A Research Report on the Change in Global Auto Industry (XII)

Part Three. Analysis of the impact of the change on players in the Chinese market

1.  Global automakers will pay more attention to the Chinese market

① The domestic Chinese market will be getting more fiercely competitive, as the financial crisis has urged global carmakers to pay more attention to the Chinese market, and they have very different urgent needs for enhancing their investment in China.
 
Since the financial crisis, China's auto market has shown strong performance. According to statistics from China Association of Automobile Manufacturers (CAAM), the monthly sales by June this year in China's auto market had exceeded one million units for four consecutive months, and China has overtaken the United States as world's largest auto market for six straight months.

Automakers are more optimistic about China's long-term potential. Judging by the Chinese government's stimulus measures for the auto market and by the continued growth of China's GDP, the world's most populous country's per capita vehicle ownership rates will further increase and car sales in China will finally exceed 20 million units to really become the world's largest auto market.

In addition, because the Chinese market is different from Japan, South Korea and other East Asian countries, and is getting even more open than the U.S. market, global brands of passenger cars in China nearly account for 70% market share in the world. Any strong automaker still has the opportunity to get some share of the Chinese market.

Although the Chinese market is one of the world's most competitive markets, it remains to be an emerging market as it is still growing continually. Therefore, multinational auto companies will surely pay more attention to the Chinese market.

② Different companies have different urgency of investment in the Chinese market, and the future competitiveness of the domestic market will be increasingly fierce.

Global automakers have all realized the importance of the Chinese market, but not each of them will see China as their strategic priority market.

For General Motors, Fiat-Chrysler, Ford, the most urgent thing now is to deal with the affairs in their own backyards. GM's most important thing is to recover from its bankruptcy protection; Fiat-Chrysler is most concerned about the bankruptcy protection, integration, and retaining its ground in the home U.S. market; Ford's situation is better, but its current focus is still on the domestic U.S. market; even the German Volkswagen Ag, while consolidating its position in the Chinese market, has a higher strategic priority to quickly open the U.S. market.

Therefore, the Chinese market should be the highest priority for Japan's top three automakers (Toyota, Honda and Nissan). Because they have overly depended on the U.S. market, and their expansion of the European market is flat. With the explosive growth of the neighboring country, the Japanese carmakers will attach the same importance to China as to the United States. Moreover, the Chinese currency yuan (RMB) against the Japanese yen is now stable, so it is a good time for expansion in China.

South Korean Hyundai Motor also depends on the U.S. market much, but as the market share is still small, it will invest heavily in the U.S. market in the near future. The importance attached to the Chinese market will also come to the same level as to the United States. Over the past year, S. Korean currency won has depreciated substantially against Chinese yuan and this is also an opportunity to expand in the Chinese market.

To sum up, over a short period of time, only Japanese carmakers, Hyundai Motor, Volkswagen and other European car companies will attach importance to and boost their investment in the Chinese market. It remains to be seen whether the U.S. Big Three will follow suit.

In the survey of global automakers' China strategy selections, the top three choices are: to speed up the penetration to tier-2 and tier-3 cities, to increase sales of small cars and low-end cars, and to use more local suppliers.

When the small car has become a market trend and growth point, it is necessary for the global automakers to put more small cars and low-end cars to the market; in the sales channels, these companies used to focus on the first-tier cities, where their sales network have nearly covered. Now with the growth of purchasing power in the tier-2 and tier-3 cities, it will be a priority of the global automakers to speed up their sales network coverage in the medium- and small-size cities. To cut the manufacturing costs, one of the best solutions is to use more local suppliers.

In the long term, or over the next five years, the world's major carmakers will continue to increase investment in the Chinese market, and China's future auto market will have more fierce competition. Toyota and Volkswagen will have the most notable race. It also remains to be seen whether Fiat will take advantage of this crisis to boost its good international brand image and return to its former glory in the Chinese market.

(To be continued)

A Research Report on the Change in Global Auto Industry (I)

A Research Report on the Change in Global Auto Industry (II)

A Research Report on the Change in Global Auto Industry (III)

A Research Report on the Change in Global Auto Industry (IV)

A Research Report on the Change in Global Auto Industry (V)

A Research Report on the Change in Global Auto Industry (VI)

A Research Report on the Change in Global Auto Industry (VII)

A Research Report on the Change in Global Auto Industry (VIII)

A Research Report on the Change in Global Auto Industry (IX)

A Research Report on the Change in Global Auto Industry (X)

A Research Report on the Change in Global Auto Industry (XI)

A Research Report on the Change in Global Auto Industry (XIII)

A Research Report on the Change in Global Auto Industry (XIV)

A Research Report on the Change in Global Auto Industry (XV)

A Research Report on the Change in Global Auto Industry (XVI)

A Research Report on the Change in Global Auto Industry (XVII)