the chinese automobile industry is driving west

1Rollins College: Prof. M. Fetscherin

The Chinese Automobile Industry is

Driving West

Prof. M. FetscherinProf. M. Sardy

Rollins CollegeDepartment of International Business

2Rollins College: Prof. M. Fetscherin

Chinese Cars Years Ago…

3Rollins College: Prof. M. Fetscherin

…Today They Have Small Cars…

4Rollins College: Prof. M. Fetscherin

…Sports Cars…

5Rollins College: Prof. M. Fetscherin

… SUV and Sedans

6Rollins College: Prof. M. Fetscherin

Agenda• Introduction

• Players, power, partnership

• First move going global and challenges

• Footprint Japanese or South Korean

• Chinese auto makers and takers

• Strategic options

• Conclusion

7Rollins College: Prof. M. Fetscherin

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

8Rollins College: Prof. M. Fetscherin

Players, Power….• 50th anniversary, but infancy • Liberalization of trade policy, import taxes• Key Players

9Rollins College: Prof. M. Fetscherin

…and Partnership• Two types of Chinese automotive companies

10Rollins College: Prof. M. Fetscherin

Production

Chery production

11Rollins College: Prof. M. Fetscherin

Parallels to Japan and South Korea

12Rollins College: Prof. M. Fetscherin

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

13Rollins College: Prof. M. Fetscherin

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?

14Rollins College: Prof. M. Fetscherin

Value Map• Some SUV

EXAMPLES

15Rollins College: Prof. M. Fetscherin

Auto Makers and Takers• Passenger car sales vs. Number JV

• Importance of JV?

• More JV, more sales?

• Importance of building own brand?

16Rollins College: Prof. M. Fetscherin

Brand Matrix• Passenger car sales (own brand) vs. JV

• Extracting sales under own brand

• Matrix with 4 categories

• Each specific characteristics

17Rollins College: Prof. M. Fetscherin

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.

18Rollins College: Prof. M. Fetscherin

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

19Rollins College: Prof. M. Fetscherin

Thank you