative-propulsion vehicles in China in the next decade, says Zhang Jinhua, vice secretary general of the Society of Automotive of Engineers of China. Others, including hydrogen fuel-cell cars and hybrid vehicles, will generate significant sales by 2020.

“While electric cars are zero emission, hybrid cars are less-demanding on the infrastructure, and fuel-cell (vehicles) can be used for a long-distance drive,” he says. “They all have their own advantages.”

General Motors with joint-venture partner SAIC recently introduced a Buick LaCrosse with eAssist, which the auto maker says could lower average fuel consumption 20%.

Priced at RMB265,000 ($41,692), it also is the first model targeting the Chinese middle class that sells for less than RMB300,000 ($47,198). GM-SAIC plans to add capacity to build 410,000 vehicles a year in order to produce 1.9 million units annually by 2015.

FAW is adding capacity to produce 960,000 units annually by 2015, while Volvo-owner Geely plans to add capacity to manufacture 1 million vehicles, in order to reach 1.68 million units annually by 2015. Great Wall and Chang’an will add 1.3 million and 900,000 units of capacity, respectively, in the same timeframe.

The risk here of course, especially given falling demand and rising material costs, is overcapacity, especially for those auto makers that fail to improve marketing and research-and- development skills.

These are the key challenges facing Chinese auto makers in the coming years, says Bill Russo, head of the Booz-Allen global-strategy firm’s automotive practice in Beijing.

Russo, a former Chrysler China executive, tells WardsAuto the market’s future will be decided by which auto makers get sales-and-service networks in place in the emerging second-tier cities.

This is where the bulk of new sales are expected to emerge as Beijing, Shanghai and Guangzhou restrict car sales to cut down on traffic congestion.

Russo predicts annual sales will hit 20 million vehicles by 2015, but he sees international brands’ local joint ventures retaining their dominance. The domestics’ biggest challenge will be overcapacity, he says. “Lower utilization at local marques will drive their manufacturing costs upwards.”

Exports offer one way out for brands saddled with excess capacity, and certain OEMs, such as Great Wall, have been aggressively expanding overseas sales. But there are issues to overcome. Marketing abilities remain a particular challenge for local brands both in export and domestic sales. Developing reliable parts and service networks are other weaknesses.

These issues partly could be addressed by foreign acquisitions, experts here say. Hangzhou-based Geely, for example, plans to sell 200,000 Volvos in China by 2015. And Tangshan-based Pang Da Automobile Trading and Jinhua-based auto maker Youngman are jointly paying €100 million ($138 million) to buy Sweden’s Saab. The deal is waiting for regulatory approval.

But Dong, of CAAM, warns going abroad is risky and requires a lot of research and negotiations. “You have to show the foreign government what kind of benefits you are going to bring them and comply with local regulations,” he says.

Auto makers in China believe increasing competitiveness will see profitability squeezed further, compelling them to expand their portfolios while also refreshing existing models.

Hua Ming, who runs a Volkswagen dealership in Beijing’s business district, has seen a 20% drop in sales so far this year, which he blames on the city’s new limits on car ownership. To compensate, he has opened a dealership in Shijiazhuang, the capital of neighbouring Hebei province.

Hua says Chinese auto makers have a chance to capture market share if they’re faster in expanding sales-and-service operations to lower-tier cities, where average per-capita income stands at half the Beijing urban average of RMB120,768 ($19,000).

“But all brands have to understand rural preferences for more durability and less fancy electronics and features,” he says.

– with Mark Godfrey in Beijing

Click here to read the article at WardsAuto.com

Buffett-Backed BYD E6 No Match for BMW Where Price Matters

2011-11-08T07:14:00.000-08:00

Bloomberg Business Week, November 7, 2011

By Bloomberg News

Nov. 7 (Bloomberg) -- For the price of BYD Co.’s electric vehicle, Chinese consumers could buy a BMW and still have enough spare cash for more than one year’s worth of gas.

