An article that is actually full of sense from our favorite propaganda machine:
There’s no tax on big talk, goes a Chinese saying. Many indigenous car brands seem to have taken that aphorism to heart.
BYD Auto, a small privately owned carmaker that recently graduated from making batteries, has grandly announced that it aims to be a global auto champion by 2025 by moving more than 13 million units a year. The only problem is the Hong Kong-listed BYD sold a mere 60,000 cars last year, less than 0.7 percent of that of Toyota, which has unseated General Motors to be the world’s top carmaker this year.
Two years ago, Geely, another privately owned Chinese carmaker, declared that it expects to sell 2 million vehicles annually by 2015, with two-thirds abroad. The company’s 2006 sales stood at 200,000 units.
Commenting on such pompous boasts, Yale Zhang, director of Greater China Vehicle Forecasts for US auto consultancy CSM Worldwide Corp, says: “They are only trying to grab publicity.”
But Zhang is quick to add that it’s just “a matter of time” before one or two local companies grow into globally competitive brands, even if not as big as Toyota. “Yet it will take them 20 to 30 years,” Zhang predicts.
Most Chinese car brands have been making rapid progress in recent years as a result of rising prosperity and the consequent increase in vehicle demand in the world’s most populous country.
According to Zhang, Chery, the top Chinese nameplate in the passenger car sector, is the most promising candidate to become a global player. The company, based in the eastern city of Wuhu, sold more than 300,000 units last year.
A partner of Chrysler and Fiat, Chery is widely seen to have the strongest research and development capability, with the biggest lineup among Chinese carmakers. It also enjoys strong backing of the central government and local authorities.
Chery has been researching the success of Toyota, from product portfolio, manufacturing, quality control and cost-cutting to marketing, sales and overseas expansion. “We will become a Chinese Toyota,” it declares.
Chery aims to boost its annual sales to 1 million units by 2010, a much more realistic goal than that of BYD or Geely. It also plans to double the number of its overseas plants to 14 and lift its sales abroad to 400,000 units from 52,000 units last year.
Other Chinese brands are also trying to follow the path of Toyota. A top executive from Geely says: “In the long term, we will have plants in all regions of the world where Toyota has.”
Growing pains
Despite fast growth, says Jia Xinguang, an independent auto industry analyst based in Beijing, indigenous brands are no match for global giants in terms of research and development, quality, financial power and internationalization. Jia predicts the nearest that the strongest Chinese brand will go to a global nameplate in the next one or two decades is French carmaker PSA Peugeot Citroen.
Chinese automakers mainly produce cheap cars that are looked down on abroad in terms of quality. Earlier this year, the Zhonghua sedan from Brilliance China Auto, partner of German luxury carmaker BMW, only achieved a rating of one star out of five in a crash test by Germany’s ADAC auto club, making headlines in German newspapers. This could well affect Brilliance’s plan to sell 158,000 own-brand sedans in Europe by 2011. Similarly, a Chery model has had a poor test record in Russia.
Chinese brands are also facing an increasing number of intellectual property issues. The most recent case is that of Shuanghuan Automobile, a small carmaker in the northern city of Baoding. It was sued last month in Germany by BMW, which claimed the Chinese company’s CEO model closely resembles a previous version of its X5 sports utility vehicle.
Daimler also threatened to take legal action against Shuanghuan, saying the latter’s Noble is a copy of its Smart Fortwo mini car.
In 2004, Chery was accused by General Motors of patent piracy. The previous year, Geely was sued by Toyota for an alleged trademark infringement.
“Domestic carmakers should take quality and intellectual property issues more seriously. Otherwise, their brand image will be ruined, especially in the Western market,” Jia says.
Going electric
Breaking new ground, BYD is betting big on electrical cars to dodge the fierce competition in conventional vehicles. The company says it will put a mid-sized F6 model with a petrol engine as well as rechargeable batteries into commercial production in the second half of next year. It will also start making purely electric cars in 2009.
“Electric cars will be the trump card for us in the global arena. We expect them to account for half of our total sales by 2015,” says Xia Zhibing, BYD’s sales chief.
According to the company’s data, F6 will have a maximum mileage of 400 kilometers and a top speed of 160 kilometers per hour if it uses batteries only.
However, Jia warns BYD’s drive to go electric runs a higher risk as the quality and reliability of electric cars are yet to be established and it’s not clear how the buyers will accept such cars.
glad to see that some ppl still have a balanced view
Good reading that, touches on a lot of points we discuss constructively (or not) here.
Now, if the BYD electric car can do 160KPH for 400 KMs then everyone would buy one…. we can take them to North Korea to drive on those empty roads….
“Jia warns BYD’s drive to go electric runs a higher risk as the quality and reliability of electric cars are yet to be established and it’s not clear how the buyers will accept such cars.”
Yes, Mr. Jia, “risk” that’s what capitalism is all about….
I applaud BYD for its vision and willingness to explore uncharted territory. With the current shortage of fossil fuels, and the need to halt further pollution, the odds of reaping big rewards are in its favor.
Unfortunatly (for China) the Japanese culture and mind set that made Japan the world leader in vehicle (and many other products)is totally different from the Chinese culture. It will take a lot longer than 20 years (probably never) for China to beat Toyota to the worlds # 1 spot, let alone get close to them. IF you also add in factors such as the fact that right now the worlds vehicle industry is going thu its biggest change since the 1890s you must agree that only the current ’superpowers’ in the auto industry will survive the technology demands and associated costs to achieve these changes. Its not a case of copying or building the same old same olds anymore. I predict that in even 10 years there will be only two or three survivors in the Chinese auto industry, and those will be the companies that are disciplined, inovators, consolidators and not driven by greed.
