Growing notion of value for money and fuel efficiency open a window for Chinese car makers

With Chrysler and General Motors entering bankruptcy protection, Toyota global sales continuously falling, several European auto companies applying for government loans, the global auto industry pattern is undergoing a new-round shift. What do these changes imply? How does the current shift impact on main MNC auto companies? Will they adjust their strategies in china market? What do these changes mean to local auto companies? There are a lot of questions arising in the new situation. 

Gasgoo.com has an interview with Klaus Paur, Regional Director Automotive for North Asia at TNS, on these questions.

Gasgoo.com: Will the current change in North American auto industry radically change the global auto industry? What will happen to the balance of strengths among European, American, Japanese and Korean automakers?
 
Klaus Paur: The current auto market shake-out will indeed change the automotive landscape. The American car industry is going to lose influence, mainly because of GM’s dramatic decline. Although GM will continue to operate after the Chapter 11 filing, its operations will have been considerably downscaled, with several iconic brands sold or discontinued (Saturn, Hummer, Pontiac) and a withdrawal from European continent (sales Opel, Vauxhall and Saab ). Despite Toyota’s current difficulties the Japanese auto industry will be able to remain strong due to its strong presence in all relevant markets and a leading position in the development of alternative energies. Europe seems to step up its influence on the global scene in particular due to a growing performance of Volkswagen and an ambitious expansion strategy of Fiat. To note also that in the context of economic downturn the Korean car makers benefit from a growing cost consciousness of consumers worldwide which helps them to reinforce their market position in most of the countries. Finally, we can see the first steps of Chinese car makers attempting to raise awareness on the global scene. With the mainland manifesting itself as number one auto market in the world, and domestic manufacturers eventually acquiring foreign brands, we can expect China to establish itself as an additional pole within the global auto industry. 

Gasgoo.com: How will the current change influence the long-term development of GM, Toyota, VW and Hyundai? Have the factors changed that decide the competitiveness of automakers in the transition from conventional vehicles to new-energy vehicles? What is the impact of the current series of regional changes on the China strategies of global automakers?

Klaus Paur: We are currently witnessing another wave of consolidation within the global auto industry. While a critical size still counts in order to achieve economies of scale, the fall of GM shows nevertheless that size alone does no longer guarantee sustained success. Auto makers must continuously adapt their marketing strategies according to the developing needs of consumers in the various markets. Worldwide, we experience an increasing sophistication of car ownership in which consumers appear to emphasize the notion of value for money, where they may be willing to abandon some unnecessary equipments (“gadgets”) but expect elevated levels of safety and quality. Linked to the aspect of value for money and supported by a rising sensitivity for environmental issues, fuel efficiency is a main driver of development, which eventually will lead to more alternative energy offers in the market. The R&D drivers value for money, fuel efficiency and alternative energies also apply for China. As the mainland is the most important growth market for most car makers, we can expect a particular dynamic of developments happening in China.

Gasgoo.com: What measures will global automakers take to win the competition in China? Will they launch many new vehicle models specially developed for the Chinese market? 
 
Klaus Paur: The Chinese car market is quickly maturing, and to be successful in the long term it is essential to read the development trends correctly. Ingredients for winning brands will be an accurate combination of cutting-edge technology, equipment level and styling. This can lead to specifically designed vehicles for China, but does not be necessarily so.  Nevertheless, vehicles manufactured and marketed in China will have to be adapted to Chinese tastes. With China taking a much more prominent role in the global automotive industry, we may see more design centers be established in the mainland, which is supposed to incorporate more Chinese elements in styling in the long term.
 
Gasgoo.com: Does the collective collapse of North American automakers indicate the failure of the inter-regional M&A (mergers and acquisitions) pattern? Will the future auto industry see further integration in the form of the Renault-Nissan Alliance? 

Klaus Paur: Overall we can expect a further consolidation within the global automotive industry with many brands regrouped by fewer car manufacturers. By its nature, automotive M&A have been and still will be intercontinental. The Fiat/Chrysler acquisition brings European and American operations together, Daewoo is still owned by GM and combines American and Korean makes. If the Hummer deal receives approval, a Sino-American collaboration will be established. The biggest challenge for all these M&A is the strategic and cultural integration. The Renault-Nissan alliance is a successful example of it.
 
Gasgoo.com: What influence will the current adjustment of the auto companies have on the auto-parts suppliers? Will it lead to a wave of M&A among auto-parts companies?
 
Klaus Paur: Auto parts suppliers were heavily affected by the global decline of auto sales, but have been under much pressure already before. We can expect to see also a consolidation process in this sector, and Chinese companies may play a major role in it.

Gasgoo.com: How will the restructuring of the global auto industry impact on Chinese auto brands? What will be the pros and cons of this impact?

Klaus Paur: Chinese car manufacturers may get the opportunity to acquire foreign brands which may help them to build their own domestic brands. We should not expect a strong impact on Chinese car brands in the short term, though, as it will take time to capitalize the international know-how for the development of the own domestic brand. The growing notion of value for money and fuel efficiency on the global level appears to open a window for Chinese car makers if they are successful in strengthening their brands, improving their overall product quality, and closing the gap in terms of technological capabilities to foreign car makers. Alternative energies in particular offer interesting development potentials for domestic vehicle manufacturers.