MIRA: long-term relationship with Chinese VMs more important

Mr. Terry Spall, in his current position as Vice President -Asia and President of MIRA Shanghai, takes responsibility for MIRA's business activities in Asia as well as engineering programmes business development worldwide. During his time at MIRA he has travelled extensively and been a very frequent visitor to both China and India in support of MIRA's business activities. He talked to Gasgoo.com reporter about MIRA's China experience, about the local market conditions, and comparison between China and India.

Being special, MIRA's China operation history

Gasgoo.com: To me, it seemed that powertrain test and development expertise is at the heart of MIRA's leading whole-vehicle powertrain engineering service. Why MIRA is reliable and professional to the customers? And MIRA's China operation history…

Terry Spall: MIRA is principally recognized as a leading independent vehicle engineering, testing, consultancy and certification organization. We offer very broad services, not only in the area of powertrain; we provide particular expertise in the vehicle development process from initial concept through to production start. We're perhaps unique in being able to employ the most appropriate design, simulation and development tools and techniques.

Regarding our experience in China, we are a well established and respected brand in China. We got our first project in 1982 and set up representation in Beijing in 1998. In the early days, our China business was relatively small. Our first major project was to design the Xiangfan Proving Ground for Dongfeng (Motor). Over recent years, the number of projects and the number of customers has been increasing dramatically, so we moved to Shanghai, opening our new Shanghai office in late 2005.

MIRA has been an active design and development partner in China for over 20 years with projects including the delivery of domestic market vehicles and vehicles aimed at export markets. Besides the broad range of engineering and other services we provide, I think one thing that has led to MIRA's current market place is that MIRA recognizes the importance of technology transfer; we're quite willing to share knowledge and technology with our customers. So it's not just developing a car, it's about developing engineers as well. This point is very important, because many of our Chinese customers are still young companies, developing their own engineering capability. Having the opportunity to work side by side with experienced engineers so that they can learn about the vehicle development process has proved time and time again to be invaluable.

Gasgoo.com: What changes have you witnessed during the development of your China operation?

Terry Spall: In most cases we undertake what we refer to as turnkey projects, in which we take full responsibility to plan and manage all aspects of project and we ensure the delivery of performance on time and within budget. Increasingly we also see projects where we share the responsibility with the customers - they have engineering capability and they want to fully utilize that, so we combine MIRA's expertise with their engineering team to make a more efficient program. This is happening more and more.

Also customers are expecting we provide more service in China and at the right price, so we are finding ways of being able to respond to this and deliver our services at the customer premises, where this makes economic and logistical sense.

Price, communication, big problems occurring on projects in China

Gasgoo.com: What do you mean by "right price"?

Terry Spall: By saying the right price…I refer to the fact that in a fiercely competitive marketplace, price expectations are not surprisingly a key factor in the outsourcing decision making process. From our perspective as an Engineering Service Provider (ESP) we fully recognize this and try our best to deliver value for money services without compromising the quality of our delivery. . Currently we have the advantage as the British pound is very weak (while the Euro and RMB are quite strong), which makes our services much more affordable, as much as 35% less, to our Chinese customers than only a few months ago.

Another thing which makes us different to most ESP's and influences our ability to be price competitive is that we don't have shareholders; we are an independent company operating as a company limited by guarantee.  The company is controlled by a Board of Directors who provide the drive and direction to ensure MIRA is there to respond to the needs of the industry, but the absence of shareholders and hence the obligation to distribute profits in dividends means that we are not under as much pressure as other ESP's (who do have shareholders) to generate large profits from our operations.  The profits we do generate are reinvested into the development of new facilities and research work to develop new technologies. The fact that MIRA has been set up in this way does make it easier for us to respond to our Chinese Vehicle Manufacturer (VM) customers who, not unreasonably, come to MIRA for high quality and professional services, but also want lower prices.

Gasgoo.com: Besides price problems, what other major problems have you met?

Terry Spall: Often the biggest problems occurring on projects are attributable to poor communication. It is not always as easy as it sounds to ensure everyone has a good and clear understanding. We always take great care these days to try and ensure we communicate effectively and our project management systems are set up in such a way to try and minimize the chance s of miscommunication.

Also I feel relationships are very important, though it can be challenging to build good relations because of language or cultural differences it is always worth the extra effort. If you have a good relationship, and this is something MIRA always strives to achieve, then you have a much greater chance success in project.

Difference between Chinese and European customers

Gasgoo.com: Then in terms of supplier-customer relationship management, what difference do you see for dealing with Chinese and European customers?

Terry Spall: The way in which we work with our customers in Europe is a little bit different from what we do in China. Obviously in Europe, there're a lot of very mature automotive manufacturers who may have been around for fifty or even more years. They have a very good understanding of exactly what and how they wish to outsourcing and the 'request for quotation' (RFQ) or 'statement of requirements' (SOR) is usually very definitive. Although we work on a project-by-project basis, the relationship is long-term (decades in many cases) with a very high level of mutual trust.  In China by comparison, the market is still developing and there are many new local VMs.  As they are going through a process of rapid development and expansion, they are very reliant on their ESP relationships in order to develop their new products.  As they are young (but very ambitious!) companies they are not always in a position to develop perfect RFQ's or SOR's and the input to the ESP can sometimes be quite vague.  It is a very different situation and we of course have to recognize and respect that. We are very prepared to work with companies to develop their SOR's and help them through the process of being able to define accurately the support services they need to be sure of ending up with the deliverable they want and ultimately get to a situation where we can work like we do with the well established VMs in Europe. Perhaps one very important common aspect between our customer relations in Europe and China is that we always regard it as a long term partnership; it has to be long term. To us, though the contract is important, it is somewhat secondary to the long-term relationship.