BYD’s E6, used in Shenzhen as taxis, has been on sale since Oct. 26 to individuals for 249,800 yuan ($39,300) -- after government subsidies. That’s 36 percent more expensive than Bayerische Motoren Werke AG’s 120i and 16 percent higher than Audi’s A3 Sportback.

The price, coupled with a lack of charging stations, illustrates why the Chinese carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc. may turn off consumers. BYD is counting on electric cars for future growth as it faces slowing demand and mounting competition with gasoline-run automobiles in a country where the average household makes less than 60,000 yuan in disposable income a year.

“It will take 5-to-10 years and further development of the technology and infrastructure before retail consumers will consider” purchasing electric vehicles, said Bill Russo, a senior adviser at Booz & Co. in Beijing. “Saving the planet is not their priority.”

China, the world’s largest polluter, is promoting alternative-energy vehicles to reduce emissions and fuel imports. The government has a five-year plan that calls for 1 million electric-powered automobiles to be on its roads by 2015, according the Ministry of Science and Technology.

The central government is offering anyone who buys an energy-efficient car in Shanghai, Shenzhen and four other Chinese cities, a 60,000 yuan subsidy.

Electric Cars

BYD says customers will get their money’s worth. The five- seater E6 can run for 300 kilometers (186 miles) per charge, comes equipped with keyless ignition, an onboard navigation system and rear-view cameras, according to the company. The car is available at nine dealerships in Shenzhen, where BYD has its headquarters, and its availability will be expanded to other cities, according to the company.

“We are confident that E6’s quality will appeal to consumers,” Senior Vice President Lian Yubo said in an interview in Shenzhen on Oct. 26, declining to give a sales target. “There is limited production capacity and supply of the car so we think the price is appropriate.”

The E6 will cost $672 a year in power bills, compared with $1,571 in fuel costs for an equivalent family sedan that runs on gasoline, according to BYD projections based on annual mileage of 15,000 miles. BYD’s self-developed iron-phosphate battery takes 40 minutes to fully charge at public stations and as long as six hours when plugged in at home.

First Mover

Development of electric cars is a “key strategy for BYD,” the company said in an e-mail. The first major domestic automaker to offer electric vehicles to individual buyers in China, BYD has failed to translate head starts into market share in the past.

In 2008, it introduced the plug-in hybrid car F3DM in China from 149,800 yuan, compared with 59,800 yuan for the gasoline version. The automaker sold 906 of the dual-powered cars as of September, according to the China Association of Automobile Manufacturers.

BYD, formed 16 years ago as a battery maker, began developing electric cars in 2003, when the company expanded into automobile manufacturing. Its investments in the technology include a 1.5 billion yuan production line in Huizhou, Guangdong province, to make rechargeable batteries for cars, according to spokeswoman Veronica Jiang. She declined to give an investment amount for the E6.

MidAmerican Energy Holdings Co., a unit of Berkshire Hathaway, in July 2009 bought 9.9 percent of BYD for HK$1.8 billion, or HK$8 apiece. The stock climbed to as high as HK$85.50 in October that year and has since declined 78 percent in Hong Kong, last closing at HK$18.96.

Profit Plunge

Earnings are falling too. The company said Oct. 28 it expects profit to decline by as much as 65 percent this year after dropping 89 percent during the first half. China’s end to tax breaks for small cars led to 13 straight months of lower sales at BYD before a rebound in September, according to the nation’s auto manufacturers’ association.

The Chinese automaker faces a difficult task in convincing consumers to choose the E6 over entry-level luxury cars from companies such as BMW and Volkswagen AG’s Audi in the world’s largest car market, said George Yin, an analyst with BOCOM International Holdings Co. in Beijing.

“There are way too many choices for Chinese consumers to shop for both foreign and local brands,” he said. “It’s a bad strategy to start as a taxi before expanding to retail sales if BYD really wants to make the E6 a volume product.”

