1.31.2011
1.29.2011
GM Takes on Geely in China's Poorer Cities With `Treasured Horse' Models
Bloomberg News, January 27, 2011
An undated handout photograph shows an SAIC-GM-Wuling Automobile Co. Ltd. Baojun 630 passenger vehicleSource: SAIC-GM-Wuling Automobile Co. Ltd.
Tour guide Chen Libin is waiting for General Motors Co. and Honda Motor Co. to roll out their new China-only brands before replacing his Xiali A+ sedan.
Chen will spend up to 80,000 yuan ($12,153) on a car he’ll drive 300 kilometers a day around the Inner Mongolia grasslands. Models by domestic automakers like Tianjin FAW Xiali Automobile Co. start breaking down after two years, while foreign cars go at least five years without major problems, he said.
“These brands are definitely something I will consider,” Chen, 30, said of GM’s Baojun and Honda’s Li Nian marques. “Foreign technology offers drivers more comfort, fuel efficiency and a lower cost of maintenance.”
GM, Honda and Nissan Motor Co. are creating unique brands for the world’s biggest car market as they try to boost sales in China’s interior, where incomes rose almost 11 percent last year. The cheaper nameplates will help them compete on price against local manufacturers without diluting their cache among Chinese buyers, said John Zeng, an industry analyst at J.D. Power & Associates in Shanghai.
“It’s a win-win situation,” Zeng said. “Consumers pay a lower price for foreign-brand technology, and the foreign makers benefit from an increase in sales volume without hurting their brand image.”
BYD, Chery Competition
These “low-budget cars” will use older model platforms and have few extra features, said Leah Jiang, an analyst with Macquarie Research Ltd. in Shanghai. Anti-lock brakes, automatic air-conditioning and reclining seats may be excluded to keep prices as low as 50,000 yuan, said Koji Endo, an auto analyst at Advanced Research Japan in Tokyo.
That market segment is dominated by domestic automakers BYD Co., Geely Automobile Holdings and Chery Automobile Co. Local brands sold three of every four cars priced below 50,000 yuan, and more than half of those costing between 50,000 and 80,000 yuan, according to Jiang.
“I’m not worried about these new brands at all,” said Jin Yibo, assistant general manager for Wuhu-based Chery, whose sales increased 36 percent last year. “Chinese cars offer better value for money, and we understand the local market and consumer very well.”
18 Million Sold
Vehicle sales grew more than 32 percent to almost 18.1 million in 2010. Sales are expected to grow about 15 percent this year, with about two-thirds of buyers coming from cities where the average annual income is less than $5,000, according to JD Power figures.
“If these brands are successful, they are going to have a much higher growth rate,” said Bill Russo, a Beijing-based senior adviser at Booz & Co. “The number of people that can shop at that price point is much larger.”
Consumer purchasing power was boosted by economic growth of 10.3 percent last year, the government said. Per capita net income in rural areas rose 10.9 percent -- the biggest gain since 1984.
The economy likely will grow 9.8 percent this year, the state-run China Daily newspaper reported this week, citing a government academy. Government officials have indicated that the country’s upcoming five-year plan will make a renewed push to boost domestic consumption.
‘Treasured Horse’
GM, the largest foreign automaker in China, will start selling the four-door Baojun 630 compact sedan early this year through its SAIC-GM-Wuling Automotive Co. joint venture. The car will be available at more than 100 dealers, the company said.
GM, which hasn’t announced Baojun prices, is targeting 15 percent growth next year after sales increased 29 percent last year to 2.35 million vehicles. The Detroit-based company’s shares have gained about 15 percent since a November initial public offering.
“There is tremendous potential in tier-two and tier-three cities,” Kevin Wale, GM’s China president, said last month after unveiling the Baojun, which means “Treasured Horse.”
First-tier cities include wealthier Shanghai, Beijing and Guangzhou, according to the National Bureau of Statistics. The second tier includes provincial capitals and the third includes smaller cities.
