Beijing Auto Show to witness 100 new cars, big shifts in global auto industry

The Economic Times of India, April 22, 2012

Beijing auto show

Over 1,000 gleaming cars, about 100 launches and roughly 10 lakh visitors: it doesn't get any grander. The biggest auto show of the year, if not in stature at least in size, kick-starts tomorrow. But it's not in Detroit or Frankfurt. It is happening in Beijing. And this shift in address says more about the new power equation in the auto industry than statistics could. 

China isn't just the biggest market for cars, the deal breaker for world number one or two spots. It is fast developing as a manufacturing hub for both the mass and class market. Last year, the extravaganza in Shanghai attracted 7.85 lakh visitors and 12,500 journalists from 48 countries. This year, "the Beijing show will be the largest international show in terms of both the number of cars and visitor attendance", says Bill Russo, founder of Synergistics, a consulting firm in China. 

Along with the new location are coming in new concepts and ideas as automakers move away from tradition to capture new markets and a tech-savvy generation of customers. In a curtain raiser, ET on Sunday analyses all the new trends of the global auto industry emerging from the show so you know what the ride is going to be like. 

Rise of the BRIC 

Once upon a time there was one big show, the Detroit show in January. And most auto firms kept their best unveilings for it. While Detroit pavilions remain the most coveted, other auto shows are fast becoming favourites for car launches. Automakers are investing more in emerging markets and scheduling more global debuts there. 

Why? Because growth has shifted East, especially to China. Last year, the US sold 12.8 million cars. China notched up 18.5 million. Remember, the party always follows the business. The China show has also benefited from the decline in importance of the Tokyo show. Once the host of Asia's biggest show, Japan has become less important even as China is getting bigger. In fact in 2009, at the peak of economic crisis, the Tokyo show was almost shelved after major global automakers pulled out. 

Previously held in October in odd-numbered years, the Tokyo show has now moved to December and the organisers have relegated it to a smaller, though better, venue in Tokyo. "Many automakers have been diverting some or all of their funding from the Tokyo show to either Beijing or Shanghai," says Michelle Krebs, senior analyst at Edmunds.com, an online resource centre on automobiles. 

India's auto shows aren't anywhere in the top league yet. But Tim Dunne, director, global automotive operations, JD Power says the country's stock is rising. The number of automakers in India, current sales and more importantly, the potential for growth makes the country interesting for global automakers. "We are now seeing more investment in auto shows in India and Brazil," says Krebs. 

Chronologically, auto shows have a set pattern. The Frankfurt show, dominated by the Germans, happens in September. The Paris Show, which was actually the first auto show in the world when it began in 1898 but is now past its prime, is held in October. The LA show is scheduled for November followed by the Tokyo show in December. Detroit is the first auto show of the calendar year, and is still the most coveted. It is followed by Chicago in February, Geneva in March and New York around Easter. China show, held in Beijing and Shanghai in alternate years, has booked a slot in April. 

New Pecking Order 

The calendar reveals the pecking order: the Tier I shows come first: Frankfurt, Paris, Geneva, Detroit and China. Tokyo has dropped out of the top league. Shows in Bangkok, India and Brazil are on the rise but have not broken into the top five, at least for the media. 

There is another ranking, this one among auto shows within the US. Detroit is the big winner, followed by New York, LA and Chicago. New York is supposed to attract maximum consumer traffic but experts say the show has gone downhill in recent years. 

Is timing important? If you asked the organisers of Detroit, they'd say yes. (Out-of-town visitors though would claim Detroit in January is a dumb idea.) The show organisers insist on being first in the calendar year, says Krebs. Detroit and Los Angeles used to slug it out, LA wanted to be first and this meant the show was sometimes slotted close to New Year's. That didn't work well so they moved it to November in 2006. New York is content with its slot: it begins the spring selling season (big sales time for US dealers/companies) and is the last major show of the season, making it a front runner for big unveilings. 

Over the years these shows have evolved their own distinct personalities, says Krebs. Frankfurt is the technical giant dominated by German carmakers. Geneva is the neutral zone where no one company dominates and hence sees wide participation. Tokyo has become more low-key and provincial, dominated by Japanese original equipment manufacturers (OEMs). Paris is dominated by the French. Los Angeles is a sort of "green" show. New York's agenda is to draw in a lot of attention from the media headquartered there. 

But now, with many new shows gaining importance amid a flurry of launches across the year, the importance of being early in the list is waning. Also, OEMs increasingly use the shows to send a broader signal. 

Strategy Tools 

Traditionally, automakers considered these shows as nothing more than grand displays. But now, the choice of models and debut cars that make the list are part of company strategies that reveal their priorities. For instance, tomorrow at the Beijing show, Ford will unveil four new cars. 

"We have never done this [so many unveilings in one go] before," says Craig von Essen, product communications director, Ford Motor. This signals Ford's strong ambitions in the region. It expects Asia-Africa to contribute 60-70% of Ford's global growth for the next few years. "China is the biggest car market in the world and this is a step towards firmly establishing Ford here," Essen says. 

