by Frank Beeton
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A probing review
of significant global
motor industry news
Whither the Chinese
Motor Industry?
The intended future direction of the Chinese
motor industry is a matter of huge interest
and importance to the global automotive
community. With annual domestic demand
currently running at about 22 million units,
which is expected to grow to around 35
million units by 2025, the industry has
grown rapidly into a world-leading position,
but it still relies heavily on that domestic
market for its critical mass, having made
a limited impact on the most important
markets in the rest of the world. In fact,
almost all of that impact has been in
what could be described as “emerging
markets”, with very little penetration into
the established, and more demanding areas
of Europe and North America. Inevitably,
after years of double-digit market growth,
China’s domestic vehicle demand is slowing
down, and it is expected to reach “only” 7%
year-on-year growth in 2014.
It has also been reported that the market
share of domestic Chinese brands, as
opposed to those linked to multinational
marques, has recently reduced from 45%
less than two years ago, to 38%. This has
been ascribed to increases in the local
production capacity of the Chinese/foreign
partnerships, and their more modern
technology and better reputations for
quality and performance. This has led to
speculation that some of the independent
brands may not survive, although further
expansion of the domestic market is
expected to open up new opportunities for
lower priced products at the entry level.
At a recent government-industry coalition
conference, the chairman of the China
Council for the Promotion of International
Trade’s Automotive Committee, Wang Xia,
reportedly stated that “Going global is very
important for Chinese automakers”. In
the ensuing discussion, it was suggested
that the local industry would need to
improve technology and quality, develop
an international mindset, and develop
clear brand identities. This latter point has
been discussed before in this column, and
we believe it is particularly important if
indigenous Chinese brands are to become
important players in the global firmament.
Although our South African perspective
may be considered irrelevantly limited in
global terms, we have observed some
characteristics of Chinese marketing
strategy that have been less than helpful in
establishing a broader global image for their
domestic brands. These include the use, in
some cases, of unique local branding and
product names, which confuse the local
buyer and prevent the establishment of a
clear international brand identity, and the
granting of sales franchises to organisations
who are only interested in making a “fast
buck”, and have no intention of developing
adequate infrastructures to ensure the
long-term success and survival of the
brand.
In our view, much of this obfuscation stems
from independent importers, who are not
owned or controlled by Chinese sources,
attempting to establish a unique local image
for the product, and possibly watering down
its Chinese origins. This may lead to shortterm success among less knowledgeable
buyers, but is unlikely to wash with the
more sophisticated clientele who look for
the comfort of visible and proven product
support structures before committing their
hard-earned cash. We have also seen
instances of short-lived local distribution
arrangements, which evaporate after a
year or two, leaving unfortunate owners
with little value in their investments, and
strange pricing tactics, where sudden price
cuts are made to increase the sales rate,
but also leave earlier buyers of the product
contemplating reduced resale val