Lexus, Audi

Audi’s A3, equipped with a guiding system that helps drivers parallel park, starts from 216,000 yuan, according to Cheshi.com, a pricing guide tracking more than 3,000 dealers in the country. The BMW 120i hatchback sells from 184,000 yuan, according to the website.

Still, the E6 is cheaper than Toyota Motor Corp.’s Lexus CT 200h hybrid hatchback, which was introduced in China on the day BYD unveiled the E6 and starts at 279,000 yuan. The car features a voice-activated GPS navigation system and radar cruise control.

BYD is counting on the government to help boost the popularity of the E6.

The city government will strive to facilitate the usage of electric vehicles and promote the E6, Li Ganming, a deputy director of the National Development and Reform Commission’s Shenzhen branch, said at last month’s BYD event, without elaborating.

The fleet of E6 taxis, operated by Pengcheng Electric Taxi Co., has clocked 600,000 kilometers since they were introduced in Shenzhen in May 2010, the company said on its website.

Domestic rivals say they’re in no rush to sell their own electric vehicles. Anhui Jianghuai Automobile Group Co., China’s biggest exporter of light trucks, will wait for the government to build more charging stations before starting sales of EVs to the public, Yang Jun, a deputy general manager with the automaker, said last month. The automaker has sold 550 electric vehicles to its employees.

Shenzhen, which spans across 1,953 square kilometers, has 60 charging stations. By comparison, neighboring Hong Kong, whose area is 43 percent smaller, plans to triple its number of charging stations to 1,000 in a year, Edward Yau, the city’s environment secretary, said in September.

“While being first carries the benefits for building an image as a technology leader, I believe we have already seen how quickly that can turn into a burden,” said Booz’s Russo. “The price needs to come down substantially in order to attract retail consumers.”

Click here to read the article at business week.com

Chinese carmakers target export markets

2011-10-31T02:57:00.000-07:00

The Financial Times, October 31, 2011

China’s automobile industry is planning an overhaul as slowing sales at home spur a boost in vehicle exports, which are up 75 per cent so far this year, compared with last year.

China is hoping for a silver lining to the global financial crisis in the form of a chance to transform itself from a low-cost to a high-added-value economy.

Some car market analysts think the country finally could be on the brink of realising its ambition to become the car factory to the world.

As exports climb, some have begun to wonder if China could even pose a threat to global carmakers such as General Motors, Volkswagen, and Toyota in developed markets such as the US and Europe, or if it will remain stuck selling cheap cars to emerging markets.

Sergio Marchionne, chief executive of Fiat and Chrysler, recently admonished global carmakers to take China’s ambitions seriously.

At an auto industry conference in the US state of Michigan in August, Mr Marchionne said: “Even assuming China were to export only 10 per cent of what it produces” – which some analysts forecast will be 30m vehicles by 2015 and 40m by 2020 – “the risk we face in our home markets is enormous.”

The push by Chinese carmakers for increased sales “in markets outside China is gaining momentum”, says Namrita Chow of IHS Automotive in Shanghai.

Chery, a leading state-owned carmaker, has so far this year boosted exports by more than 80 per cent from last year.

It plans to build a $400m factory to assemble cars in Brazil as well as production facilities elsewhere in Latin America. Chinese carmakers JAC and Lifan both have ambitious plans for overseas expansion and truckmaker Beiqi Foton intends to build a plant in India.

But while excess capacity at home will drive Chinese carmakers to export, analysts say that will not necessarily guarantee success in markets beyond their current mainstays of Latin America, the Middle East and Russia.

“Until ‘Made in China’ can attract more affluent Chinese buyers, it’s unrealistic to expect that [Chinese carmakers] can win over more experienced and discerning consumers in the more mature markets,” says Bill Russo of Synergistics auto consultancy in Beijing, former head of Chrysler in China.

“Until that happens, they will be limited to selling to consumers shopping on price.”

