Britain’s boom to bust motor industry – are there lessons for China?

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This article was written by guest writer, Martin Hayes. Martin is the Executive Chairman of AutomotivePR, one of the world’s leading specialists in public relations for the automotive industry. AutomotivePR now has a world wide office network that spans Europe, the USA and China.

Think of country which halfway through the 20^th Century was the raging tiger of the world’s motor industry, with its cars, trucks and buses exported to just about every country in the world and with brands which were renowned for their advanced technology and customer appeal. Think of a country which – for a so-called developed nation – today has one of the smallest, indeed virtually invisible, domestically owned automotive sectors yet which is still at the forefront of vehicle design. You would be thinking of the same country – Britain.

Britain gave the world such iconic motor brands as Rolls Royce, Jaguar, Bentley and many, many more but is now viewed by some observers as being like an aircraft carrier moored off the coast of Continental Europe, serving as an assembly source for Japanese, American and now Indian car makers.

So could the rise and dramatic fall of the British-owned motor industry have lessons for the burgeoning and apparently invincible motor industry of today’s China? That’s what I am trying to address in this article – and I have inside knowledge since I was employed by Britain’s largest vehicle maker during its most difficult period.

In 1950 Britain dominated the global automotive market. Three quarters of British car production and 60% of its commercial vehicle production was exported (up from just 15% less than 15 years previously) and Britain provided 52% of the world’s exported vehicles. There are complex reasons behind that meteoric growth, many to do with the consequences to Western countries of World War 2 (1939-45), but nevertheless it was a remarkable achievement yet one which was sadly short lived with real global power turning – during the 1960s and 1970s – into weakness, collapse and the decimation of output, jobs and companies.

The symbol of Britain’s transient strength and eventual weakness was the conglomerate known as British Leyland (BL). An unlikely combination of a successful, profitable and world renowned truck maker (Leyland) and a creaky, hastily assembled collection of car brands (BMC), this company came to be a metaphor for the ills of the entire industrial sector in Britain in the post war years. So what went wrong?

While this is a highly complex argument, and one which has been argued over for decades by brains much more powerful than mine, the key factors in the decline are fairly clear. They span: a failure to recognise the pace of improvement amongst competitors; weak management; overly powerful trades unions; too high costs coupled with poor product quality; and a singular failure to care for brand values. Oh, yes, and one other ingredient, contentious in the Chinese context – the dead hand, towards the end, of Government intervention.

Without trying to fully analyse each of these, let me briefly address these issues and draw some parallels with the Chinese motor industry during the first decade of the 21^st Century.

Post the War, Britain’s motor manufacturers still relied heavily on sales to what had once been the British Empire and which even in the first half of the 20^th Century remained areas of British influence – I’m thinking particularly of Africa and India but stretching, for example, to Hong Kong and elsewhere. Those countries shared two key attributes which opened the door to British imports – a lack of indigenous competitors and an undemanding consumer base. This combination meant that ailing British makers (they didn’t know they were ailing at the time but lack of investment and a realisation of competitive pressures meant that they certainly were) could still sell second rate and poorly produced and supported vehicles without difficulty.

The Chinese parallel here is obvious. Most of China’s vehicle exports – really quite small given total output – today are going to undemanding markets such as Chile, Ukraine, Africa etc. These are countries which do not demand the latest technological developments or impose the latest legislative standards, particularly in respect of emissions and safety.

The management of Britain’s motor makers was intrinsically weak and inward looking. It lacked the resolve to deal with some deep-seated labour issues and failed to notice the dramatic growth of competitors from Germany and, later, Japan and Korea.

Well, Chinese managers do not have to address labour issues such as those (though recent wage inflation and worker unrest, though minor, is perhaps a worrying trend) but they do need to very carefully track what overseas rivals are doing, driven in many cases by the legislative standards which China is only slowly embracing both at home and in export markets.

British trades union history – in its quest for perceived worker rights and improved pay and conditions – is almost synonymous with British Leyland and its fall. At that company (and it has to be said, at other British makers at the time) strikes and disputes were a part of the industrial scene in a way which was totally unsustainable and which led – in the fullness of time – to the switch of Britain from a manufacturing nation to a service economy, with dire results for many in society.

In China such problems seem inconceivable and both the work ethic and the traditionally disciplined society mean that they can be avoided in the long term. Yet, as I said in my last point, there are one or two minor trends becoming visible which concern labour costs and commitment and which should concern industrial leaders.

Labour-intensive methods, and wide model ranges hindered opportunities to reduce manufacturing costs inside BL in the 1960s. Britain’s unit production costs were higher than those of its major Japanese, European and American competitors. This is a fundamental economic fact which even the very best managers cannot overcome. At the same time, in BL, product quality was abysmal to the point where ‘Made in Britain’ became a label consumers avoided at all costs.

