After years of losing out to foreign brands, China’s automakers are winning in the world’s hottest SUV market by employing a tried-and-tested strategy: offering them cheap.
Showing posts with label Bill Russo. Show all posts
Showing posts with label Bill Russo. Show all posts
3.04.2016
4.24.2015
How China Brands Took Over the World’s Hottest SUV Marke
Bloomberg Business, April 17, 2015
BYD Co.'s Sport-Utility Vehicles
BYD Co. S6 sport-utility vehicles (SUV) move along the production line at the company's assembly plant in the Pingshan district of Shenzhen, China. Photographer: Brent Lewin/Bloomberg
By flooding the market with comparable models at lower prices, Chinese automakers accounted for eight of the 10 bestselling sport utility vehicles in the first quarter, crowding out global nameplates like Toyota Motor Corp.’s RAV4 and Honda Motor Co.’s CR-V.
Chinese-branded SUV sales more than doubled in the first quarter to overtake foreign nameplates in the segment this year, accounting for 56 percent of all deliveries, according to data from the China Association of Automobile Manufacturers. At the Shanghai auto show next week, Honda will unveil a full-sized SUV concept that will compete for attention with local offerings like BYD Co.’s new Song and Yuan SUVs.
“A significant number of Chinese consumers are looking for a more affordable alternative to premium-priced foreign SUVs,” said Bill Russo, a Shanghai-based managing director at consultant Gao Feng Advisory. “Foreign automakers now need to price more aggressively as the market matures and becomes more hyper-competitive.”
Almost half of the new and refreshed passenger vehicles slated for debut this year in China are SUVs, with about three-quarters of them from local automakers, according to estimates by Bloomberg Intelligence.
Cheaper SUVs
Global automakers are competing against names little known outside China: Anhui Jianghuai Automobile Co.’s Ruifeng S3, BAIC Motor Corp.’s Huansu and Chongqing Changan Automobile Co.’s CS35 all rank in the top 10 by sales. Great Wall Motor Co.’s H6, the most popular SUV in China, costs about half the price of Volkswagen AG’s Tiguan.
The average price of the bestselling Chinese SUVs in the first quarter was was 82,900 yuan ($13,380), versus 167,300 yuan for the foreign makes, according to dealership quotations compiled by Autohome, a car-pricing website.
The addition of new models is being accompanied by a surge in production. Annual output of SUVs in China is estimated to reach more than 7.04 million units in 2018, up from 4.32 million last year, according to researcher IHS Automotive.
Rare Win
The SUV success represents a rare win for China’s automakers, which have struggled despite heavy government intervention. Foreign companies are required to set up joint ventures with local carmakers to operate in the country, sharing profits and technology.
Utility vehicle sales accounted for 24 percent of the total passenger-vehicle market in the first quarter. Local carmakers have been fast to catch the shift in consumer preference from traditional sedans to more spacious crossovers, and fill the gap in the market for lower-priced alternatives.
“It’s about time Chinese automakers gained back some territory after losing out to foreign brands for so many years,” said Cao He, a Beijing-based analyst at China Minzu Securities Co. “But they have to watch their backs and make sure the growth is sustainable and they don’t put all their eggs in one basket.”
Bill Russo to chair Automotive CEO Dialogue at J.P. Morgan Global China Summit
Beijing, China, June 3, 2015
Gao Feng’s Managing Director and Auto Practice leader Bill Russo will chair a panel discussion titled The Next Golden Age of China Auto Industry at 11:15am on Wednesday, June 3.
CEO Dialogue: The Next Golden Age of China’s Automotive Industry
Hubertus Troska, Member of the Board of Management, Daimler AG; Chairman & CEO, Daimler Greater China
Karsten Engel, President and CEO, BMW Group China
Jochem Heizmann, Member of the Board of Management of Volkswagen AG, President & CEO Volkswagen Group China
Chair: Bill Russo, Managing Director, Gao Feng Advisory
4.22.2015
Executive Shows China’s First Home-Grown Electric Sports Car
The Wall Street Journal, April 22, 2015
Write to Colum Murphy at colum.murphy@wsj.com
A Chinese company’s new electric sports car is aimed at the luxury end of the market, currently dominated by European brands. The WSJ's Colum Murphy reports.
