Understanding the Chinese Commercial Vehicle Market

China Car Times, October 28, 2013

Respected China auto analyst Bill Russo gives his five part opinion and outlook on the Chinese commercial vehicle market in this must read report. The Chinese CV world is the polar opposite to the automotive world, consumers base their purchases on best bang for the dollar, nearly all purchases are Chinese brands and foreign brands are the 1% rather than 50+ percent as in the auto industry.

One opening point is extremely note worthy:

Global manufacturers will increasingly be pushed into the luxury “niche”, unless they adjust their business model and develop low-price, as opposed to low-cost products, which are not just “good enough”, but have the right features, durability, more rapid innovation, and lower price to be sold globally. The Chinese market is already highly fragmented, and the pathway to entry for foreign players is not obvious. However, we believe that several market entry options exist as previously noted. MAN’s JV with Sinotruk may be able to crack open the mid-range market in which local OEMs are dominant.

Read the rest here, ASAP.

Click here to read this posting at China Car Times

Competing In The China Market

China Law Blog, October 27, 2013

Click here to view this at China Law Blog

By Dan Harris on October 27th, 2013 Posted in China Business

Bill Russo has a wealth of experience and knowledge about China’s automotive and truck industries as anyone and I always enjoy his writings on those industries.  He recently came out with a five part article on “Competing in the China Truck Market” and it is excellent.

Like so many excellent articles on a single industry, almost all of what Russo says about China’s truck industry applies with equal force to competing in the China market as a whole.

If you are doing business in China or just thinking of doing so — be it related to trucks or not — I recommend you go here and read all five installments of Russo’s article.

And if that article does not help you with your China business, I’ll eat my hat.

全球汽车论坛举行 中国因素关乎世界汽车业发展

China News, October 25, 2013

　　这是中国汽车业界高水平的论坛，政府、行业、企业代表层次颇高，热点话题层出不穷。政府部门的相关人士在论坛上表示：“随着越来越多国内企业走出国门，合资公司股比放开的问题也会提上议事日程”。在中国整车制造生产领域，外资持股比例不得超过50%，一直是政策的“红线”。虽然争议不断，但在近年来却持续升温。此次论坛，这个话题再一次成为了焦点之一，而且响应者有所增加。——编者

　　10月17日至18日，第四届全球汽车论坛在武汉成功举行。与会嘉宾紧紧围绕“汽车未来发展之路——目标·策略·模式”的主题展开精彩对话和研讨。

　　今年，中国汽车产销有望突破2000万辆大关，继续领跑全球汽车市场。但是，全球汽车产业共同面临诸多挑战，包括环境、油耗、能源、安全与交通管理等等问题，能否提出可行的、创新性的解决方案，已成为关乎汽车产业发展及汽车企业生存的关键因素。因此，政策制定者、重要的行业机构、汽车制造商、供应商、销售商和所有相关方之间的协同合作也正在变得更为重要。

　　全球汽车论坛组委会执行主席、中国国际贸易促进委员会汽车行业委员会会长王侠在开幕式致辞中说：“作为全球人口最多、新车需求量最大、汽车产业发展增长最快的国家，中国汽车产业在成为全球汽车产业发展引擎的时候，所面临的巨大挑战和深层次问题也应该引起全球的关注，因为这些问题的解决不仅关乎中国汽车产业的发展，也关乎世界汽车产业的发展。”

　　本田技研工业株式会社会长池史彦对于中国汽车工业的发展寄予厚望。他认为，面对来自于能源、环境的挑战，重要的是中国应该引领全球汽车行业的方向。而这样一个正确的方向和节奏，可以更好地为世界带来利益，而且重要的并不仅仅是提高销量，而是质量、安全以及环保，这样才能够更好地实现全球竞争，支持全球的市场更好地接受中国制造的汽车。

　　但事实上，中国要引领全球汽车的方向，要解决的问题还有很多。中国机械工业联合会会长王瑞祥指出，和世界发达国家相比，中国在自主创新、核心零部件和品牌打造等方面还存在着较大的差距。“要真正建设汽车工业强国，我们还有很长的路要走。”王瑞祥说。

　　美国博斯公司（Booz&Company）高级专家，Synergistics有限公司创始人、总裁BillRusso也指出，现在中国汽车市场仍然非常分散，自主品牌竞争非常激烈。所以，中国的汽车格局还是分而治之，没有凝聚力，而且本土的内部市场就是竞争非常的激烈。这个竞争层次还需要提升。

　　作为全球第一大汽车市场和生产国，未来中国能否引领全球汽车行业的方向？东风汽车公司总经理朱福寿提出：面对战略机遇期，中国汽车产业如何实现持续、健康发展，必须解决三个矛盾点：合资品牌与自主品牌在中国市场同台竞争、长期对峙的矛盾；中国企业走进国际市场的坚定决心与国际贸易壁垒的矛盾；汽车刚性需求与能源、交通、环境保护的矛盾。

