The Chinese Automobile Industry is Driving West Prof. M. Fetscherin Prof. M. Sardy Rollins College Department of International Business
Agenda • Introduction • Players, power, partnership • First move going global and challenges • Footprint Japanese or South Korean • Chinese auto makers and takers • Strategic options • Conclusion
Introduction • 2005 first Chinese auto companies appeared in global 500 • SAIC with sales USD 12.4 bn • FAW with sales USD 14.5 bn • Production of 6 million in 2006, > German • Third largest auto market • Fragmented market 120 producers, 12 major • Small local manufacturers • Large national with JV
Players, Power…. • 50th anniversary, but infancy • Liberalization of trade policy, import taxes • Key Players
…and Partnership • Two types of Chinese automotive companies
Production Chery production
First Move Going Global • Exporting introduction stage (PLC) • In 2003, Honda produces cars to export to Europe and Asian markets • In 2005, 170,000 vehicles exported • Asia, Africa, South America, Europe • Trucks (60%) • Chinese domestic brands
Key Challenges • Currency risk, import restriction • Processes • Lack of sales • Distribution, and • After sales • Product • Quality issue (e.g., safety, environment standards) • Brand How do customers value Chinese cars compared to competitors?
Value Map EXAMPLES • Some SUV
Auto Makers and Takers • Passenger car sales vs. Number JV • Importance of JV? • More JV, more sales? • Importance of building own brand?
Brand Matrix • Passenger car sales (own brand) vs. JV • Extracting sales under own brand • Matrix with 4 categories • Each specific characteristics
Example Rover SAIC has launched its first own-brand car based on technology from the defunct British carmaker Rover.The introduction of the "Roewe 750" (the name means "glory and authority" in Chinese) will be based on Rover 75 technology purchased from BMW.
Conclusions • Domestically, China third biggest auto market • Internationally, Chinese brands are exporting, in introduction phase PLC • Quality issue can be solve • Brand one key challenge • Consumer perception key • Parallels to Japan and South Korea • Independent more likely to export soon