By Colum Murphy
CH-Auto's electric sports car, the Event!, is seen at Shanghai Auto 2015, China's annual auto show, in Shanghai on April 20, 2015. Photo: Miguel Gonzalez Jr./The Wall Street Journal
BEIJING—In a quiet technology park near the Chinese capital’s airport, a former Beijing Jeep executive is completing a plan to create China’s first homegrown electric sports car.
Lu Qun’s idea: design and build a battery-powered sports car that is cheaper than imported European gasoline-engine roadsters. If successful, Mr. Lu’s first car would go into production in late 2016 and challenge similar models from much bigger foreign companies.
His CH-Auto Technology Co. has a track record. It has designed gasoline-powered cars for Chinese manufacturers including Zhejiang Geely Holding Group, Jiangling Motors Corp. and a Dongfeng Motor Group. joint venture.
British auto maker Aston Martin Lagonda Ltd. also has plans for an electric sports car that it will sell in China and everyone from Tesla Motors Inc. to Toyota Motor Corp. have big plans to expand electric-car sales here. Aston Martin Chief Executive Andy Palmer said he was aware of at least two other companies in addition to CH-Auto looking into similar electric-car projects.
Electric cars are enticing because the Chinese government has pledged substantial support for their development to address air pollution produced by conventional-engine vehicles. China also hopes adoption of electric cars will bolster energy security by reducing dependency on imported gasoline.
Sales of electric vehicles in China rose to 18,000 units last year, quadruple the number in 2013, according to the China Association of Automobile Manufacturers.
But success for electric-car makers in China—including Tesla—remains elusive. Shenzhen-based BYD Co. , backed by renowned investor Warren Buffett, has struggled for years to gain traction. Last year BYD sold around 21,000 pure electric and plug-in hybrid vehicles, according to the company. Tesla sold 32,733 vehicles globally last year. It doesn’t disclose sales figures for China, but for the year, Asia as a whole supplied 15% of Tesla’s sales.
Challenges include the high price of most electric vehicles, as well as difficulty in developing infrastructure such as charging stations for a nation as vast as China.
Mr. Lu says the solution is to give customers a reason to buy an electric vehicle, which is where sports cars—already high-ticket items popular with wealthy Chinese—come in. Mr. Lu plans to first target the high end of the market with Event, the name of the company’s first battery-powered sports car. Once the brand, with its dragonfly logo, is established, CH-Auto would follow with cheaper electric cars made in greater volumes.
This week, CH-Auto displayed three cars, including a high-tech two-seater that it said runs on a 48-kilowatt-hour battery and can go from zero to 100 kilometers an hour in 4.6 seconds. It claims a range of 250 kilometers (155 miles) and can be recharged in six hours using a standard 220-volt power supply.
The company didn’t reveal the price, saying only that it will be significantly cheaper than imported sports cars.
Industry analysts expect the Event to be priced around 700,000 yuan, or about $115,000. A Maserati Gran Turismo sports car, by comparison, costs 1.95 million yuan in China.
Industry watchers say the odds for success are still long, especially for lesser known companies like CH-Auto, which face costly investment in manufacturing facilities and difficulties in creating a brand.
“I don’t think it’s crazy, but the road ahead is fraught with potential pitfalls,” Mr. Palmer said of his potential competitors, which don’t have Aston Martin’s100-plus-year track record.
CH-Auto said it recognizes the challenges but is confident its vision is sound and it can adequately address any obstacles that may arise.
Mr. Lu has selected Suzhou, in eastern China, for CH-Auto’s production base, and hopes to begin building a factory there this year. The company declined to say how much it is investing.‘Can they do what Tesla does? That is a bit of a stretch.’—Bill Russo , managing director at Gao Feng Advisory
Eventually, CH-Auto hopes to produce as many as half a million vehicles a year, if it is successful in expanding into mass-market passenger cars, he said.
To finance production of its first vehicle, the company this summer plans to sell shares in the company on Beijing’s over-the-counter stock exchange that is designed for growth enterprises.
Mr. Lu said CH-Auto plans to go it alone, but he didn’t rule out partnerships with other companies.