　　广汽集团总经理曾庆洪的建议是：第一，加快自主创新能力的提升，特别是关键零部件与关键核心技术的突破；第二，加快整合重组；第三，加快经济结构调整，特别是产业布局调整。而四个跨越包括：从制造到创造的转型升级、生产基地向产业基地的跨越、从资产经营向资本经营的跨越、从经营产品到经营品牌的跨越。

　　江铃集团董事长王锡高则认为，为提高我国自主品牌汽车企业的自主研发能力，在引进国外先进生产技术时通过吸收、模仿、改进，逐步实现技术科研开发的成熟化，最终达到能够自主创新的目的。在这个环节中，改进是关键，不能一味地模仿外国的技术，而应该在学习的同时找出一条适合中国市场和国际市场实际需要的道路。

　　观致汽车董事长兼首席执行官郭谦表示，中国汽车发展经历了几个阶段，首先是能够掌握一些关键技术，或者是一个车身，一个变速器；其次，能掌握车的整合；第三，产品的平台化、模块化；第四构建品牌特征。在这方面，观致汽车已经打造了一个高起点的汽车，成为一种观致新模式。

　　福特汽车公司总裁兼首席执行官AlanMulally则给出了一个可持续的技术路线图：柴油以及汽油在内的传统内燃机及材料的改善，空气动力学以及电子设备等等的改善和系统的整合以及技术的连接性，汽车未来会变成一个可移动的设备，让人们可以连接到互联网，混合动力到纯电动车的发展。“在整个过程当中，需要协同合作，让全球各地的政府和企业一起来建设基础设施，这样才能够把这些成熟的技术带给消费者”，AlanMulally说。

　　大众汽车集团（中国）总裁兼首席执行官Prof·Dr·JochemHeizmann博士认为，汽车行业未来发展靠的是三个支柱：节约资源的生产、高效的移动性和智能的系统。他坚信，要实现这样一些目标，中国的汽车行业需要广泛的合作，包括和供应商进行合作，一个清晰稳定的法律框架和环境，并且能广泛和核心的参与者和合作伙伴建立关系，同时员工要建立紧密的团队合作精神。

　　就中国车企的国际化合作来讲，通过收购沃尔沃和其他一些国际公司，吉利汽车已走到了前列。沃尔沃汽车公司董事长、吉利控股集团创始人兼董事长李书福表示，今年8月，吉利沃尔沃在成都的国产化项目已经获批，这也是中国汽车工业进行中具有非常深远意义的一件事。目前，吉利已立志将中国打造成沃尔沃的第二本土市场，推动沃尔沃汽车在全球范围内的复兴进程。

　　第四届全球汽车论坛共安排16场公开环节，分别就战略机遇、跨国发展、未来汽车、后市场、金融创新、新能源战略、汽车消费、国际化人才等等一系列议题展开了精彩的讨论。论坛组委会执行主席王侠说，中国的汽车梦是世界汽车梦的重要组成部分，全球所有汽车人的共同梦想就是：汽车让社会更美好。这次融合了全球智慧为汽车工业发展建言献策的论坛，正用大家的创造性、建设性、前瞻性的思想，去引领汽车产业的新一轮发展。

　　本届论坛由中国国际贸易促进委员会汽车行业委员会和武汉市人民政府主办，吸引了来自世界20个国家和地区的900多名专业人士参与，其中200多人为外宾或来自境外，使“全球”论坛的性质进一步得到强化。(张宇星)

Click here to read the original article in China News （中文）

Tooth and Nail: Local governments and car makers battle consolidation

China Economic Review, June 2012

China’s car industry gives the impression of a badly tended garden, overgrown and sprawling. Instead of pruning, wayward car plants have received big doses of government support. As a result, China is home to the world’s most fragmented auto industry. According to LMC Automotive, Chinese and foreign auto makers now offer 94 car brands and 476 models in China, compared with less than 40 brands and about 370 models in the US, the world’s second largest market.

Many Chinese brands cling to a tiny share of the market. The top 10 foreign and Chinese manufacturers account for about 80% of the Chinese market, while more than 100 other companies compete in China for the remaining 20%, said Bill Russo, an analyst at Booz & Co.

With so many players, the central government has been forced to split its subsidies many ways, and companies have had more difficulty capturing consumer attention. That has made it difficult for national champions to arise. Both Beijing and industry analysts insist that industry consolidation is an essential part of building strong Chinese car brands.

But consolidation has been a long time coming. Any effort to slim down the industry has to take on profitable car companies and powerful local interests.

A history lesson

The industry’s basic design dates back to Deng Xiaoping, who jump-started China’s economy in the 1980s by encouraging a wave of decentralization. Shanghai, Changchun, Wuhan and other cities were encouraged to build car companies that supplied local cadres and state-owned companies – a system that persists today.

China’s sea of brands became even wider as Beijing gradually began allowing foreign companies to establish joint ventures in China. Unlike Japan or Korea, which built strong domestic industries by banning foreign companies altogether, China grudgingly began to accept foreign-local joint ventures beginning with Volkswagen in 1984.

The original idea was to give state-owned enterprises the opportunity to transfer technology from these partnerships that they could use in creating their own brands. Ultimately, however, these JVs may have waylaid the creation of domestic brands. Analysts say that joint-venture products like the Volkswagen Santana and the Buick Sail were so successful and profitable in China’s rarified market that, for most of the 1990s, both Chinese car companies and local officials were happy to sit back and watch the money roll in, instead of working to improve the quality of domestic products.