Even the recent sharp rise in exports is deceptive, says Yale Zhang of Auto Foresight, adding that exports are merely recovering from an artificially low base hit amid the 2008 global financial crisis. Most analysts agree that the main force behind the current export boom is that Chinese carmakers are struggling to maintain rapid sales growth in the face of weakening domestic demand. They are even losing market share to the global OEM’s (original equipment manufacturers) during the slowdown.

But any worries of a serious pick-up in competition for global carmakers from Chinese rivals – at least in developed markets – are probably premature. “Even in the domestic market, Chinese cars cannot compete with European and American cars, not to mention in the US and European markets,” says Zhang Junyi of Roland Berger in Shanghai.

Even in emerging markets, the Chinese OEMs are facing intensifying competition in overseas markets from European, American and Japanese carmakers struggling to diversify away from their own slow-growing home markets.

“In the long term, success abroad will have to build on success at home,” says Klaus Paur of Synovate, a Shanghai auto consultancy.

Click here to read the article at FT.com

BYD a victim of its own grand predictions

2011-10-27T04:23:00.000-07:00

The Financial Times, October 26, 2011

BYD, the Chinese carmaker backed by billionaire US investor Warren Buffett, picked a brand name that stands for “Build Your Dreams”, but over the past year many of its dreams have become fantasy.

The Shenzhen-based company, which makes conventional and electric vehicles, last year predicted it would sell 800,000 cars. It later scaled down its forecast to 600,000, but missed that target despite breakneck growth in the Chinese auto market. It has repeatedly said exports of its electric cars to the US were on the horizon, but has repeatedly moved that horizon.

After rapidly expanding its dealer network to cover some of China’s smallest cities, BYD reversed course. According to the Chinese media, it now plans to fire as many as two-thirds of its 2,600-strong salesforce. Several senior executives have quit and net profit fell 89 per cent in the first half of 2011, compared with the same period last year.

Many are now questioning whether the dream is over for BYD – and with it, for China’s electric car industry. Or can China, led by BYD, still bypass the internal combustion engine and lead the world in alternative fuel vehicles?

After starting out in 1995 as a maker of rechargeable batteries, BYD built its first branded conventionally powered car in 2005. Four years later, it had the top-selling conventional compact car in China, and Wang Chuanfu, its founder, was predicting that BYD would be the world’s biggest car company by the middle of the next decade.

“BYD is a victim of its own PR,” says Bill Russo, head of Synergistics, a Beijing auto consultancy, and former head of Chrysler in China. “It overinflated expectations and then under-delivered.”

BYD did not respond to requests for comment.

Zhang Junyi, automotive consultant at Roland Berger in Shanghai, says BYD expanded its dealer network by more than 2,000 dealers – including some previously involved in different businesses who had never sold cars before – “without detailed analysis of the market”.

“When you have problems with dealers, you definitely have problems yourself,” says Mr Berger.

All of BYD’s problems so far involve the company’s conventional cars powered by internal combustion engines – a century-old business to which BYD is a newcomer.

Sales of its full electric car to private buyers have only just started, with the E6 rolled out to retail customers in Shenzhen on Wednesday, though some of its F3DM plug-in hybrids have been sold to car rental companies. E6s are already being operated by vehicle fleets in Shenzhen.

It was the alternative-fuel side of the business that excited Mr Buffett, and here too there have been problems. Industry insiders who know the company well say BYD has struggled with consistency and quality control, including in its EV batteries. Automotive batteries are much more complex to manufacture and manage than the smaller ones used in phones and laptops.

“How do you take a mediocre internal combustion engine product and a mediocre battery product, and even try to make a mediocre electric car, much less a good electric car?” asks one executive of a competing company who knows BYD well.

BYD’s problem could be exacerbated by the fact that Beijing is rethinking its previous singular focus on electric vehicles. China had planned to hurdle an entire generation of conventional engine technology to develop what Beijing hoped would be an early advantage over the west in electric vehicles.

Now, frustrated with delays to the original timetable, decision-makers in Beijing are leaning toward favouring all technologies that improve fuel efficiency, not just EVs.

