This blog has been posted by Martin Hayes, Chairman of Automotive PR. 这篇文章是APR的Martin Hayes先生编译的
The global financial meltdown which is impacting on car markets everywhere presents a potential opportunity for Chinese auto makers. As never before car owners worldwide are going to be focusing on value for money – both in new car pricing and in ongoing running costs. In both areas, Chinese models have an opportunity to score well and conquer new markets and owners for themselves.
Yet, unless things change very fast, Chinese makers’ ability to capitalise on this opportunity will be severely constrained by a single factor: lack of brand awareness. Western consumers are brand loyalists – they want to know and understand the connotations of the car brand they choose.
This is something well understood by the most successful car brands – BMW, Mercedes, Audi, Toyota and the rest. They guard their brand values fiercely and invest heavily in sustaining their brands across all markets with powerful, consistent and high-impact communications programmes.
In China, where ironically the importance of brands seems to be well understood on the High Street, with global names such as Prada, Gucci, Armani and many, many more battling it out for supremacy - auto makers have not yet grasped this issue. Leaving aside the JV operations (where of course linking up to a globally-renowned brand is a key added-value for domestic makers), few if any indigenous makers understand and have given due weight to this aspect of their marketing plans.
A single exception might be BYD which has both an understandable and pronounceable (in the West) brand name – ‘BYD – Build Your Dreams’ – and sizeable foreign exposure for it. However, BYD – where it is recognised – is a name for a battery not a car which may help with the company’s aspiration to produce EV and hybrid models but will be of little assistance for conventional vehicles.
But names like Geely, Chery, Brilliance, FAW, Lifan, Great Wall and many others are simply unknown and – where they are beginning to gain some visibility – not understood. When it comes to vehicles, ‘Made in China’ - generically speaking – means dubious quality, questionable safety and lack of design originality (ie: ‘it’s a copy’). It may also mean ‘cheap’ but that’s a very double-edged sword when the car owner is concerned.
‘You are what you drive’ is an old adage in the West but it has some basis in reality. Who wants to be seen driving a poor quality, unsafe copycat model, even if its as cheap as chips?
Those negative brand attributes are the ones which – all too often – Chinese makers have right now for their products. Attributes they don’t – in many cases - deserve but which they have because they are not fighting their corner and building brand values based on the strengths and attractiveness of their products and businesses. Because ‘brand image’ is not just about the vehicle, its about the whole ethos of the company and its philosophy.
The world knows that BMW, for instance, stands for cars which deliver high performance and are technologically advanced. Its an image the company has striven to achieve over decades of solid investment and product planning. Doubters queried if the little 1 Series might be stretching the brand too far but – unlike Audi with its clever but flawed A2 model – they seem to have carried the day.
Chinese makers need to wake up quickly to the challenges of developing distinctive worldwide brands which are clearly differentiated from the competition both at home and overseas. Those negative brand attributes which vehicles designed and made in China unfortunately have as a given can – and must - be offset.
The Chinese brands which are going to succeed in foreign markets are the ones which will stand apart – the ones which will demonstrate the power of their investment programmes, the excellence of their R&D facilities and the quality of both their production and their people. It’s a process which is slow to implement, takes real investment yet cannot be avoided.
So if a brand crisis in Chinese auto making is to be avoided – with almost as serious consequences for them as the financial debacle is having for the international banking community – urgent action is needed now. Building the brand is just as important as designing and building the car!
Now is the perfect time to buy foreign brands put on sale by desperate US automakers, like Saab, Volvo, Buick, Chrysler, Dodge, Hummer, Mazda, and so on.
Since it costs tens of billions and decades to build up a brand image from scratch, the best option for Chinese automakers is simply to buy existing foreign brands. This saves both time and money.
The only problem is coming up with billions to do pay for foreign brands, and this may require state assistance since independent Chinese automakers lack the cash to do so.
Nice comment IHC, I have a few ideas as well.
How about a new seperate company formed by the top 10-20 Chinese automakers (car, bus, truck, motorbike etc) with assistance from the govt to help with inital funding? The govt still own a large share of most automakers so it would not be impossible and they could put it under control of the big sovereign fund.
This new company could then pool together to purchase one of the foreign brands. Through a new R&D center they could develop a few new models of their own to replace aging models from the brand they purchased and use the existing worldwide distributors to market the vehicles. There will be some factory closures in the country of origin but that will happen anyway even without being bought out by the Co-op (or anyone else).
Over about 20-30 years the Co-op members could slowly merge into the Co-op itself and be like GM/Chrysler is now with many existing brands they bought out over time. Some existing brands will die but being part of the Co-op they won’t really die but will become part of a Chinese mega automaker possibly competing in some markets with similar vehicles like Ford/Mazda do now.