Mr. Lu, who was chief production engineer of the Jeep Cherokee in China until 2003, says his dream is for the Event to become as famous as Chinese smartphone maker Xiaomi, online retailer Alibaba and drone maker DJI, and help China graduate from low-cost car-making to true automotive innovation.
That is a tall order. China’s giant Internet and technology brands have succeeded by the business-model innovations brought to consumers, said Bill Russo, managing director of consulting firm Gao Feng Advisory.
But Mr. Russo said CH-Auto takes a different approach than China’s internet companies. “Their approach is innovation driven by product and technology. It’s not business-model innovation,” he said. “They probably can make a cool sports car and sell a few hundred, or even a few thousand. But can they do what Tesla does? That is a bit of a stretch” for a small, little-known company like CH-Auto, said Mr. Russo.
“When a technology is disruptive, newcomers have an edge on existing players,” said Oded Shenkar of the Fisher College of Business at Ohio State University. In addition, he said, the Chinese government is eager to nurture national electric car champions by offering assistance ranging from tax breaks to export rebates and preferential status for government procurements.
But for CH-Auto to benefit from such support, it will have to show first that it is viable as there are multiple contenders for such assistance, Mr. Shenkar added.
—Rose Yu and Lilian Lin contributed to this article.
Write to Colum Murphy at colum.murphy@wsj.com
2.23.2015
2.15.2015
Too Many Car Factories in China?
Bloomberg News, February 13, 2015
Automakers have been successful at adding factories. Maybe too successful
When consultant Bill Russo visited Chery Automobile’s headquarters in China’s eastern Anhui province about three years ago, he listened to the company’s plans to expand its factories to make as many as 1 million vehicles a year. But demand didn’t grow as planned. So Chery today has the capacity to make 900,000 vehicles annually—twice the number of cars it sold last year. Sales have slumped by one-third since their peak in 2010.
“Chery is a classic case” of overcapacity, says Russo, a former Chrysler executive who’s now a Shanghai-based managing director at consultant Gao Feng Advisory. “The pressure is that once they receive the permission [from government authorities] to build, they feel like they have to build.” Chery didn’t respond to requests for comment about its sales falling short of planned capacity.
Domestic and foreign-based carmakers are building more factories in China than anywhere else, a construction binge that risks hurting margins in what remains one of the world’s most profitable vehicle markets. By 2017 there will be 140 car production plants in China, vs. 123 at the end of 2014, estimates JSC Automotive Consulting.
According to IHS Automotive forecasts, factories across the mainland in 2015 will be able to build 10.8 million more vehicles than will be sold in Greater China. In North America, however, IHS expects plants to churn out about 3.2 million more cars this year than the factories were intended to produce when they were built.
Overcapacity is only expected to get worse for Chinese carmakers. China will have about 11.4 million vehicles’ worth of idle capacity by 2017, more than double that of European automakers, according to data from JSC and Deloitte Consulting.
Some carmakers already are regretting plans for Chinese plants that will open in the next few years, says Jochen Siebert, Shanghai-based managing director of JSC, who declines to name the companies. “But that decision has been made,” he says. “It’s done; they cannot backtrack.”
Plans for most of the factory space built in China in the past few years were put in motion during the global recession, when China proved to be a godsend while General Motors and Chrysler were being bailed out by the U.S. taxpayer and Europe’s auto sales seemed in free fall. The trouble is, too many carmakers sought the same refuge.
“When you get too many competitors with too much capacity, there’s just not enough growth to sustain everybody,” says Thomas Callarman, Shanghai-based director of the China Europe International Business School’s Centre for Automotive Research. “They’re all smart people, and they look at the right things, but I think they read the tea leaves wrong.”
For now, the China car market remains profitable. Chinese automakers accounted for 7 of the 10 carmakers with the highest profit margins in the world, with BMW’s Chinese partner, Brilliance China Automotive Holdings, topping the ranks at 8.2 percent in the past year, according to data compiled by Bloomberg Intelligence. Toyota Motor’s margin was 7.6 percent. Hyundai Motor and Volkswagen’s Audi count China as their largest market, with Subaru maker Fuji Heavy Industries standing out as the only car manufacturer among the 10 most profitable that doesn’t have a factory in China.