“I think where the error has been is that the free money is probably making car companies fat, dumb and happy,” said one Beijing-based industry analyst.

Where to from here?

The central government has aimed to consolidate the industry into six or fewer companies since its inception, but progress has been slower than expected. Analysts say that situation is unlikely to change soon. There are two basic ways to consolidate the industry – bankruptcies and initiatives led by the central government – and neither seems likely to occur in the next few years.

The most efficient and organic way to slim down the industry would be through bankruptcies. But Jenny Gu, an analyst at J.D. Power and Associates, said she doesn’t expect many Chinese car makers to fold in the next two years, since most earned a lot of money from the sales boom of 2009 and 2010.

And while profitability is on the decline, overall industry profits remain higher than in developed markets, said Ivo Naumann, managing director at consultancy AlixPartners. “So far I don’t think the pain is high enough that you would see a massive consolidation process. It would take several years of profitability under pressure before really the consolidation process would take up speed.”

The industry could also be consolidated by government mandate. Beijing has forced through consolidations before, but they tend to be slow and painful. “The key obstacle here is the so-called provincial interest. When you set up a car plant in some city or province, it contributes a lot to local tax revenue and employment,” said Huaibin Lin, an analyst at IHS Automotive. Local governments have often made big investments in attracting these facilities, for example, offering generous tax breaks and discounted land, and they want to see them run their course.

“These investments take four or five years to plan and they last for 20-30 years,” Kevin Wale, managing director of GM China, said at an American Chamber of Commerce event in Shanghai in March. “It’s not unusual that once a city has welcomed you into their culture and their operations that they’re going to continue to try to support you, because [auto manufacturers] are a major source of revenue growth, and associated business and technical skills sets.”

The auto industry demonstrates how Beijing’s role is sometimes limited in a decentralized economy. “That decentralization of power at local levels runs totally contrary to strategy to building a powerful auto industry with strong brands,” said Michael Dunne, an independent auto analyst. “People have been asking me about consolidation since 1990, and it just hasn’t been going that way at all,” he said.

Click here to read the original article in China Economic Review

China Still 5-10 Years Away From Being Western Player

Wards Auto, October 18, 2013

A top China industry consultant blames the delay on many factors, including the lack of positive identities for Chinese brands, the still-fragmented nature of the country’s domestic auto industry and the perception of Chinese goods as "cheap."

Click here to read the article at WardsAuto.com (subscription required)

WUHAN, CHINA – It will take another five to 10 years before domestic Chinese automakers enter developed Western markets, an analyst says during the 2013 Global Automotive Forum. The West is "not a market where you can fit a lot of competitors," Bill Russo, president-Synergstics, tells attendees during an Oct. 17 panel discussion here.

For more on this topic please read Bill Russo's article The Path to Globalization of China's Automotive Industry

"Competing in the China Truck Market" rated Most Popular Article in CHINAtalk

CHINAtalk, October, 2013 edition

The following recognition was received for Bill Russo's series of articles on the China truck market in the recent edition of GlobalAutoIndustry.com's CHINAtalk newsletter:

MOST POPULAR ARTICLES FROM SEPTEMBER EDITION

Competing in the China Truck Market: Leveraging China for the World

We are in the midst of an economic revolution: a shift of the global center of gravity of economic strength towards the east, which is fundamentally reshaping the competitive landscape of numerous industries.  As an economic bellwether, the ...  Read on...

1st installment:   An Introduction 2nd installment:  The Competitive Landscape 3rd installment:   Policy and Regulatory Outlook 4th installment:   Implications for Multi-National Corporations 5th installment:   Winning in China's Mid-Market Click here to read the article in the September edition of CHINAtalk

Bill Russo to Join Panel Discussion at the 4th Global Automotive Forum in Wuhan

 Wuhan, China, October 16, 2013

TOPIC:

Chinese Automotive Companies:  Opportunities and Challenges Outside of China

China has been the largest vehicle producer in the world since 2009, but this has not been matched by the rise of Chinese automakers in global markets.  The range of strategies adopted by Chinese companies to expand overseas has included exporting, establishing overseas production as well as acquiring distressed assets, international brands, technologies and international operations.  Progress so far has been mixed and there are still significant obstacles before Chinese companies can become a force in the global automotive market.

This session will debate the relevant issues relating to Chinese automotive enterprises' strategy of "going and succeeding abroad".

• In what areas do Chinese companies have a sustainable global competitive advantage and how should they optimize their growth strategies?
• New mode and strategy for Chinese auto enterprises to go abroad
• Case studies and lessons to be learned

PANELISTS:

Wang Dazong, Chairman of Ophoenix Capital Management Inc.; Chairman of US China automotive exchange, China

Bill Russo, Founder and President of Synergistics Limited, China

Lori Baker, President and CEO of TTi Global, USA

MODERATED BY:

Joachim Glatter, Managing partner of Taylor Wessing; Head of China Group, Germany