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It's adapt or perish as wheel turns
October 23, 2011, Sunday
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Print Edition
Print Edition
AFTER being the world's No.1 in 2009 and 2010, the Chinese automotive market is now facing a new horizon. The ever-widening European debt crisis, the continuing gloom in the global economy, the interim shortage of auto-parts supply caused by the Japanese earthquake and the withdrawal of government stimulus policies - all these factor signal an end to the "golden days" of the Chinese automotive industry.
Slowly, automakers are being forced to walk away from their reliance on generous government support.
Facing this kind of market shift, automakers in China must give serious thought to how they will adapt the world's largest auto market to changing times.
First off, at the research and development level, the coalface of the automotive industry, carmakers able to produce models adapted to the tastes and habits of Chinese consumers will enjoy a competitive edge in the future.
From wheelbase extension and platform customization to localized homegrown brands, foreign automakers and Sino-foreign joint ventures have made special efforts to localize their production.
Those moves are paying off at the sales end. In today's market, Passat remains a classic model, the Lavida continues to take lead in sales, and New Sail and Baojun are still active players.
Many international auto giants, such as Toyota, Audi and Honda, have set up technology centers in China. However, most new models from them are vehicle designs introduced from overseas and labeled with "United States/European version." In other words, they are far from "made-for-China." No wonder, there is a cry for a "Steve Jobs of the Chinese automotive industry" to materialize.
Secondly, there are still hidden risks behind "rosy" sales rankings.
Automakers with too few models may suffer the most. Gone are the days when a carmaker could place well in the rankings with only one or two best-selling models.
Take this year's auto sales, for example. SUV models have achieved sales growth despite a slowdown in overall vehicle purchases. The SVW Tiguan, Beijing Hyundai ix35 and Dongfeng Nissan's Qashqai have been popular lines.
This has raised "envy" among automakers that don't make similar vehicles. Therefore, improving and expanding product lines are important considerations for automakers.
Lastly, automakers need to consider the reality of China when planning dealership networks.
Now that China has become the world's largest auto market, the sales networks are being expanded to tier-3 and tier-4 cities.
That all required changes in the traditional 4S model of the dealer network.
One example is that Dongfeng PSA and SGM have set up dual-brand dealers in some regions, effectively easing the shortage in human and land resources. What's more, in tier-1 and tier-2 cities, where the car population is approaching its limits, automakers need to focus more on after-sales servicing and maintenance. Dongfeng Nisssan's "City New Express," FAW Toyota's "After-Sales Service Car" and SAIC's "House-Call Service" are all good attempts.
Now that the government is scaling back on subsidies and other incentives to aid the auto industry, manufacturers need to develop more self-reliance. That will determine who succeeds and who becomes the "black sheep" of the industry.
If we were to design a system coordinated for the industry's future, branding and image would be the height, product lines would be the width and dealership networks would be the depth. Positioning automakers according to their performance in this system would give us a clearer picture of development trends.
Slowly, automakers are being forced to walk away from their reliance on generous government support.
Facing this kind of market shift, automakers in China must give serious thought to how they will adapt the world's largest auto market to changing times.
First off, at the research and development level, the coalface of the automotive industry, carmakers able to produce models adapted to the tastes and habits of Chinese consumers will enjoy a competitive edge in the future.
From wheelbase extension and platform customization to localized homegrown brands, foreign automakers and Sino-foreign joint ventures have made special efforts to localize their production.
Those moves are paying off at the sales end. In today's market, Passat remains a classic model, the Lavida continues to take lead in sales, and New Sail and Baojun are still active players.
Many international auto giants, such as Toyota, Audi and Honda, have set up technology centers in China. However, most new models from them are vehicle designs introduced from overseas and labeled with "United States/European version." In other words, they are far from "made-for-China." No wonder, there is a cry for a "Steve Jobs of the Chinese automotive industry" to materialize.
Secondly, there are still hidden risks behind "rosy" sales rankings.
Automakers with too few models may suffer the most. Gone are the days when a carmaker could place well in the rankings with only one or two best-selling models.
Take this year's auto sales, for example. SUV models have achieved sales growth despite a slowdown in overall vehicle purchases. The SVW Tiguan, Beijing Hyundai ix35 and Dongfeng Nissan's Qashqai have been popular lines.
This has raised "envy" among automakers that don't make similar vehicles. Therefore, improving and expanding product lines are important considerations for automakers.
Lastly, automakers need to consider the reality of China when planning dealership networks.
Now that China has become the world's largest auto market, the sales networks are being expanded to tier-3 and tier-4 cities.
That all required changes in the traditional 4S model of the dealer network.
One example is that Dongfeng PSA and SGM have set up dual-brand dealers in some regions, effectively easing the shortage in human and land resources. What's more, in tier-1 and tier-2 cities, where the car population is approaching its limits, automakers need to focus more on after-sales servicing and maintenance. Dongfeng Nisssan's "City New Express," FAW Toyota's "After-Sales Service Car" and SAIC's "House-Call Service" are all good attempts.
Now that the government is scaling back on subsidies and other incentives to aid the auto industry, manufacturers need to develop more self-reliance. That will determine who succeeds and who becomes the "black sheep" of the industry.
If we were to design a system coordinated for the industry's future, branding and image would be the height, product lines would be the width and dealership networks would be the depth. Positioning automakers according to their performance in this system would give us a clearer picture of development trends.
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