GM will soon sell Buicks made at a plant that opened last month, with plans to open a Cadillac factory later this year. GM has 22 factories on the mainland. Volkswagen, which is vying with Toyota and GM for the global auto sales crown, has 28 plants in China and will open three more within the next few years.
Jochem Heizmann, who heads Volkswagen’s China business, told reporters in November that the automaker has decided to expand its China capacity to more than the previously targeted 4 million autos a year by 2018 because it couldn’t build enough to keep up with demand.
In the next few years, however, increased competition amid slowing growth in car sales will result in lower prices, says Yang Yipeng, a Beijing-based analyst at Goldman Sachs’s Chinese affiliate. As the world’s second-largest economy cools, vehicle sales are forecast to expand this year at just half of 2013’s 8 percent growth, to 21.3 million passenger vehicles. General Motors President Dan Ammann said in January that he expects China’s sales expansion to slow over the next few years after being the main engine for the global industry’s growth for 15 years. Volkswagen in November also said the pace of expansion is becoming “more normal” in China.
The spare capacity may force carmakers to increase sales incentives, hurting profit margins, Barclays says. “This is a heavy asset industry,” says Song Yang, an analyst at Barclays. “When utilization trends down, margins will trend down.” Already, car dealerships in China are asking for financial support and lower sales targets from carmakers after a combination of rapid expansion of sales networks and increased restrictions on vehicle ownership by city governments hurt their profits. BMW agreed last month to pay 5.1 billion yuan ($815 million) to its dealers. Toyota will give $200 million to the dealers of one of its joint-venture partners, FAW Group, while Renault, which is building a plant that opens in China next year, said it will give its distributors more rebates.
The bottom line: By 2017, plants in China will be able to produce 11.4 million more cars than will be sold there, JSC Automotive forecasts.
2.12.2015
2.06.2015
Qoros Names Former Head of GM China Operations as CEO
The Wall Street Journal, February 3, 2015
Click here to read the article at wsj.com
Phil Murtaugh in Los Angeles on March 16, 2012. Photo: ReutersBy Colum Murphy
SHANGHAI—Chinese car maker Qoros Automotive Co. named the former head of General Motors Co. ’s China operations as its new chief executive in a bid to revive the startup’s fortunes in the world’s largest car market.
Phil Murtaugh ’s appointment is effective immediately, a statement on the company’s website dated Monday said. He succeeds Guo Qian, who resigned in December as chairman and chief executive to return to Qoros partner Chery Automobile Co., according to a Qoros spokesman. Mr. Guo couldn’t be reached for comment, and a Chery spokesman said he had no immediate comment.
Qoros produces cars in China and is a 50-50 joint venture between China-based Chery and Singapore-based Kenon Holdings , which was spun off from Israeli investment firm Israel Corp. last month. It had hoped to woo customers in China with a mix of quality and affordability. But the brand sold just under 7,000 cars in China last year, the company’s first full year of sales, according to data from consultancy Automotive Foresight.
In an October interview, Mr. Guo said that awareness of the new Chinese auto brand in China was falling below company expectations. Anning Chen, a Chery executive, has succeeded Mr. Guo as chairman.
Stefano Villanti, head of sales, marketing and product strategy, has also recently left the company. He told The Wall Street Journal last October the startup period for the company had been “tougher than expected.” Mr. Villanti couldn’t be reached for comment on Tuesday.
In November, Israel Corp.’s controlling shareholder, billionaire Idan Ofer, reaffirmed his support for Qoros following Chinese media reports that the firm was considering pulling out of the venture.
Mr. Murtaugh is credited in the automotive industry with being a pioneer of GM’s earlier successes in China and has spent almost 16 years in the country. Most recently, Mr. Murtaugh headed the now-defunct Chinese-invested electric-car manufacturer Coda Automotive Inc.
Bill Russo, managing director of consulting firm Gao Feng Advisory, who worked briefly with Mr. Murtaugh at Chrysler in China, said Mr. Murtaugh’s challenge will be to create a car that appeals to buyers, whether they are in China or elsewhere.
“The question is whether the world is waiting for a high-end Chinese car? So far the market is saying ’no,’ ” Mr. Russo said.