The idea of a Co-op is more to give the Chinese their own brand and not just relying on all the JVs that exist already. Chrysler would be the best investment for this new co-op as they already have manufacturing facilities in China and they could get it for a good price from Cerebus. The biggest issue is they should NOT strip the factories in the states and move them back to China or else it will be similar to MG and taking years to get back into the market while losing brand recognition at the same time. Some models should be made in China but offshore factories (JVs of their own perhaps) will need to happen some time in the future anyway.
What Chinese auto industry needs is an industry consolidation(aka The Strong eats the Weak), not some co-op. There is no room for 100 automakers even in China, there can be only three.
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If the communist government cannot directly lend Chery and Geely money to buy these foreign brands on sale, another option is for the Chinese sovereign fund to buy these brands itself then lease them to Chinese automakers for an annual payment.
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What is certain is that these former American held auto brands will be on sale on a rather cheap price, because it costs $1 billion to dispose an auto brand(Dealer compensation and inventory buyback). This brand closure cost is so high that there is a talk of Chrysler declaring bankruptcy before merging with GM, so that GM doesn’t have to pay former Chrysler/Dodge dealers for brand closures, like they did with Daewoo takeover. Accordingly, GM will be happy to sell Pontiac brand and its dealer network for $700 million, Chrysler brand for less than a billion. We are talking about a reputable brand plus a complete distribution network for less than $1 billion. Saab and Volvo will fetch more because they include worldwide distribution network, but they are worth the price if they could be secured for less than $2 billion each.
I see your point but is now the right time for the stronger Chinese brands to be taking over the smaller ones if everyone is still making a profit? The industry is still in its relative infancy so the natural takeovers will happen with time regardless of the current situation. The idea of the co-op is for them to save face and instead the strong vs weak mentality its about the big and small working together to create better brands and profits for everyone involved while building themselves into a truly world brand such as GM has done. There would be nothing wrong having 1-2 co-ops (2 seems more likely with FAW and SAIC leading the way with each) producing all kinds of vehicles on the world market rather than what is happening now which is basically making cars for the worlds major manufacturers and not developing anything decent enough to sell to the general public outside of China unless its in the third world (MG and Ssangyong don’t really count).
As you said, it takes decades and $$ to build a brand so which is the better way forward, divide and conquer using money to take over a domestic brand to build your own market OR working together with other brands to create a mega maker capable of taking on the big 3 rather than being the worlds factory for them while competing against each other domestically? No other country has 2 different manufacturers making similar products for the same company do they? Let alone more.
Sadly the big 3 in the US are in a fair bit of trouble. GM is panicking more than Ford (just) but both of them should ride the storm and “hopefully” come out of it without to much damage by having stronger business models offshore and doing some restructuring at home. Unfortunately Crysler will probably be history before too long. Even if GM do take them over it will only be delaying the inevitable and many people will lose their jobs as with the others after restructuring and closing factories. Outside the USA though most people wont really notice they aren’t around any more. Why is GM flicking off Pontiac? Sorry, I’m not up to date on that one. If its trying to trim fat they should start in the boardroom
It will be interesing to see what happens to Saab and Volvo, they may even get sold to the Indians later. We forget their economy is growing as well because the world seems content with complaining about China instead of wondering why you call Mumbai to find out why your power isn’t working on the other side of the world.
LOL, It doesn’t matter what we think. Its a decision that the manufacturers will make in their own sweet time.
I don’t see Saab and Volvo being sold to the Indians or Chinese. VW or Daimler or FIAT are more likely. These brands are unknown outside of the EU and US, and they are very very very small.
I also don’t see Chinese cars being exported to the US/EU markets anytime soon. The japanese would eat them alive. Quality is bad, design is several generations behind. Both markets are so large there are plenty of used cars for price conscious consumers.
I believe the current 08 range of Chinese cars, such as the Brilliance FRV, and the Chery A3, JAC Bin Yue etc are easily on par with their Korean competitors that are priced at similar levels. It also looks like Chinese cars are much better speced than their Korean price competitors.
I doubt Fiat will be sold, they are at their strongest for many years.
In addition to the original topic, I have heard that Hafei are still looking for a partner to carry them through difficult times, they are supposed to be talking with Changhe right now.
I am noticing Hyosung motorbikes (made in China) on Australian Roads. I think the best option is for a Chinese vehicle company to buy Hyosung and then build cars using the brand. I have heard no bad reports from Hyosung bikes as I am a motor bike rider. Brand recognition on the streets of the Hyosun would be a good platform to sell 2 seater sport cars for the 18-25 year old market. From there a bigger saloon. Think Honda with its bikes and now Formula 1.