Honda, Japan’s second-largest carmaker, and local partner Guangzhou Automobile Group Co. expect to start selling the Li Nian S1 sedan early this year. The brand, which means “Ideal,” uses the City platform and targets entry-level consumers with 1.3-liter and 1.5-liter engines, the Tokyo-based company said.
‘Morning Star’
“We are aiming that these Li Nian users will step up to the Honda brand,” said Takayuki Fujii, a Beijing-based spokesman for Honda.
The company declined to comment on the price. Honda sales in China increased 12 percent last year are expected to grow 10 percent this year, the company said.
Nissan, Japan’s third-largest automaker, and local partner Dongfeng Motor Group Co. said their upcoming Qi Chen, or “Morning Star,” will meet rising demand for cheaper models. They wouldn’t comment on price, though Endo said it likely will be priced between 50,000 and 70,000 yuan.
The car will have the “technologies, quality level, engineering standards” of a foreign brand, said Toshiyuki Shiga, chief operating officer of the Yokohama, Japan-based company.
“I can see some optimistic forecast in this market,” Shiga said last month.
Volkswagen AG, China’s second-largest foreign car manufacturer, and local partners SAIC Motor Corp. and China FAW Group Corp. also may create a China-specific brand, Karl-Thomas Neumann, the company’s China chief executive, said last week.
Hao Hongfu, 32, is waiting for the Baojun before deciding on a replacement for his Beiqi Foton Motor Co. pickup truck.
“I want to buy the car because I think cars made by companies backed up by foreign automakers have better quality,” said Hao, a fruit wholesaler in Shandong province. “I have been driving local automakers’ vehicles and would very much like a change.”
--Liza Lin. With assistance from Tian Ying, Li Yanping in Beijing. Editors: Michael Tighe, Bret Okeson.
To contact Bloomberg News staff for this story: Liza Lin in Shanghai at +86-21-6104-3047 orllin15@bloomberg.net
To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net
1.27.2011
1.26.2011
ON-DEMAND SEMINAR CHINA: "China's Next Revolution: Leading the Transition to Electric Cars"
Bill Russo On-Line Seminar for GlobalAutoIndustry.com
Please note:
Please note that all events are for automotive suppliers and OEMs only. Select Global Expert guests may also attend at our discretion. If you have any questions whether you or your company is eligible, pleasecontact us.
GlobalAutoIndustry.com Live Online Seminar to assist you with doing business in or with China.
- On-Demand Seminar recorded on January 20
- Attend 1-hour seminar on your computer, view via Internet
- A 40-minute presentation is followed by a 20-minute online, interactive 'Q&A' session
- Cost: $59 per person - $99 for two persons attending - $129 for three persons attending
- Attend this On-Demand Seminar + any 4 other On-Demand Seminars for only $179. (5 total for $179)
- To register, click on Register Now! link at bottom of this page.
Topics covered:
China’s emergence as the leading automotive market in terms of sales has several implications. While most attention has been paid to relative sales performance of the foreign and domestic companies, what is arguably of more long-term significance is the impact of China’s market expansion on energy consumption and environment.
Since the 1970s, there has been a growing awareness of the lack of sustainability of petroleum-based consumption. Rising concerns over the impact of carbon emissions on the environment have increased the pressure on finding alternative energy technologies that can eventually replace the ICE.
Recent technological advances are bringing new energy vehicles back into the spotlight. A new era of alternative energy technology is emerging in the 21st century automotive industry, and China and its domestic car companies are positioned to play a leading role in this transition..
Our Guest Speaker / Presenter
The Online Seminar guest presenter is Bill Russo (see Speaker's Bio by clicking here).
Who Should Attend
This Online Seminar is for companies doing business in or with China.
Event Info
Recorded on January 20, 2011
Pricing
Your price: $59 per person.
Special Offer: Multiple Attendee Offer
Your price: $99 for 2 attendees
Your price: $129 for 3 attendees
Your price: $129 for 3 attendees
Your price: $155 for 4 attendees
Your price: $179 for 5 attendees.
Your price: $179 for 5 attendees.
Attend any 5 On-Demand Seminars for $179!
Please note:
Please note that all events are for automotive suppliers and OEMs only. Select Global Expert guests may also attend at our discretion. If you have any questions whether you or your company is eligible, pleasecontact us.