Write to Colum Murphy at colum.murphy@wsj.com
Corrections & Amplifications
Qoros is a joint venture between China-based Chery and Singapore-based Kenon Holdings, which was spun off from Israeli investment firm Israel Corp. last month. An earlier version of this article incorrectly said Qoros’s foreign partner was Israel Corp.
Click here to read the article at wsj.com
1.28.2015
Toyota Isn't in Tune With China's Needs: Russo
Bloomberg Television, January 22, 2015
Gao Feng's Managing Director Bill Russo discusses China's car market snd why the country is so important for automakers with Bloomberg's Rishat Salamat on "On The Move".
http://www.bloomberg.com/news/videos/2015-01-22/toyota-isn-t-in-tune-with-china-s-needs-russo
Gao Feng's Managing Director Bill Russo discusses China's car market snd why the country is so important for automakers with Bloomberg's Rishat Salamat on "On The Move".
http://www.bloomberg.com/news/videos/2015-01-22/toyota-isn-t-in-tune-with-china-s-needs-russo
Toyota Poised to Lose Global Sales Lead to VW on China
Bloomberg News, January 22, 2015
http://www.bloomberg.com/news/articles/2015-01-21/toyota-poised-to-lose-global-sales-lead-to-vw-on-china
Toyota Motor Corp., which fended off Volkswagen AG to remain the world’s top automaker in 2014, may lose the sales crown as early as this year as it falls behind in China, the world’s biggest auto market.
Toyota is predicting its global deliveries will decline 1 percent in 2015 to 10.15 million vehicles, or just 10,000 units more than what Volkswagen sold worldwide last year. A new factory the German company is opening this year in Changsha, China, will add capacity for another 300,000 vehicles annually.
As Volkswagen and General Motors Co. add factories to bolster their already-dominant position in China, Toyota President Akio Toyoda’s strategy of foregoing new car plants until at least next year could result in the first shakeup in auto-sales leadership since 2011. Toyota ranks sixth among global automakers in China and sells less than one-third as many vehicles as its two main competitors in China.
“The difference is that Volkswagen has a jet engine strapped to its back called ’China’,” said Bill Russo, Shanghai-based managing director at Gao Feng Advisory Co. “Toyota, unfortunately, is in a position of weakness when it comes to the China market. It would be almost impossible to hold on to a number one position without being in the lead in China, and Toyota’s not even in that league.”
Worldwide sales for Toyota, including at its Hino Motors Ltd. and Daihatsu Motor Co. units, climbed 3 percent to 10.23 million vehicles in 2014, according to a company statement. Volkswagen last week reported a 4.2 percent gain to 10.14 million vehicles, that included its two heavy-truck units. GM followed with sales of 9.92 million units, up 2.1 percent. Volkswagen and GM haven’t announced projections for this year.
China Capacity
Toyota, which hasn’t built an assembly plant in China since 2012 and faces a self-imposed moratorium on new factories until next year, will fall behind even further as Volkswagen and GM step up their expansion plans.
GM has announced plans to add five new plants in China by 2018 even though President Dan Ammann said the market is “maturing rapidly.”
Volkswagen expects to raise its China plant capacity to more than 4 million vehicles by 2018 from 3.1 million at end 2013, according to the company. Mainland China and Hong Kong accounted for a record 3.67 million deliveries at Volkswagen group last year, up 12.4 percent and extending the country’s lead as the German manufacturer’s largest single market.
Sales Target
By comparison, Toyota missed its sales projection for 1.1 million units in China in 2014, even as the Corolla and the Levin compact cars helped boost sales 13 percent to 1.03 million units. The company kept its China sales target unchanged for this year.
Even though Toyota may cede the sales leadership, it still outearns Volkswagen. Analysts estimate Toyota earned a profit of 1.96 trillion yen ($16.7 billion) last calendar year, compared with 10.7 billion euros ($12.4 billion) at Volkswagen.
“Their focus is not No. 1,” said Peggy Furusaka, a Tokyo-based auto-credit analyst at Moody’s Investors Service. “Toyota is more concerned about keeping profitability than chasing numbers. So for coming years, I wouldn’t be surprised to see Toyota selling fewer cars than Volkswagen.”
Toyota’s also-ran status in China is compounded by threats by its dealers to drop out of its network, citing poor sales and a lack of profit.
