China's domestic car manufacturers need look to their home markets before trying to expand internationally
30 October 2013

China’s ailing car makers must “conquer their home market” before they have any chance of succeeding globally, according to Asian car industry consultant Bill Russo.

The home-market share of China’s car makers has been falling for some years, with passenger car sales by domestic brands dropping to just under 29 per cent of the market last year.  

China is expected to export around 580,000 cars this year, a fall on last year, and many of the vehicles will be sold to less competitive markets such as the Middle East, Africa and Latin America.

Making inroads into the US, Western Europe and Asia-Pacific markets is still seen as a huge step, despite the Chinese government wanting to see its domestic car industry exporting to the rest of the world.

Speaking at last week’s Global Automotive Forum in Wuhan, China, Russo said although China would be the “centre of the automotive universe in the 21st century”, a globally competitive car maker had yet to emerge from the country. “It is difficult to live in the West and not buy Chinese-made goods, but where is the Chinese Hyundai?” he said.

Russo, who was director of product and business strategy at DaimlerChrysler, said the first hurdles for the domestic Chinese car makers were the problems caused by the “fragmentation” of the industry around the huge country. “There is no Chinese Detroit,” he said. “We need to see a consolidation of Chinese companies and get rid of the weakest. Such small companies cannot grow to scale in competitive markets.”

The next step, according to Russo, is for China’s brands to “develop a value proposition”, which he suggested could be “affordable transportation”. Referring to many domestic car makers who still think that undercutting imported cars is the most effective strategy, he said “China cannot trade on the proposition of ‘cheap’ cars”, because cheap is associated with poor quality. “‘Affordable’ is a much more positive association,” he said. 

Business paper China Automotive Review underlined the problems facing domestic brands even when equipped with cutting-edge technology, pointing out that just 4905 Roewe 950 models were sold last year, while its Buick LaCrosse sister car (which shares the same GM Epsilon platform) sold 86,100 units.

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Comments
19

30 October 2013
Darren Moss wrote:

“It is difficult to live in the West and not buy Chinese-made goods, but where is the Chinese Hyundai?”

I don't think the Chinese have any chance until they invest in a proper research and development base in the western market. The MG6 is basically a Chinese car with a few hints and bits SAIC could've picked up on weeks holiday in Birmingham with the hope it'll work and sell. Kia, & Hyundai put the groundwork in, invested wisely and now it's paying off for them. They're selling cars in decent numbers because the cars are probably more at home on the roads of Scunthorpe than they are in Seoul. As soon as they crack this, people will buy Chinese cars like they'll buy Chinese laptops and tv's.

30 October 2013
C2_Matt wrote:
Darren Moss wrote:

“It is difficult to live in the West and not buy Chinese-made goods, but where is the Chinese Hyundai?”

I don't think the Chinese have any chance until they invest in a proper research and development base in the western market. The MG6 is basically a Chinese car with a few hints and bits SAIC could've picked up on weeks holiday in Birmingham with the hope it'll work and sell. Kia, & Hyundai put the groundwork in, invested wisely and now it's paying off for them. They're selling cars in decent numbers because the cars are probably more at home on the roads of Scunthorpe than they are in Seoul. As soon as they crack this, people will buy Chinese cars like they'll buy Chinese laptops and tv's.

As much as I dislike Kiayundai, you have to admire their determination and stamina for developing the cars they have now. They have moved on leaps and bounds from the Pony and Pride. To think in 20 ish years they have gone from super budget Lada rivals to $75,000 luxury saloons. The Chinese probably can achieve this providing they don't get greedy on the way. Just mimicking or copying western designs is not the way forward. Kia started with a massive collaboration with Mazda one of the most accomplished engineering motor manufacturers in 70s and 80s. They learnt a lot from them. They them poached the top guys from PSA and VAG to create the current range of vehicles. China needs to open up its anti-foreigner policies to allow more collaboration of knowledge and R&D.

Also like the comment about Scunthorpe. There was a comment in the local news about some steel workers who had been given the boot after a foreign company bought the plant and promptly culled the staff. He said from the seat of his Kia, "the problem he is, all these foreign companies and workers and the government does nothing to stop it". I am not sure if the thousands like him should have bought European products (or even Nissan or Honda) before banging on about foreign companies from the Far East.

30 October 2013

Surprised at Chinese poor attempts at main stream, cars for masses,great shapes,50/50 interiors,so-so built quality,because that's all they are failing at in the Western markets.

Peter Cavellini.

TBC

30 October 2013

Makes you wonder just what perception Chinese buyers have of their own manufacturers, when they won't buy Chinese products. If they can't sell them there, where will they be able to sell them?

30 October 2013
TBC wrote:

If they can't sell them there, where will they be able to sell them?

Spot on.


30 October 2013

What do we want from a new car?(I'm talking about the vast majority of people). Something reliable which gets you from A to B cheaply.

The MG6 isn't a bad car, offering it with a 1.8T only option to markets where running costs are of major concern wasn't the brightest of ideas. They eventually launched a diesel version - again with an engine that's years old and uncompetitive.

So what did the Chinese manufacturer learn from it's mistake? Well they've just launched the MG3 which given it's price, should be as competitive as anything out there, apart from one small detail - they've given it an elderly inefficient single petrol engine option.

If the Chinese treat their home market with similar contempt it's little wonder their cars don't sell.

30 October 2013

scotty5@

Spend almost £20K on an MG6,30K miles later it's lost 75% of it's value!,not good enough is it?

Peter Cavellini.

30 October 2013

You don't HAVE to spend £20k on an MG6, they start at £15,455 which is less than a Ford Fiesta 1.6. And I don't know where this 75% depreciation scare came from; I can't find that figure anywhere. Plus, while the car is manufactured in China, it was designed, engineered and assembled for the European market in the U.K. Either people keep forgetting that fact or they're purposefully ignoring it because they don't want MG or SAIC to succeed. The same kind of fear manifested itself when the Japanese were forging ahead in the 70s/80s and the South Koreans made massive inroads in the 90s/00s. Now it's China's turn, and people are kicking off again.

30 October 2013
Dark Isle wrote:

The same kind of fear manifested itself when the Japanese were forging ahead in the 70s/80s and the South Koreans made massive inroads in the 90s/00s. Now it's China's turn, and people are kicking off again.

The point of the article was that the Chinese are struggling to flog their own cars in their home market. Maybe it's the Chinese who are kicking off?


30 October 2013
Dark Isle wrote:

You don't HAVE to spend £20k on an MG6, they start at £15,455 which is less than a Ford Fiesta 1.6. And I don't know where this 75% depreciation scare came from; I can't find that figure anywhere. Plus, while the car is manufactured in China, it was designed, engineered and assembled for the European market in the U.K. Either people keep forgetting that fact or they're purposefully ignoring it because they don't want MG or SAIC to succeed. The same kind of fear manifested itself when the Japanese were forging ahead in the 70s/80s and the South Koreans made massive inroads in the 90s/00s. Now it's China's turn, and people are kicking off again.

The big difference between the Chinese and Japanese is that the Japanese not only copied what the west was doing but also worked to improve the shortcomings in quality and build processes.

The Chinese just copy, that's it.

I have a friend who works in senior quality control for a manufacturer, The problem he used to have is, the factory in China will get the spec of the part, that will be studied and then rather than followed they'd do it their own way, which inevitably was wrong, which would mean thousands of parts would be just binned, they didn't care, the waste produced by them not understanding basic quality would have put UK based setups out of business.

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