Buffett’s BYD Gain May Drop Further on Car Woes: Chart of Day
Bloomberg News, January 24, 2011
Warren Buffett's investment gain in automaker BYD Co. may shrink further, having more than halved from the peak in 2009, amid delays for expansion of the Chinese
company’s electric vehicles and rising competition, according to analyst recommendations compiled by Bloomberg.
company’s electric vehicles and rising competition, according to analyst recommendations compiled by Bloomberg.
BYD, China’s fastest-growing carmaker in 2009, saw sales drop five straight months through December last year as Great Wall Motor Co. and Dongfeng Motor Group Co. registered growth. BYD’s plan to start exporting its E6 electric cars to the U.S. was delayed more than a year to late-2011 for fleet sales and to early-2012 for retail customers, company founder Wang Chuanfu said this month in Detroit.
The CHART OF THE DAY compares BYD shares with those of Great Wall and Dongfeng Motor, the best-performing the past year among mainland carmakers listed in Hong Kong. BYD stock has dropped by more than half since early April, although it’s still up 363 percent since Sept. 27, 2008, when Buffett’s Berkshire Hathaway Inc. disclosed paying HK$1.8 billion ($232 million) for a 10 percent stake. Great Wall, an independent brand, has surged 662 percent, with much of its rally in the past seven months. Dongfeng, which makes cars with Nissan Motor Co. and Honda Motor Co., has almost matched BYD’s total rise.
“The Buffett investment itself generated so much public relations for BYD and it turned into a very significant win for them on their conventional car, the F3,” said Bill Russo, a senior adviser at Booz & Co. in Beijing. “The problem is that they have not been able to commercialize any of their electric vehicles, not to a level of reaching any kind of profit.”
BYD has a consensus rating among 27 analysts compiled by Bloomberg of 2.85 out of a possible 5, with “sells” topping “buys” by an 11-to-nine margin, with seven “holds.” Great Wall, which reported a 90 percent rise in vehicle sales last year, has a 4.64 rating from 22 analysts. The grade on Dongfeng, China’s second-largest automaker, is 4.48 from 29 brokers. Buffett, 80, made his first visit to BYD in Sept. to inspect a plant in Shenzhen and Changsha.
BYD sold 519,806 cars last year, 13 percent short of its target, which had already been cut by 25 percent in August. The Shenzhen-based company said the E6 will run for more than 300 kilometers (186 miles) on a full charge, and Buffett’s bet “is a long-term investment in a company he believes has the ability to electrify the automobile,” Russo said.
1.25.2011
A News Page to Call His Own
Inside Booz & Company, January 20, 2011
People
A News Page to Call His Own
With more than 25 years of driving strategy and operational excellence in the automotive and electronics industries, including seven years of working experience in Asia, it stands to reason there wouldn't be much about the Chinese business landscape to surprise Bill Russo.
But the Beijing -based Senior Advisor last week was as tickled as anyone to discover that Bloomberg.com has created something completely unexpected: Russo’s own news page.
The link, http://topics.bloomberg.com/bill-russo/, is a compilation of recent Bloomberg pieces in which Russo has contributed. There are nine articles in all dating to June 2010 in which he delivers commentary on many of the major aspects affecting the Chinese auto industry.
"'A page for me?'" Russo says he asked himself on discovering he had his own news page. "It's a sign of our wired world, I suppose. And it’s kind of funny because for all the interviews, articles and public speaking I’ve done through the years, this was something I hadn’t pushed for or even known about."
The news page features pieces in which Russo is quoted on a range of topics on the Chinese auto industry, from the challenges of overseas car makers in China such as General Motors, Ford and Nissan to the BYD Company's recent slide in sales and labor issues at Honda Lock Company. The articles reinforce Russo’s status as one of the foremost experts on the Chinese auto industry, while keeping Booz & Company foremost in the minds of senior executives of leading automakers.
Russo spent more than 15 years as an auto executive himself, most recently as the first Vice President of North East Asia automotive operations for Chrysler, where he negotiated and secured government approval for six vehicle programs with three different Asian partners over a four-year period. He also 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.