Dealer Threats
As many as 10 percent of dealers for one of Toyota’s China ventures could abandon the brand, according to the China Automobile Dealers Association. Among the 523 distributors in the FAW-Toyota Motor Sales Co. group, 95 percent are losing money, with some dealers stopping sales or shutting down altogether because of the losses, the state-backed dealer’s group said.
Vehicle sales growth slowed last year in China in tandem with the nation’s weakest economic growth since 1990. Deliveries are forecast to gain 8 percent to about 21.3 million passenger vehicles this year, according to the state-backed China Association of Automobile Manufacturers.
“As long as China is growing rapidly, Toyota will need to build new factories there,” said Yoshiaki Kawano, an analyst with IHS Automotive in Tokyo. “They are probably reserving some energy for growth in the longer term, as they are trying to improve the efficiency at their existing plants.”
To contact Bloomberg News staff for this story: Alexandra Ho in Shanghai at aho113@bloomberg.net; Ma Jie in Tokyo at jma124@bloomberg.net; Masatsugu Horie in Osaka at mhorie3@bloomberg.net
To contact the editors responsible for this story: Chua Kong Ho at kchua6@bloomberg.net Suresh Seshadri
http://www.bloomberg.com/news/articles/2015-01-21/toyota-poised-to-lose-global-sales-lead-to-vw-on-china
1.19.2015
Chinese Car Buyers Embrace Online Sales, Dealers Still in the Loop
Car Scoops. January 11, 2015
http://www.carscoops.com/2015/01/chinese-car-buyers-embrace-online-sales.html
E-commerce is nothing new, especially in what is probably the world’s most connected country: China. The thing is, Chinese are embracing online sales for new cars, too – and that’s good for business.
Local automaker Geely estimates that it has sold nearly 3,000 units in 2014 online five years after first launching its e-commerce website. “The impact of Internet firms has been a major success for the company”, company spokesman Ashley Sutcliffe said.
Paul Hu, Volkswagen Group China’s chief marketing officer for Greater China and ASEAN, is even more buoyant: “E-commerce in the automotive market is taking off”, he told Wards Auto. “In my personal opinion, online sales in the total car market in China will account for 10 percent in the near future.”
Still, traditional dealers are not left out of the game. One of VW’s joint ventures, Shanghai Volkswagen, is selling cars online through a number of websites; customers place the order in one of the sites but have to close the deal and pick up the vehicle from a dealership.
Kyle Dickie, CEO of dealership best-practices consultancy Sewells Group, thinks that “there is some disruption to come to the distribution model, but it is not imminent. In China, there is an unusually high level of trust still placed in the sales consultant. Consumers want to interact face to face.”
The “disruption” mentioned by Dickie are smartphones. Right now, China is estimated to have more than 500 million smartphone users who, naturally, use their devices buying stuff online. Beijing-based iResearch forecasts that 2014 online retail sales in the country increased by 45.8 percent to 2.76 trillion RMB (US$444 billion).
“Empowered with technology, consumers of mobility services are likely to make choices other than what the automakers and their dealers are offering today”, commented Bill Russo, the managing director of the Gao Feng consultancy firm.
In other words, e-commerce may bring customers to the dealerships – they just might not be interested in the same vehicles the dealer and the brand want to promote.
http://www.carscoops.com/2015/01/chinese-car-buyers-embrace-online-sales.html
1.17.2015
China in 2025 and Implications for Automakers
Gao Feng Insights Report, January, 2015
Dear Friends of Gao Feng,
Dear Friends of Gao Feng,
We are pleased to share with you a report titled: China in 2025 and Implications for Automakers. As we know, China’s economy has been growing dramatically for more than two decades. China is now the second largest (and will inevitably soon become the largest) economy in the world. Yet we are recently confronted with rising concern over the impact of a deceleration in overall economic growth, especially in the automotive sector.
Since 2011, we have seen single digit growth in 3 of the past 4 years, raising questions over the future prospects for the industry. In this analysis, we seek to avoid the trap of “driving by looking in the rear-view mirror”, and instead look in front of us at the plausible scenarios which may unfold which will impact the auto industry over the next decade.
