CHINA: BMW expansion knockback raises concerns

Just-Auto.com, July 30, 2013

A regulatory refusal for the expansion of a BMW joint venture factory in China has added to recent concern global automakers could find it increasingly difficult to win approval for projects in the country.

According to Bloomberg News, shares in BMW partner Brilliance China Automotive Holdings fell the most in almost four weeks in Hong Kong after China’s Ministry of Environmental Protection said it sent back an application, citing inadequate wastewater analysis and the plan’s failure to meet government anti-pollution targets.

“The ease of expansion is probably not going to be as easy as in the past,” Bill Russo, Beijing-based president of automotive consultant Synergistics, told the news agency.

Russo, in China for the past decade, said he can’t recall the government ever issuing a statement knocking back an automaker’s expansion plans for an existing project.

BMW spokesman Alexander Bilgeri said the ministry asked for additional documents and that the government decision on the project wasn’t final. Such events are routine, he said.

But Russo, a former executive for Chrysler told Bloomberg turning down approvals to expand an existing project was “unusual”.

In a statement on the ministry’s website, the government said it didn’t approve BMW Brilliance Automotive’s plans for the third phase of a factory in the northeastern Chinese city of Shenyang. The first phase of the plant has yet to pass an inspection, it said.

The Economic Information Daily, one of the official Xinhua News Agency’s newspapers, reported on 29 July industry officials are increasingly calling for China to start an investigation into imported car prices. Profit from selling imported luxury cars in China was 30% higher than the global average, the newspaper said, citing China Automobile Dealers Association executive vice president and secretary general Shen Jianjun

Getting lower-level bureaus to sign off on manufacturing projects are among the first regulatory steps for foreign companies before they receive central government approval, Bloomberg noted.

Click here to read the original article at just-auto.com


Daimler unveils €2bn China expansion

The Financial Times, August 27, 2013

Daimler has announced plans to export critical engine components from China for use in its German-made vehicles as part of a fresh €2bn expansion effort intended to kick-start its business in the world’s largest car market.

Hubertus Troska, a Daimler board member and Beijing-based chairman of the company’s Greater China unit, said on Tuesday: “There is a recognition [at Daimler] that we need to improve our position in China vis a vis some of our competitors.”

The expansion plans, which will double capacity at Daimler’s passenger car joint venture in Beijing, include construction of the luxury carmaker’s “first fully fledged engine factory outside Germany”. Frank Deiss, president of Beijing Benz Automotive, said critical engine components including crankshafts, cylinder heads and engine blocks would be exported back to Germany.

Mr Troska added: “The quality level that we are putting in here will be like no other engine plant that we have outside Germany and is to the same level as our German plants.

“Customers will never know – nor do they need to worry – where the parts come from . . . Beginning next year we’re actually going to ship the parts to Germany. They’re waiting for them.”

Bill Russo, a Beijing-based automotive consultant said: “Powertrain systems are usually the last major component technology to be localised. Daimler arriving at this stage is a huge step and using Chinese-sourced components outside of China is also significant.”

Mr Troska is the first board member posted by Daimler to China, where it has long lagged behind German rivals BMW and Audi. “[Board representation] is a prerequisite in order to make sure the decisions of our company will always take Chinese needs and market characteristics into consideration,” said Mr Troska.

Ivo Naumann, managing director at consultancy AlixPartners, added: “The appointment of a board member to China is a reflection that they understand this is one of the two or three core markets for luxury cars and if you are not successful here it is going to be hard to achieve your global targets.”

Last year only 96,500 of the more than 206,000 Mercedes-Benz cars Daimler sold in China were manufactured by its Beijing joint venture – a local production rate well below those achieved by BMW and Audi. Daimler said it intended to boost sales to 300,000 units a year by 2015, with two-thirds produced in China.

Analysts also point to the success of Daimler’s German rivals in developing a wider range of vehicles specifically tailored to the Chinese market, including longer cars with more room in the back seat for owners who prefer to be chauffeured in comfort through the country’s clogged city streets.