Nevertheless, auto industry analysts say they may have initially overstated the potential of BYD, but that it would be just as wrong now to exaggerate its problems.

“There are a lot things that need to be done to fix BYD, but I don’t think it’s terminal,” says Mr Russo.

Another analyst says the company has proved that its management is “not completely incapable”, adding that it just needs a viable long-term strategy and that overall, “the brand is still basically OK”.

Dieter Zetsche, chief executive of Daimler which has a technology joint venture with BYD to develop electric cars, recently defended the company, saying reports about its decline were exaggerated.

Mr Zetsche told the Frankfurter Rundschau that BYD could neither “walk on water”, as was previously asserted, nor had its managers become “also-rans”, as has been claimed more recently.

And as Guo Guangchang, chairman and founder of Fosun, China’s largest private conglomerate, told the Financial Times recently: “BYD is a good company: even good companies make mistakes.”

Click here to read the article at FT.com

福特提速是中国机会还是另一个遗憾？

2011-10-19T22:39:00.000-07:00

汽车商报10月12日报道 福特今年在中国比以往五年中的任何时候都活跃。9月24日，福特集团总裁兼CEO艾伦·穆拉利和福特亚太地区CEO韩瑞麒来到中国，出席长安福特马自达重庆变速器工厂奠基仪式，并参加重庆市长国际经济顾问团年会。就在前一天，福特宣布任命David Schoch为福特中国董事长，此前这一职务一直由韩瑞麒兼任。虽然这一职务任命要到11月才能生效，但将中国区业务独立，至少反映了福特中国态度的转变。

今年4月，福特刚刚宣布了未来四年在中国的扩张计划，其中包括到2015年之前，在中国市场推出15款新车，将在去年在华经销商340家的基础上至少翻一番。除了第一款车将是明年推出的新一代福克斯之外，其他都还未确定，但当下这个大步跃进的姿态，的确与福特过去五年在华的缓慢发展形成鲜明对比。

三个致命伤

一个不争的事实是，福特进入中国的十个年头里，其在市场中的地位始终不及它在全球范围内同水平对手通用和大众。对此，Booz & Company管理咨询公司高级顾问罗威(Bill Russo)向汽车商报记者表示，福特在中国的问题主要存在于三个方面。“一是产品跟不上国内消费者不断变化的购车需求。二是福特在中国只依靠单一品牌，特别是缺少一个更低端品牌来帮助福特在未来市场快速增长。三是与通用、大众和现代等企业相比，福特在华本土化程度较低，尤其是在产品研发方面主要还是依赖于美国总部。”较之通用、大众在华丰富的产品线，福特显得过于单薄，福特SUV在美国大卖，在中国市场却错过最为火暴的时期。除了产品引入速度过慢，福特在中国频繁的人事调动也一直给外界传递出不稳定的信号。即将就任的福特中国CEO一职在短短五年内，从程美玮、葛致诺、韩瑞麒(兼亚太CEO)再到现在的David Schoch，人事变动达四次之多。

今年4月，福特发布中国未来规划，6月的全球规划中又提到，到2015年前后，公司年销量将从2010年的530万辆上升至约800万辆，增长幅度约为50%。预计到2020年，公司汽车产品销量中约60%~70%将来自亚太和非洲区，而当下中国市场占亚太地区60%。

然而，就在福特终于决定加大力度投资中国市场的同时，却必须面对中国汽车行业整体增长放缓的事实。4月份，中国汽车市场的销量在连续增长了27个月之后，首次出现负增长。自汽车刺激计划终止之后，中国汽车市场销量增长放缓是必然趋势。韩瑞麒也在8月份美国底特律的摩根大通汽车行业大会上表示，福特预计2011年中国汽车销量增长5%~10%，甚至低到5%~6%。但他同时还表示希望中国政府能够继续刺激汽车市场的增长。在经历了2010全国销量年超过30%的高速增长之后，福特的这一愿望恐怕未免有些一厢情愿。