Ill disagree with you there Mr. Dog Tucker, I believe Jap cars were utterly useless until Edward Deming arrived in the 1950’s with his ideas about Quality Control, he turned Japan around, from being the China of their day into becoming a world leader with high class goods in just 20 years worth of work.
If the Chinese ever figure out quality = Result of work efforts/total costs, then they might just crack the intl. markets.
I believe that the Chinese car makers biggest problem now is recruiting capable managers at every level of the company chain to oversee quality production. Design work can always be outsourced, but quality cannot be outsourced, nor can it be an afterthought.
I agree with your other statement however, I believe that Chery/Geely will become major players in the developing world and various emerging markets but to tap into Western Europe, Japan, and North America its going to be a long uphill battle. These markets are too well established, any new brand will be like Christians being thrown to lions in Roman times. I believe SAIC, FAW, and NAC MG may crack Western markets with their own brand of cars (which admittedly are just existing cars with their own designs) but they will need to spend a lot of money doing it. Obviously the only way to go for them is to buy an existing brand (ala NAC) and rework it into a world player.
But of course, in recent years the whole ‘China’ brand has been tarnished through various incompetent actions of mainland companies, sometimes I wonder if it would be easier to stop the Titanic from sinking than reverse the negative publicity trend about Chinese goods.
I will stop here, I am clearly blabbering.
Don’t talk about culture and mindset. In history, where did the Japanese get its written language, architecture, cuisine, dress, music, art? If you can answer that, you’ll realize that the civilization that Japan copied is back, and you will see that the world is underestimating them.
I don’t think China needs to go global just yet. What they need to do is first win the domestic market and beat the foreign auto makers. Given time, China’s car market may surpass the whole world (besides India) combined. This may take a few years, but China’s market is so vast, they don’t need to go overseas, just beat the foreigners. If they can surpass the foreign makes in China, then they will be ready for the international market, because if the Chinese buyer would rather buy a Chinese car over a foreign one, most of the battle is already won.
Why besides India？ Have you seen what TATA has been making of late?
I take my comment back.
http://www.tatamotors.com/
What I meant was population-wise in terms of market for cars.
I kinda disagree with Dog tucker, yes Ashley was right about that American man came to Japan and taught Japanese about quality control, and beside that we can see that when the Japanese cars entered the american market, they were viewed lowly because Japan as a country synonomous to making toys, Japanese Toyota struggled for nearly 2 decades until the oil crisis of 1973 came, that is when American people opted for better fuel efficient vehicles. The Big three of America were mocking Japanese cars in many ways and said those Japanese can never reach to the top. So my question here is “Where would Japanese cars be now without the oil crisis ?” Yes no doubt about Japanese cars and products now
It has nothing to do with the culture really, as you can see developing countries tend to manufacture low end low quality goods, mass produce things to grow, as the country get better and more developed, the people’s view of quality also starts to develop with it or can you name one developing country that can produce quality goods ?
And talking of culture I think you still have a lot more to learn about Japanese and Chinese culture (as phillip woon said), so culture is kinda out of the question here.
One more thing here for you to think about , Toyota auto department was established in 1933 and Toyota managed to reach its height in the 1970s, now we have something to think about.
Thanks for reading.
Well Ash and others - I wasnt just talking about quality-sure Mr Deeming put that on the right foot. But having been in the auto industry full time since 1968 and having worked in the same in Japan, China, Korea, Aussie, the US of A and the Uk (and for a small period in Germany) let me tell you from my experiance there are many differences between all cultures, none so vast as the difference beyween PRC and Japanese. These differences go beyond quality and are from management commitment and attitude levels that has made The Japanese almost fanatical in all endeavours, and at least they were prepared to listen to Deeming and as an industry (not as individuals) adapt and change. I can tell you from my daily observations since 1996 here in PRC this is not happening, therefore quality will become an issue- but far too late for most of the local players.
Mememe - culture is what has given cars their indivduality - think of the USA bathtubs, VW beetles, fusy French cars, crazy exotic Italian cars and bland Korean cars- if they dont all reflect on cultute then Im going home to become a shoemaker!
Hey, I read the same article in Winding Roads 2 weeks ago! Are chinese copying articles too now?
:O
Perhaps they syndicated it, although its not as if China Daily doesnt borrow articles now and again.
@ Joest
You mean your Winding Road copied that article from China daily ?
I can give you the link to the original article if you want (from China daily) and btw most of the news source copy article from each other, if you read news more often you will see, I can give you a lot of websites that copy this article. And if you come here just to be one liner and leave your blog URL and to troll then I suggest you not to come here.
1. I don’t come here to “leave my blog URL”.
2. It’s clear that everybody’s copying each other (I admit that in the past I made a lot of article based on CCT) but copying an article word by word seems unethical to me.
OK I am sorry I did not mean to offend you or anything. When I say other news source copy articles from each other I don’t mean just a few words I mean the whole article and I have seen a lot of cases like that amongst the online newsagency.
No problem. Winding Roads never talks about chinese cars. I guess they just bought the whole article from China Daily.
There is few review about Chinese cars from a US view. I thaught that for a premiere, they made something great, far from the usual “Chinese cars are rubbish” we just hear all the time in western countries.
So it’s a disapointement to me to discover that this great article wasn’t actually written by Winding Roards.