When you ask Western automakers whether the Chinese companies will become global automakers in close proximity to Toyota Japan and Hyundai Motor Company, the answer is very positive. However, when you asked which company in China will become the global car manufacturer, the answer is usually: not clear.
Impatient to imitate adults' "children"
Chinese car manufacturers feel good. At the 2006 Beijing International Auto Show held last year, Chinese auto makers launched their latest designs to attract audiences, and people watching the auto show flooded into every new car. Chinese automakers not only have enough confidence to demonstrate the new low-priced small cars they design, but also dare to display luxury cars and sports cars they designed, reveal the concept of future "concept car" and even hybrid cars. In this world’s fastest growing world’s third-largest auto market, Chinese automakers seem to have grown up. But just like children eager to imitate adults, it may not be wise for Chinese auto makers to pursue high technology.
In particular, currently China's automobile production standards are not completely in line with international standards, and Chinese auto makers are unable to produce products that are competitive in the developed countries' markets. For example, the environmental standards for automobiles in many countries in Japan, Europe, and the US are higher than those in China, which affects the export of Chinese automobiles to these regions.
Below the limit of the export price
In the past 10 years, almost every major international automobile manufacturer has entered China. However, these companies were surprised that they found that their biggest competitors turned out to be just starting car manufacturers from China. Prior to this, many Chinese automakers have been clumsily imitating the models of foreign companies and producing their replicas. However, in recent years, this situation has gradually changed. In order to push the brand overseas, domestic car makers such as Chery, Great Wall and Geely have taken great pains to design and prove that they can also design their own models. Last year, Chinese automakers exported more than 100,000 cars to more than 100 countries. But the biggest concern for foreign automakers is their price below the limit.
Rapidly growing brand value
The extent to which this miracle is due to the fact that Chinese automakers will do business - not because of the special treatment they enjoy - remains to be discussed. Many of the early technologies used by Chinese automakers originate from foreign companies. The government also provides support to just-started car manufacturers through direct investment and loan guarantees. The university provides them with technical assistance, especially in the development of costly engines. Future laws are likely to force foreign companies to work with China to strengthen R&D and ensure that Chinese automakers still have access to advanced technologies. Therefore, Chinese automobile manufacturers have governments supporting them. Essentially, this is indistinguishable from the government support enjoyed by Japanese car manufacturers 30 years ago or by Korean car companies 20 years ago.
The only difference is that the pace of development is different - it is also a source of worry. Has China's auto industry developed so fast that it has not yet obtained the necessary depth of technology? At least for now, in a car market like China, brands don't have much value (except luxury cars). For most car buyers, prices are the most important. As Chinese automakers continue to introduce new models, the quality of cars is declining.
Two opposing market strategies
Two different strategies are sprouting in Chinese companies. Most manufacturers are entering the market through low-cost and small cars, the most typical of which is Chery Automobile. Chery has become the main brand of Chinese-made cars.
In the face of many well-known foreign brands, many Chinese manufacturers believe that they have no other choice and can only participate in competition by reducing costs as much as possible.
Stephen Clarke, a representative of Ricardo Engineering Consultants in the United Kingdom, said: "They are groping our way of car development to make their own cars as soon as possible."
However, SAIC Motor adopts another strategy. Its products are already close to the high end of the market. The price of the newly launched Roewe sedan is estimated to be around US$30,000. It can compete with Buick Regal and Honda Accord.
“If you want to sell low-priced cars, many people can do it,†said Murphy, a former General Motors executive and currently responsible for SAIC’s international operations. He said that in the past two years, China’s cheap cars may have been able to form A shock, but some consumer websites show that many consumers are not satisfied with the quality of this car.
Some analysts pointed out that the low-cost strategy is limited because the weight of famous brand cars in the Chinese market is becoming larger and larger. Many consumers are not the first time to buy a car, so it is becoming more and more important to get consumer recognition.
Similarly, the Chinese consumer's demand for cost performance means that they will not pay big prices for less reliable products.
Michael Dunne, an American automotive consulting firm's China office, said: "Consumers don't want to pay. But in China, forcing commodity prices to become almost a kind of civic obligation. That means that the lower-grade brands will be This market disappeared."
Two different business models
In the presence of these two opposing strategies, there are two distinct business models. Chery and Geely only rely on their own brands, so it is difficult to find the product's R&D funds.
In addition, SAIC is one of the few state-owned companies that has cooperated with multinational companies for many years. Thanks to cooperation with GM and Volkswagen, it has become China's largest auto assembly plant. This means that it has a relatively strong financial strength. However, the risk it faces is that it lacks urgency in developing autonomous brand cars.
As domestic competition has become increasingly fierce, many Chinese companies have become increasingly cautious about expanding overseas. Chery will not launch models for the US market until 2009, and Geely has postponed its export plans.
SAIC also conceives that the Rover-based cars will be sold to the United Kingdom next year. However, Murphy said that only after learning how to operate in the domestic market and do a good job in sales channels and after-sales service will they go overseas. He said: "Our greatest opportunity for success is in China. Going overseas, you need to provide the products and services that the local market needs, but we have not yet reached this level."
Fierce competition reliability
With car retail prices declining by an average of RMB 10,000 per year, automakers are racing to reduce costs rather than improve quality. Fierce competition also forces them to shorten the development cycle. Automakers themselves admit that this means that they have to use raw materials with poor quality and spend less time on testing. It can be imagined that the reliability of the performance of a car thus produced is likely to be further weakened.
These problems have caused Chinese automakers to vigorously expand overseas markets and increase their ambitious plans to export to developed countries. Today, most of the exported cars are exported to Africa, Southeast Asia, and Middle East countries. These countries have lower requirements for imported cars, and they care more about prices.
(Lao Cheng translated from the "Financial Times")
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