地位失衡的背后

6月在华建发动机工厂、9月变速器工厂奠基，再加上重庆和南昌的两个整车工厂，福特在华的全部投资已超过30亿美元。人们并不怀疑福特对中国市场的重视，但这种重视似乎来得有些晚，让人有些遗憾，这也导致在华品牌形象与其在国际上的地位并不相符。

在2008年金融危机时期，福特在美国的销量并不比通用和克莱斯勒好到哪去，全年亏损146亿美元，销量下滑20%，而通用和克莱斯勒销量下降分别为22%和30%。而福特之所以能够挨过底特律的“寒冬”正是由于穆拉利的未雨绸缪。2006年当美国还处在一切正常的情况下，穆拉利在上任不久就将福特的全部资产作为抵押，借债236亿美元来扭转福特的亏损局面。据《纽约时报》报道，穆拉利当时表示这笔钱可以“帮助福特有备于经济萧条和不可预测的意外”。因此在2008年各大银行金融机构捂紧金库时，福特得以用已经到手的贷款助自身渡过难关，免于破产。

当通用和克莱斯勒在2009年刚刚才完成破产重组时，福特在2009年第二季度已经开始实现了盈利。当然这两个破产的美国车企除了政府贷款之外，还在破产重组中得到债务减免，但福特的债却是一分都不能少还。到2009年底公司的债务已经累积到了336亿美元，而福特当时希望在2011年3月底将债务减少至100亿美元。通用在破产重组后，得益于中国市场的销量大增，或许也是福特始料未及的。

穆拉利在2006年上任之前，福特在中国的发展步伐本就已经落后，此后五年福特又把精力更多地集中在了北美市场。当福特在中国还处在向本土化过渡阶段时，福特针对北美市场展开了一系列转型计划。其中包括在北美地区投放数款具有出色燃油经济性的新款小型车，根据消费者需求的快速变化调整北美地区的生产布局，在短期和中期将北美地区的产品规划和投资转向小型车和具备良好燃油经济性的动力系统等；引入欧洲销量较好的六款小型车投放北美市场，加速引入高效省油的EcoBoost四缸发动机，增加混合动力车型的产量；并将三家卡车和SUV工厂加以改造，转而生产小型车；将福特、林肯、水星品牌绝大部分车型在2010年底前全面升级。同时，为减少成本，穆拉利提出“一个福特”的核心计划，使福特汽车在少数几个平台上制造出更多适应全球市场的车型，来进一步削减零部件和系统的通用性，将北美、欧洲和亚洲市场销售的全球车型进行统一。

福特中国相关人士告诉记者，穆拉利上任时，福特面临着170亿美元的亏损。因此，拯救并重振公司成了福特当时最主要的任务。如今，走出阴霾的福特有能力在中国这样的新兴市场重拳出击。保美国，失中国，这或许是福特无奈错过中国汽车黄金时期的另一个主要原因。

再次与机会失之交臂？

按照福特的逻辑，巩固了美国市场，再将新车型引入中国才能水到渠成。但中国市场显然不会原地不动等待福特的转型。当下中国依旧高速增长的是豪华车品牌，而更持续升温的是新能源汽车。J.D Power &Associates公布的数据显示，预计中国豪华车市场今年将增长35%。但福特和现代是仅有的在华缺席豪华车市场的两个品牌。穆拉利在此次访华时表示会考虑将林肯引入中国，但还没有任何具体计划。

在新能源汽车方面，福特电动化战略包含了2012年之前在北美市场，2013年之前在欧洲市场推出五款电动车。福特在2010年推出了小型商用货车全顺Connect电动车，今年将推出福克斯电动版，明年将推出C-MAX混合动力车和C-MAX Energi插电式混合动力车。穆拉利在访问重庆时透露会考虑在华生产电动车，但电动车能否引入中国，何时引入都是未知数。相比之下，此前通用宣布将与上汽合作开发电动车的计划显然更有吸引力。福特希望其电动车和混合动力车都能够和汽油车、柴油车共用同一条生产线。对于削减成本来说这当然是绝好的计划，只是不知这一次福特能否把握好中国新能源汽车市场发展的脉搏。