In the past, because display was the core of auto shows, pretty young models lounging inside plush interiors or posing alongside the sleek cars were the highlights of the pavilions. They still make newspaper front pages, but the approach is little different. 

Automakers in the shows want customers to engage with the products, understand the technology and the environmental impact. "The attempt is to make the displays more interactive, showcase technology and explain the features of the vehicles and, through all this, establish the brand in a broader sense," says Essen. As a result, the models at the stalls are not just pretty faces. They are trained to talk to customers and answer product queries. 

Concepts and Fads 

The cars that draw maximum gasps and questions from the audience are futuristic, concept cars, the stuff you'd expect to be in Batman's garage. Earlier companies loved flaunting them, designs you would never see on the road. But that's changing now. "Over time, fewer and fewer cars are pure fantasy driven. They have become more realistic," says Rebecca Lindland, auto analyst, IHS Global Insight. 

Now the sexiest thing in new technology is green and small. Hybrids and electric vehicles are vying for attention as car companies showcase models with multiple fuel options. At the Detroit show, for example, Ford flaunted a redesigned Fusion sedan in gasoline, hybrid and plug-in hybrid versions. 

Dodge, known for its big pickups, showcased the compact Dart. Not to be left behind, Audi pulled the covers off a bright Allroad wagon based on A4 and Hummer-famous GM had a smaller Buick Encore ready. The trend was followed in Geneva too where premium automakers showcased small cars, Audi had A3, Mercedes an A-class and Volvo a V40. Given rising fuel prices, environmental concerns and economic volatility smaller, power-packed feature-rich small cars are here to stay. 

It's the Economy 

But what's on display is not the only thing that makes an auto shows a hit. The economy plays a role too. If things are rough there, neither the customer nor the automaker is happy. The mood reflects in auto shows. 

Off late, economic cycles have become sharper. And the financial health of OEMs is lot more volatile. Just in 2009, GM and Ford were struggling to keep afloat. These twists in fortune have a deep impact on the nature of auto shows. 

Look no further than the history of Detroit to understand the economy effect. "In 2009-10, nobody was discussing new products. Everyone was talking about how best to survive the rough times," says Lindland. In two years, the good times rolled in again: there were 40-odd global debuts at the show in January this year. 

The Moscow show has a similar story: in 2006, when the Russian economy was booming, GM chose the show to unveil its Chevrolet. Now, Moscow is almost off the auto show calendar. Just as Tokyo is barely hanging on as Japan's economy flounders. 

The OEMs' financial health does have a bearing too. In 2009, many OEMs including Mitsubishi, Suzuki, Land Rover pulled out of the Detroit show. 

In some cases it is a matter of choice and positioning. Nissan decided to give Detroit a miss for two years and participated in others like LA and New York shows. This year it returned to Detroit. Independent domestic Chinese OEMs like Geely Automotive too have been occasionally showing up at international shows like Detroit since 2006. "It is kind of wave which comes and goes. Turmoil in the company and the country reflects strongly," says Lindland. 

There is only one place that seems immune to such fluctuations: Detroit. The big three of the region, Ford, GM and Chrysler, are past their prime and Detroit is struggling to retain its identity as an auto manufacturing hub. "But as far as the auto shows are concerned, Detroit still is the most coveted. Car manufacturers from across the world participate and so does the international media," says Lindland. 

More Than Cars 

One of the ways to make a big splash, in good and bad times, is to expand the agenda of auto shows. Convergence has long been the buzzword in technology. Cars have jumped on the band wagon. They are about mobility, communication, entertainment and many more things as in-car experience gains currency. For instance, Google is working on a modified Toyota Prius for an experiment on driverless cars. Bill Ford of Ford Motors recently showed up at Mobile World Congress. 

All kinds of alliances are being forged. GM is tying up with LG Electronics for an electric car project. Intel is trying to diversify into the auto sector by supplying Nissan with chips. Microsoft is among other technology companies which will be present at the Beijing show. 

Not surprisingly, companies are also using lot of technology in their stalls to impress visitors. Ford will allow its audience to take control of the all-new Ford EcoSport virtually. 

Using a sensing camera, the crowd will collectively be able to control the compact SUV as it drives along the road and unlocks information at each bend. Photos from this event will be taken during each game and then uploaded to a Facebook gallery. 

Automakers want customers to do more and spread the word. So that people are still at the shows, talking about it after curtains are down on the show.

Tiger Moms Craving SUVs Drive Next Wave of Chinese Demand

Bloomberg News, April 20, 2012

Tiger Moms
A Chrysler Group LLC Jeep sport utility vehicle (SUV) sits parked under red lanterns in Beijing, China. Photographer: Keith Bedford/Bloomberg