Gasgoo.com: What's the approach of project planning you often use in China?

Terry Spall: Typically the projects of MIRA would be carried out following a very well proven system of project management.  The MIRA system of managing projects has been evolved over many years and benefits from the experience of many of our engineers who have worked previously for VMs. Key to the task is understanding very clearly  the requirement of the project, and then breaking the project down into discrete tasks splitting the requirements to smaller elements--from vehicle level to overall system level, then to component level…The way we manage the project has to be adapted to organizational conditions, like availability of critical resources and facilities.  Experience then allows us to estimate the timing of activities and the interdependency on other tasks within the project to determine a critical path network for the programme.  However, putting the technicalities aside, the key to success is being able to handle the unforeseeable things that often happen during a project.  Being able to react quickly with an innovative approach and flexible attitude usually means we can handle most problems effectively and keep the programmes on track.

On "copycat" cars

Gasgoo.com: For those manufactures of "copycat" car models (and they also ask MIRA for help), what's your comment on them?

Terry Spall: That's a difficult question as lots of OEMs are still tempted by the prospect of a low technical risk and fast track project by 'copycatting' for their new car models. My personal view of this, is that it is a short term strategy that comes with high commercial risk.  At MIRA, we have to take great care not to infringe IPR but that does not mean that we cannot provide low technical risk and fast track programmes.  What we can offer is the creation of original designs based upon our huge design experience that are appropriate for the customer in term of technology to create products in the fastest possible time scales.  Developing a new design may appear to be a higher technical risk that will require greater investment and take longer, however I am quite sure such a strategy will prove more cost effective in the longer term and of course create greater market opportunities than something which, to a greater or lesser extent is based upon the IPR of others.  It is understandable why some might feel it is a safer option to copy  (a car that has sold well), but these days you can see more and more companies trying to develop and protect their own IPR as they want to build their own brand. Without a doubt times are changing, and there'll be more and more self-developed cars with true IPR ownership and less what you refer to as "copycat" cars.

Comparison between China and India

Gasgoo.com: You're responsible for the Asia Pacific business; what if you compare the Indian market and the Chinese market?

Terry Spall: Well from our perspective, what I see is China is most in need of engineering services whereas India is in need of both engineering and testing services. It is true to say that at the present time the basic automotive testing infrastructure in China is better than in India - but don't be complacent, India has embarked on a huge national level project to create the automotive test and R&D infrastructure it will need to be globally competitive.  The programme which is called the National Automotive Testing & R&D Infrastructure Project (NATRIP) is currently in progress and huge investments are being made by the Government of India.

The way we work with manufacturers in India and China is quite similar and is developing at a similar pace. We see more and more partnering cooperation, where we work together with the engineering teams in the manufacturers; where they share part of the responsibility allowing us to provide much more cost effective support.

An eye on long term cooperation

Gasgoo.com: Have you noticed that more and more engineering service outsourcing in the emerging markets and smaller design and engineering workshops thrive?

Terry Spall: Yes, we have observed that and we do engage with other partners, we are continually looking for ways to better use the local resources in our projects whether it be from the VM themselves or from local ESP's.  Of course we have to be very careful in doing this to ensure we are always able to deliver the high quality people expect from MIRA.  However, by doing more locally it can help to reduce costs in some cases and also improve programme logistics but not in every case and so we have to use our experience and judge each project/customer on their own merits.  The ultimate goal has to be to integrate as fully as possible with the customers' own engineering team and where appropriate local engineering and test resource to deliver the best quality services that people expect from MIRA at the lowest possible cost and in the shortest possible time - easy to say I know, but this is the real challenge we have today and one which we believe we can win.

Gasgoo.com: With so many foreign engineering services available, how should they choose the most suitable one? Could it be possible that the more they work with MIRA, the more they rely on you?

Terry Spall: Among the various engineering service suppliers, one should clearly understand which company has the right strength for their projects. Technical capability and experience are a pre-requisite, price is important, equally delivery on time is important, but being able to manage the technology transfer and help develop the company's engineers is also very important. Developing good relationships at all levels of the organization so that people can work well together is also important.

At present many Chinese customers rely on engineering service suppliers like MIRA; but this is really a transient situation as they develop their own engineering capabilities and they are able to do the project themselves. In the future, we hope to still be working with our current Chinese customers; but not because they don't have the capability, but perhaps for reasons such as they don't have the capacity to do all of their projects.  I came to MIRA in 1995, and my first job was to work with the Korean automakers; during this time we were engaged in many projects that could be described as technology transfer biased.  We are even today still working with many of these Korean companies but the work now is biased more towards tuning products for the EU market or specific areas of advanced engineering, so very different to what we were doing for them in the mid-nineties. I see our relations with Chinese VMs developing in a similar way. And I am hopeful that many of our current customers are still with us in 10 to 20 years time; maybe we'll all have a few more grey hairs by then, but hopefully we'll still be working together and perhaps reminiscing on current times as the good old days, though with the current economic issues the world is facing that might be stretching things a little!