(本文来源：网易汽车综合作者：顾静)

China’s Innovation Challenge: Reinventing the Automobile

2011-10-13T20:22:00.000-07:00

by Bill Russo

Click here to read this article at auto.sohu.com

in Chinese

in English

In 2010, China's automotive industry achieved worldrecord sales of 18.06 million units, a 32 percent rise from 2009. However, about 70% of the sales came from foreignbrands. In spite of great progress, China’s domestic automotive industry isstill in its infancy, and still lacks core technology development andinnovation capabilities. The strong growthin automotive consumption means that China will continue to attract foreigncompanies to invest and cooperate in the development of technology that isrelevant to the China auto market. As the world’s largest automotive market, Chinahas the opportunity to assume a leadership position in defining the standardsand architecture for automobiles in the 21^st century.

One such development challenge is in the development of energy saving and newenergy vehicles. The rapid growth in the consumption of automobiles has adirect impact on air pollution, energy reliance and traffic congestion. Forthese reasons, the Chinese government has actively promoted the development ofalternative energy vehicles. Thedevelopment of a domestic electric vehicles industry has been set forth as oneof seven key strategic industries in the 12^th five-year plan. The government is investing 100 billion RMBover the next 10 years and has set an ambitious target to have between 5 – 10million alternative energy vehicles on road by 2020. Domestic auto manufacturers have respondedwith demonstration projects, and investment is being made in building theinfrastructure needed for charging and servicing electric cars. However, market acceptance of these solutionsremains limited, since the purchase costs of the technology outweigh the operationcost savings when compared with cars powered with internal combustion engines.

Over the next decade, we can expect theImprovements in EV technology can help reduce the cost of ownership gap.Closing such a gap will require innovation in the core battery, batterymanagement system and electric motor technologies of the electric vehicle. While China possesses several resource andinfrastructure advantages, it is clear that Chinese automotive manufacturers lackoverall vehicle and drivetrain systems engineering capabilities that will beneeded to achieve the necessary breakthrough to drive market acceptance ofEVs. Such capabilities should bedeveloped in partnership with multi-national players in order to accelerate theprocess.

Though China has the opportunity to lead the commercializationof EVs, it must be open to overseas as well as non-traditional partners(including new entrants) in the EV ecosystem. Companies that provide integrated drivetrainsystem solutions, as well as companies from outside the traditional automotive ecosystem(such as utility and infrastructure servicing companies), must play a role inthe commercialization of EVs. Chinese automotive manufacturers should conductjoint research and development with such organizations, and pursue new businessmodels in partnership with the government to create solutions that makeeconomic sense to consumers.

China’s automotive industry developed rapidly as aresult of policies that encouraged foreign investment to realize rapid creationof a domestic supply and production system to mass-market affordabletransportation solutions for Chinese consumers. Repeating this success for electric vehicles requires even morecollaboration to achieve mass-market acceptance. China has the opportunity tolead the reinvention of automotive propulsion technology. However, this cannotbe achieved efficiently or effectively without assimilating leadingtechnologies from around the world toward achieving the ambitious targets for theelectrification of transportation. Industrial policies that encourage foreigninvestment in the development of the EV market should be pursued. The talentand technology spillover will accelerate the development of China’s domesticautomotive industry.

China’s industrial strength is derived from itsability to leverage its huge domestic market to encourage rapid introductionand assimilation of technology from the best global companies with the goal of“making breakthrough innovations affordable” – this is the Chinese valueproposition. The technology sourcesneeded to achieve China’s electrification strategy should not be associatedwith national flags. China’s automotive manufacturersshould strive to make such innovations affordable to mass-market Chineseconsumers through the scale and cost benefits of producing such solutions inChina.

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