Zhou Na, a 37-year-old Beijing mother, says she knows why sport-utility vehicles are the fastest-growing segment in the world’s biggest automobile market: kids.
“I have to drive my kid around practically non-stop on Saturday,” said Zhou, who ferries her eight-year-old son to Kung Fu and English classes on weekends to the Children’s Palace of Beijing before joining her friends for yoga. “It’s pretty tiring, but I feel very good driving my BMW X5 around.”
Zhou represents the growing army of so-called tiger moms who may fuel the next spurt of growth for the automotive industry in China, where the middle-class population is projected to double over the next decade. Bayerische Motoren Werke AG (BMW),Daimler AG (DAI) and Ford Motor Co. (F) are among automakers unveiling new models, particularly SUVs, at next week’s Beijing International Automotive Exhibition to vie for families looking for a second vehicle to drive around children and buy groceries.
“You look at the trend for more utility and family- oriented vehicles and behind that is women,” said Bill Russo, a senior adviser at Booz & Co. and formerly Chrysler Group LLC’s China head. “In the U.S., we call it the soccer moms.”
SUV demand in China jumped 20 percent last year, more than triple the growth in total passenger-car deliveries, according to data from the China Association of Automobile Manufacturers. SUV demand continues to outpace other vehicle segments, with sales up 18 percent in the first quarter, bucking the slump in the broader market, where deliveries fell for the first time since 2005.

Car Sales Increase

The average Chinese consumer now earns more than $4,000 a year, crossing a threshold that Macquarie Group Ltd. (MQG)says typically spurs car purchases to increase at twice the pace of income growth.
“A car parked outside follows on the heels of home ownership as part of the middle-class Chinese dream,” Janet Lewis, a Hong Kong-based analyst at Macquarie, wrote in a February report. “Private car ownership was not common prior to 2000, but a family car is quickly becoming a desired -- and attainable -- consumer product.”
China’s middle-class population will reach 600 million to 800 million in the next 10 to 15 years, compared with about 300 million now, according to Macquarie.

‘Tiger Moms’

“For tiger moms -- and other moms -- SUVs offer great appeal as the whole family can be transported safely and in style,” said Trevor Hale, Ford’s Shanghai-based spokesman, in reference to the nickname coined by author Amy Chua for strict Chinese mothers. “We see great potential to grow this segment and are bringing more of our SUVs toChina.”
Ford will display three SUV models at the Beijing auto show, including the Kuga that’s aimed at families with a small child. The Dearborn, Michigan-based carmaker currently sells the imported Edge SUV in China and plans to build the Kuga at a new plant in Chongqing, southwest China, Hale said.
BMW will show the X3 xDrive 28i and revamped X6 at the Beijing show, which opens to the public on April 27. Sales of BMW’s X-series SUVs surged 92 percent in the first quarter to more than 20,000 units, according to the company.
Porsche AG, which depends on the Cayenne for half of its deliveries, will show a refreshed version of the luxury SUV. Maserati will exhibit its new Kubang, which the company said it expects to go into production in 2013. Volkswagen AG (VOW)’s Lamborghini will unveil an SUV study at the Beijing show, almost two decades after discontinuing the so-called Rambo Lambo military vehicle, a person familiar with the company’s plans said in February.

‘Year of SUVs’

“Automakers are swooping in with SUV models, even those that never had SUV models before,” said Zhang Zhiyong, an independent automotive analyst based in Beijing. “The segment is getting more crowded, which will definitely lead to price competition.”
That doesn’t deter Daimler’s Mercedes-Benz, which predicts 2012 to be the “year of the SUV” for the German carmaker, which will unveil its China-made GLK in Beijing next week. Mercedes-Benz boosted SUV sales in China by 85 percent last year, while total sales in the country rose 35 percent.
“With the rising middle class in the country, SUVs are among the most popular choices for Chinese consumers,” said Bjorn Hauber, executive vice president of sales and marketing at Mercedes-Benz (China) Ltd.
Demand for SUVs will continue to increase as more families buy their second car and the number of women owners increases, said Hui Yumei, head of automotive research at Sinotrust International Information & Consulting (Beijing) Co.

Changing Times

“In the past, most Chinese families had one car and it’s driven by the men,” said Hui. “Times have changed and there’re now more women car owners. SUVs will be the most important segment for automakers in China for a long time.”
Automakers are counting on Hui’s prediction to come true after sedan sales in China declined 2.2 percent in the first quarter, weighed by record fuel prices and a slowing economy. So-called dual-purpose vehicles used to ferry goods and people have slumped 8.5 percent, while truck sales have dropped 6.8 percent, according to data from the auto association.
That’s a contrast to 2010, when overall auto demand jumped 32 percent after the government introduced subsidies and rebates. Sales then slowed to 2.5 percent last year after the incentives ran out. This year, vehicle sales will probably miss the 8 percent growth forecast by CAAM, Gu Xianghua, deputy secretary general of the state-backed auto association, said last month.
The slowdown may be short-lived. Macquarie estimates SUVs will revive annual total vehicle sales growth to at least 10 percent from next year as incomes grow, Chinese cities become increasingly urbanized and public transportation remains inadequate.
Among those driving demand may be women like Nina Zhang, a 35-year-old accountant living in Beijing, who bought a Land Rover Freelander 2 last year to run errands and take her daughter to dance and art lessons on weekends at Jingshan Park, a former imperial garden.
“We used to go away a lot to the countryside before we became parents,” said Zhang, whose husband drives a Volkswagen Magotan sedan. “Now we don’t have as much time, but this SUV reminds us of the lifestyle that we love.”