We believe that China’s economic growth is likely to continue over the next decade, driven by a mix of continued (albeit more selective) fixed-asset investment and growth in consumption. A broad transformation is expected to continue and will present an environment that is characterized by a long-term and sustained shift towards a middle-income, consumption-based economy. This trend would lead to a profoundly different economic landscape.
We also believe that discontinuities int eh political, social and economic landscape have the potential to reshape China dramatically by 2025. While the outlook is positive, there will likely be discontinuities - both upward ad downward - along the way. The key to sustainable success for businesses in such an environment depends on an ability to anticipate the trends and challenges that are in the “blind spots” today - but which can create disruptive threats or discontinuous opportunities for those who can respond rapidly. In essence, and “early warning system” is needed which leverages unique insights which can be brought to bear on the question of how the market, the regulatory system, and business models may develop over the next decade in China.
We welcome your comments and feedback on our briefing paper or in general about our firm. We would be glad to meet you in person to share our data and perspectives in a fuller manner. Please let us know if you are interested in meeting and discussing directly how we can help you to operationalize these insights.
Thought leadership is core to what Gao Feng does. We will, from time to time, share with you our latest thinking on business and management, especially as it relates to China and China’s role in the world.
Best Regards,
Dr. Edward Tse
CEO, Gao Feng Advisory Companyedward.tse@gaofengadv.com
CEO, Gao Feng Advisory Companyedward.tse@gaofengadv.com
Bill Russo
Managing Director, Gao Feng Advisory Companybill.russo@gaofengadv.com
Managing Director, Gao Feng Advisory Companybill.russo@gaofengadv.com
Chee-Kiang Lim
Principal, Gao Feng Advisory Companyck.lim@gaofengadv.com
Principal, Gao Feng Advisory Companyck.lim@gaofengadv.com
Tel: +86 10 8557 0676 (Beijing); +852 2588 3554 (Hong Kong); +86 21 5117 5853 (Shanghai)
Gao Feng website: www.gaofengadv.com
1.06.2015
Bill Russo to Brief Investors on the Internet of Vehicles
Coleman Research Group Conference Call
TOPIC:
Building the Internet if Vehicles and Related Smart Car Technologies in China
Date: Tuesday, January 13, 2015
Time: 10AM EST, 11PM China
Venue: Conference Call
Click here to register (sponsored by Coleman Research Group)
- Traditional auto ownership model re-shaped by rapid urbanization in China
- Disruption of the automotive value chain
- New mobility concepts changing traditional business models
- Unique context of China’s urban transportation challenges
- High rate of adoption of mobile device connectivity driving need for connected car technologies
- Need for OEMs to develop strong relationships with telcos and technology players
- Companies: Ford (F), General Motors (GM), Volkswagen (VOW), Toyota (TM),Honda (HMC), Fiat Chrysler (FCAU), Nissan (NSANY), Hyundai (HYMTF),Daimler AG (DDAIF), BMW AG (BMW), Continental AG (CON), Valeo (EPA),TRW Automotive (TRW), Mobileye(MBLY), Uber, Yidao, Relay Rides, Baidu(BIDU), Alibaba (BABA) and Google (GOOG)
China is the world’s largest auto market and also has highest number of internet and smart phone users which will likely make it an innovator and incubator of smart car technologies. China’s urban transportation challenges, the high rate of adoption of connected mobile devices, combined with the rapid and aggressive introduction of alternative mobility and vehicle ownership concepts will ultimately compress the time needed to commercialize smart, connected car technologies and services. Investors, automakers and dealers are optimistic that these developments will dramatically revolutionize the Chinese auto market. As a result, OEMs are investing rapidly in the marketplace to gain first mover advantage in the most promising auto market in the world.
ABOUT OUR EXPERT:
ABOUT OUR EXPERT:
Bill Russo is President of Synergistics Ltd and Managing Director and Automotive Practice Leader with Gao Feng Advisory Company, Ltd. He has more than 25 years of experience in the auto industry. He was formerly the VP of Chrysler Northeast Asia, where he successfully negotiated and secured government approval for six vehicle programs with three different Asian partners. In this time period, he launched a regional holding company as well as two distribution companies and oversaw the industrialization of the first Chrysler and Dodge-branded vehicles in Asia. He holds a U.S. patent for his innovative efforts towards reducing automotive new product development cycle time and is a published author and opinion leader whose viewpoints have appeared throughout several media outlets.