Well Done!
1.18.2011
China stalls on the road to greener propulsion
Financial Times Special Report: Innovation in Energy, January 14, 2011
By Patti Waldmeir
The West has developed something of an inferiority complex towards China since the global financial crisis, and one area is that of green cars.
Beijing’s decision to throw money at its economy largely prevented the financial crisis spreading to China. But will the same combination of cash and central planning propel the mainland to dominance of the world green car market? Most car market analysts in China say: not within the next decade.
For although the country has recently taken over as the world’s largest market for internal combustion cars, its prospects for dominance of alternative fuel markets have recently appeared to wane.
As recently as 2008, McKinsey, the consultancy, was predicting that alternative fuel vehicles would grab 30 per cent of the China market by 2030, and AT Kearney consultants even predicted that alternative energy motors would capture nearly 40 per cent of the new vehicle market by 2020.
Yet last year Wan Gang, China’s minister of science and technology and a driving force behind the development of green cars, forecast sales of only 1m electric cars by 2020 – only 5 per cent of the 20m new vehicle sales expected this year, and a much smaller percentage of the vastly larger total car market expected by 2020. And JD Power, the car consultancy, was even less sanguine: it forecast late last year that total demand for hybrid and electric vehicles would reach only 472,000 units by the beginning of the next decade: only 2.3 per cent of total passenger vehicle sales.
So it may be time to tone down apocalyptic visions of a Chinese stranglehold on alternative fuel technology. Still, car analysts agree that China is serious about cleaning up environmentally unfriendly forms of transport, and reducing its dependence on expensive and insecure supplies of imported oil.
Last year central government announced that it would offer a subsidy of up to Rmb50,000 ($7,571) for each plug-in hybrid sale, and Rmb60,000 for each pure electric vehicle sold in five big cities. Since then some of those cities have added hefty local producer subsidies as well. Local Chinese media say one Shanghai local government was even considering giving a free electric car to anyone who purchased a property in their district.
This month is likely to bring further news of government support for the industry, with Beijing expected to publish its long- awaited 10-year plan to encourage production of electric and plug-in hybrid vehicles. The government is expected to invest up to Rmb100bn in the sector over the next decade.
“China’s efforts to stimulate demand for EVs are a demonstration of the seriousness of their commitment to the electrification of transportation,” says Bill Russo of Synergistics, a Beijing auto consultancy, and former head of Chrysler in China.
“China views electrification as a national strategy to reduce emissions and increase energy security, as well as a means toward achieving sustainable economic growth.”
Beijing also views green cars as a way to leapfrog over the west’s traditional dominance of internal combustion technology – and make up for all those decades lost to communism, when cars were a rare sight on Chinese roads.
Some industry analysts believe China will never catch up with the US on internal combustion vehicles, or Europe and its diesels or Japan with its hybrids – but in the words of Kevin Wale, China head of General Motors (which recently began selling its Volt hybrid electric cars on the mainland), “China could be the country that leads the world in switching to electric vehicles.”
With its cheap labour, powerful government, and vast auto market to offer economies of scale in green car production, “China could become a pioneer in the conversion of electric vehicles from an expensive niche technology to an affordable, widely used technology,” according to Paul Gao, formerly of McKinsey and now an executive at Chery, the Chinese carmaker, which also has electric-car ambitions.
But Mike Dunne of Dunne & Co, the Asian auto consultancy, says: “Breakthroughs in China are almost never orderly or elegant and its drive for electric vehicles has already experienced some stall-outs, delays and backsliding.”
BYD, long viewed as the leader in Chinese electric vehicle technology, has repeatedly missed self-imposed deadlines for exporting electric vehicles overseas.
And officials of the China Association of Automobile Manufacturers admit most domestic companies lag far behind multinationals in battery technology.
Mr Dunne expects city bus and taxi fleets to be the main buyers of electric vehicles, at least until 2015: “After that, with more charging stations in place, private individuals will have greater confidence to buy electrics too,” he says.
