Accelerated drive to globalization of Chinese automotive brands (6)

In our introduction, we introduced six Emerging Trends Driving the 2010 China Auto Industry:

• Sustainable demand growth fueled by urban economic development
• Shifting preferences for increasingly savvy consumers
• Hyper-competition across the automotive market segments
• Adaptive brand innovation to extend product reach and grow share
• Increasing focus on the automotive aftermarket
• Accelerated drive to globalization

This is the final article in this series.

Accelerated drive to globalization

The global financial crisis temporarily disrupted growth in the business for exporting vehicles made in China. However, domestic vehicle manufacturers are once again focusing here and the business has picked up rapidly since early 2010, experiencing a 62.5% growth in the first nine months of 2010. Total export is as high as 405,200 units with even split of passenger and commercial vehicles.

Such a strong rebound is largely fueled by a recovery of market demand in places such as Algeria, Vietnam, Syria, Russia, Egypt, Bangladesh, Iran, Chile, and Brazil. Moreover, improved product quality and a focused business strategy of Chinese local brands has contributed to Chinese export growth. One example is Great Wall Motor Company’s success in securing approval for sales in the European Union, which has enabled them to assemble and ship their 4 small cars to all European countries. It also has greatly enhanced the quality image and market acceptance of Chinese vehicles in other markets.

In view of growing entry barrier of most export markets, Chinese local brands are shifting their market entry strategy from complete vehicle shipment to building a KD plant to assemble locally. Great Wall and Chery have aggressively invested in local facilities in the Middle East, South America and Africa - either solely or with local partners. Meanwhile, other Chinese firms have chosen to work with their international partners to jointly develop locally-adapted product platforms for those fast-growing markets. Recent cooperation between SAIC-Wuling and GM to set up a 50:50 JV to expand into India is a starting point of shifting Chinese small car and engine technology to other markets. With such aggressive and innovative efforts, we expect to see China emerge as a platform for globalization in the coming years.

Summary

These trends observable in the China auto industry in 2010 are reshaping the brands, products and global footprint of those who hope to prosper in the global automotive industry. This is pushing multi-national as well as local Chinese vehicle manufacturers to alter their thinking and adopt new strategies to play the game.

We can clearly see that China has taken the center stage in the development of the 21st century global auto industry.

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About the authors:

Bill Russo, Gasgoo.com's columnist, is a Senior Advisor with Booz & Company as well as the Founder and President of Synergistics Limited. He lives in Beijing and has more than 20 years of experience in the automotive industry, most recently serving as Vice President of Chrysler's business in North East Asia.

Jeffrey Zhao, is an Advisor with Synergistics Limited. He lives in Fairfax, Virginia and has more than 10 years of experience in the automotive industry, most recently serving as Senior Manager for New Business Development for Chrysler's business in North East Asia.