“Daimler has been behind BMW and Audi [in China] for quite a while because their product development cycle has been lagging,” said Benjamin Lo, an auto industry analyst with Nomura in Hong Kong.

Click here to read this article at FT.com


Daimler Opens First China Engine Plant

Bloomberg TV, August 27, 2013

Synergistics President & CEO Bill Russo discusses how luxury car makers are trying to tap into the largest growth market in the world. He speaks with Zeb Eckert on Bloomberg Television's "First Up." (Source: Bloomberg)

Volvos image ska lyfta Geely i USA

Dagens Industri, August 27, 2013

Article on Geely's decision to leverage Volvo technology to accelerate its entry into the US market.

Med hjälp av Volvo personvagnars goda namn och rykte planerar Geely Automobile nu en omstart på den amerikanska marknaden.  Det meddelar bolagets vd Gui Shengyue.

”Bra för Geely men riskabelt för Volvo”, säger den amerikanske bilexperten Bill Russo till Di.

Med start 2016 planerar VolvoPV:s kinesiska systerbolag, biltillverkaren Geely Automobile, att börja exportera gemensamt utvecklade Geelybilar till USA.

Geelys tidigare försök att slå sig in på den amerikanska marknaden har misslyckats. Men Gui Shengyues mål är att 60 procent av bolagets försäljning ska komma från marknaden utanför Kina 2018.

”Förvärvet av Volvo har förbättrat vår image och utländska konsumenter ser oss nu som ett internationellt företag. I USA kommer vi att satsa på våra gemensamt utvecklade modeller”, sa han under en presskonferens i Hongkong.

Enligt Gui Shengyue är Geelys och Volvo PV:s samarbete fortfarande på ett utvecklingsstadium och de nya modellerna väntas vara klara under 2015.

Skiljer sig från mängden 

Till Di säger Bill Russo, ordförande för bilkonsulten Synergistics i Peking och tidigare chef för Chrysler i Nordostasien, att Geelys planer för den amerikanska marknaden ska ses i ljuset av att det nu blir allt viktigare för kinesiska biltillverkare att nå globala framgångar, och därmed kunna särskilja sig från mängden hemma i Kina i takt med att konkurrensen på hemmaplan hårdnar.

”Geelys strategi är att marknadsföra sig som ett globalt bolag med framgångar utomlands och på så sätt vinna de kinesiska konsumenternas förtroende och öka försäljningen
på den kinesiska marknaden”, säger Bill Russo.

Det kinesiska superdepartementet NDRC räknar med att den planerade kapaciteten bland biltillverkare i Kina uppgår till 40 miljoner bilar 2015, vilket med råge överstiger den beräknade inhemska efterfrågan på omkring 27 miljoner. Samtidigt föll de kinesiska billtillverkarnas marknadsandel i landet till den lägsta nivån på fem år under juli, enligt branschorganisationen China association of automobile manufacturers, CAAM.

Volvos varumärke i fara

”Det innebär att det kommer att finnas betydligt mera kapacitet, särskilt för Kinas lokala biltillverkare, än vad det finns efterfrågan”, konstaterar Bill Russo.  

Samtidigt säger han att Geelys strategi för att nå exportframgångar på mogna marknader som USA kan skada Volvos varumärke:

”Uppriktigt sagt är det lite riskabelt om Geely gör kopplingen med Volvo alltför tydlig. Det kan vara negativt för Volvo.”

I förra veckan meddelade Geely Automobile att det strävar efter att bli Kinas största fordonsexportör i år med runt 180 000 exporterade bilar.

Negativ kännedom Enligt CAAM sålde Geely förra året 100 800 bilar utomlands, att jämföra med den kinesiska konkurrenten Chery Automobile vars export landade på 184 800 bilar. Men Bill Russo är tveksam till Geelys försäljningsframgångar i USA.

”Det kommer att vara mycket utmanande, även om Geelys koppling med Volvo ger Geely en relativ fördel”, säger han.

”Geelys största problem på mogna marknader handlar om bristande varumärkeskännedom, eller negativ varumärkeskännedom. Det blir mycket svårt att få konsumenterna att acceptera kinesiskt tillverkade bilar och teknik.”