But as Yang Jian, editor of Automotive News China wrote recently: even with 1m electric vehicle sales per year, “electric cars would be a niche – not a mass market”.
By Patti Waldmeir
The West has developed something of an inferiority complex towards China since the global financial crisis, and one area is that of green cars.
Beijing’s decision to throw money at its economy largely prevented the financial crisis spreading to China. But will the same combination of cash and central planning propel the mainland to dominance of the world green car market? Most car market analysts in China say: not within the next decade.
For although the country has recently taken over as the world’s largest market for internal combustion cars, its prospects for dominance of alternative fuel markets have recently appeared to wane.
As recently as 2008, McKinsey, the consultancy, was predicting that alternative fuel vehicles would grab 30 per cent of the China market by 2030, and AT Kearney consultants even predicted that alternative energy motors would capture nearly 40 per cent of the new vehicle market by 2020.
Yet last year Wan Gang, China’s minister of science and technology and a driving force behind the development of green cars, forecast sales of only 1m electric cars by 2020 – only 5 per cent of the 20m new vehicle sales expected this year, and a much smaller percentage of the vastly larger total car market expected by 2020. And JD Power, the car consultancy, was even less sanguine: it forecast late last year that total demand for hybrid and electric vehicles would reach only 472,000 units by the beginning of the next decade: only 2.3 per cent of total passenger vehicle sales.
So it may be time to tone down apocalyptic visions of a Chinese stranglehold on alternative fuel technology. Still, car analysts agree that China is serious about cleaning up environmentally unfriendly forms of transport, and reducing its dependence on expensive and insecure supplies of imported oil.
Last year central government announced that it would offer a subsidy of up to Rmb50,000 ($7,571) for each plug-in hybrid sale, and Rmb60,000 for each pure electric vehicle sold in five big cities. Since then some of those cities have added hefty local producer subsidies as well. Local Chinese media say one Shanghai local government was even considering giving a free electric car to anyone who purchased a property in their district.
This month is likely to bring further news of government support for the industry, with Beijing expected to publish its long- awaited 10-year plan to encourage production of electric and plug-in hybrid vehicles. The government is expected to invest up to Rmb100bn in the sector over the next decade.
“China’s efforts to stimulate demand for EVs are a demonstration of the seriousness of their commitment to the electrification of transportation,” says Bill Russo of Synergistics, a Beijing auto consultancy, and former head of Chrysler in China.
“China views electrification as a national strategy to reduce emissions and increase energy security, as well as a means toward achieving sustainable economic growth.”
Beijing also views green cars as a way to leapfrog over the west’s traditional dominance of internal combustion technology – and make up for all those decades lost to communism, when cars were a rare sight on Chinese roads.
Some industry analysts believe China will never catch up with the US on internal combustion vehicles, or Europe and its diesels or Japan with its hybrids – but in the words of Kevin Wale, China head of General Motors (which recently began selling its Volt hybrid electric cars on the mainland), “China could be the country that leads the world in switching to electric vehicles.”
With its cheap labour, powerful government, and vast auto market to offer economies of scale in green car production, “China could become a pioneer in the conversion of electric vehicles from an expensive niche technology to an affordable, widely used technology,” according to Paul Gao, formerly of McKinsey and now an executive at Chery, the Chinese carmaker, which also has electric-car ambitions.
But Mike Dunne of Dunne & Co, the Asian auto consultancy, says: “Breakthroughs in China are almost never orderly or elegant and its drive for electric vehicles has already experienced some stall-outs, delays and backsliding.”
BYD, long viewed as the leader in Chinese electric vehicle technology, has repeatedly missed self-imposed deadlines for exporting electric vehicles overseas.
And officials of the China Association of Automobile Manufacturers admit most domestic companies lag far behind multinationals in battery technology.
Mr Dunne expects city bus and taxi fleets to be the main buyers of electric vehicles, at least until 2015: “After that, with more charging stations in place, private individuals will have greater confidence to buy electrics too,” he says.
But as Yang Jian, editor of Automotive News China wrote recently: even with 1m electric vehicle sales per year, “electric cars would be a niche – not a mass market”.
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