12.20.2014
Chinese Electric-Car Maker BYD’s Shares Plunge
The Wall Street Journal, December 18, 2014
A BYD Co. electronic vehicle is charged at an EV charging station at the company's campus in the Pingshan district of Shenzhen, China, Aug. 5, 2014. Bloomberg News
By Colum Murphy
SHANGHAI—An executive at Warren Buffett -backed BYD Co. defended its business prospects after shares in the Chinese electric-car maker fell as much as 47% on Thursday.
In a conference call late Thursday, company secretary Qian Li said BYD’s operations were normal despite the share plunge and sought to dispel what he called rumors about the company. BYD’s Hong Kong-traded shares regained some ground later Thursday and finished at 25.05 Hong Kong dollars (US$3.23), down 29%.
Mr. Li described rumors circulating in the market about BYD—including suggestions that its founder and chairman had been arrested—as “ridiculous” and urged investors to ignore them.
He also dismissed talk of BYD having large exposure to the troubled Russia market, describing the company’s investment in that country as “very small.”
BYD also produces mobile-phone components and solar panels.
Asked whether the price movement could be related to a selloff in shares by Mr. Buffett’s Berkshire Hathaway investment vehicle, Mr. Li said BYD had been in recent contact with Mr. Buffett but there was no sign that Mr. Buffett was considering a sale. He added BYD didn’t reach Mr. Buffett on Thursday due to the time difference between China and the U.S.
Berkshire Hathaway owns a roughly 9% stake in BYD, according to previous company filings, including about one-quarter of its Hong Kong-traded shares. In the Chinese city of Shenzhen, BYD’s shares fell about 10% on Thursday, the daily limit.
In October, BYD reported a third-quarter profit drop of 26% and said it expects this year’s profit to fall by up to 22%. Auto-sales growth in China has slowed in recent months amid a broader drop in China’s economic momentum.
Overall in the first 11 months of 2014, BYD has sold 384,977 vehicles, down from 458,042 vehicles sold in the same period the year before—a 16% drop, according to data from research firm IHS Automotive.
While the company frequently touts its line of electric vehicles and plug-in hybrids—vehicles that can run on both gasoline and electricity—it relies heavily on sales of traditional gasoline engine cars for the lion’s share of its automotive revenue.
Bill Russo, managing director of consulting firm Gao Feng Advisory, said BYD, like many other Chinese car brands, need to create a brand that appeals to Chinese consumers. “It has to go beyond just being a cheap car,” he said.
Mr. Li said BYD faces “hot competition” and decreasing margins in the traditional car market in China but said it was transforming into a manufacturer of new-energy vehicles.
China has a long-stated goal of reducing its dependency on imported oil by promoting new-energy vehicles, including passenger cars and buses. China wants half a million such vehicles on the road by next year and 10 times that by the end of the decade.
But in the first nine months of this year, fewer than 40,000 electric vehicles were sold in China, according to data from the government-backed China Association of Automobile Manufacturers. Around three quarters of these were passenger cars. By comparison, around 14.2 million conventional passenger cars were sold in the period.
IHS Automotive researcher Namrita Chow said the high cost of replacing batteries, lack of adequate charging infrastructure and range anxiety—where buyers worry about how far they can travel on a single charge—are all obstacles in the path to high sales growth rates.
She said that BYD had doubled sales of its pure electric e6 car to 2,203 vehicles in the first 10 months of this year compared with the same period last year. Sales for the hybrid Qin had so far reached just over 11,000 vehicles in its first year on sale.
Mr. Li dismissed talk that the Chinese government could be reducing its support of new-energy vehicles, including buses, saying BYD continued to see good order flow for them. “We’re confident on the future of electric buses,” Mr. Li said.
A nearly 50% drop in oil prices over the past six months has pressured green stocks in a number of areas.
“With the oil price down, the global outlook for electric vehicles looks very different from just a couple of months ago,” said Jochen Siebert, a Shanghai-based managing director at JSC Automotive Consulting. “BYD’s electric and hybrid car business will likely be impacted,” he added.
Write to Colum Murphy at colum.murphy@wsj.com
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