Well, here at least, there seems not much of a lesson to be learned for China. Its production costs are some of the lowest in the world – that’s why such a very high percentage of the world’s manufactured products are ‘Made in China’. Although some other Asian nations are challenging that low-cost role, the sheer scale of China’s workforce surely means that such competitors can never overtake it. In terms of quality, though, Chinese makers need to be continually alert – they still have some way to go to catch the best of the rest.

At its peak, BL controlled some of the best and most iconic car brands in the global motor industry lexicon including Austin, Morris, MG, Riley, Wolseley, Triumph, Jaguar, Daimler and many more. Yet this enormous heritage – each brand had its own distinct personality and buyers – was largely squandered by an uncaring management who failed to understand the power of these assets. When you hear that the Jaguar factory (then, and thankfully now once again, restored as one of the highest prestige sporting brands) was briefly renamed ‘Large Car Factory No 2’ you know all you need to about the brand management skills of BL management of the time.

Here, I do think, Chinese makers have some lessons to learn. Despite China being a nation of brand lovers – just go down any high street and see those Western brands plastered all over shop fronts and billboards – attitudes to Chinese motor brands seems surprisingly lax. Little effort is being made to educate audiences outside China about brands such as BYD, Changan, Lifan and the rest – yet all claim to have strong export sales ambitions. Global brand building takes years and costs millions – its a process which should be well underway right now.

Finally, BL’s end came after a unhappy period of Government control. Despairing politicians effectively nationalised the business in the late 1960’s in a desperate bid to preserve it. When I joined the company – as a fresh-faced innocent – in 1975 it had just been awarded the then unimaginable sum of RMD 10 billion with which to invest in new models. But by then the politicians efforts were too little and too late.

In China, of course, many motor makers are completely controlled by the State and all are heavily influenced by its strategic direction. Of course, that is the way in China and few could argue that that result has been anything but positive – up to now. But politicians do not understand issues such as branding, specifications and the ingredients which make one model desirable and another less so. Professional world class managers are required for that and, if there is one thing Chinese leaders could usefully do now to consolidate the power of the Chinese motor industry, it is to grow and attract more such people and then let them get on with the job of growing their businesses without undue central control.

So what do I draw from all of this? On the face of it China is becoming the dominant power in global automotive production. It has strong, well equipped auto companies who are fast acquiring the technological resources and skills to compete internationally. Its factories are new, its workers are well educated and trained and are keen to succeed. It has the enormous benefit of the fastest growing home market in the world.

And yet – all is not quite as strong as it first appears. As I have tried to point out in this article, Chinese products will not be taken seriously until they compete and succeed in the world’s most demanding car markets – and that means in North America, Europe and Japan. So far Chinese brands are conspicuously absent there.

And there is a real lack of perception about what brand building really entails. It involves high investment, consistent application and a really understanding of the values of the brand and a sure fire means of communicating those values to a mass audience. Just look at the globally strong brands – Coca Cola, McDonalds and IBM, for example. Or in the auto sector – Mercedes, BMW and Ford.

In those companies there is a single minded commitment to the brand and a complete dedication to protecting, nurturing and growing the brand in every market. Do we see that amongst indigenous Chinese auto brands? We do not, I am afraid.

I talked with executives from one of China’s best known car companies recently, one with imminent plans for European market entry. They told me that they had ‘sub-contracted’ brand management – along with dealer development, sales and everything else – to a single distributor for Europe. I was astonished! Its inconceivable that Mercedes, BMW or VW would do that in China – they work with the JV partners of course but they control and manage their own brands in minute detail.

That is the way to succeed and, as I‘ve already said, its a long drawn out process to fashion and launch a new brand in these highly competitive and critical markets. Just getting the best from an influential but sceptical and free media is a whole chapter in itself – and one where my company has been trying to help Chinese brands develop. But progress is slow at present and that will, before very long, be a real dampener on overseas sales growth for Chinese makers.

So there is lots to praise about the modern Chinese motor industry – but there are some concerns.

Meanwhile, Britain, having gone from being a world force in vehicle supply, has not lost everything. For example, 80 per cent of the world’s motor racing cars are developed in the UK, many of the Formula One teams are based there and many British-trained designers are at the helm of major car design teams worldwide. The country’s reputation for innovation and engineering excellence remains and its no accident that some of the best brand and marketing talents are to be found in the UK.

When Korean motor industry companies focused on Western markets a couple of decades ago its no accident that they hired largely British talent to manage their businesses and drive them forward. Maybe the future for British exports to China is in brains and skills rather than cars? If that is the case then the heritage of British Leyland may not – in the long term – be viewed so negatively.

This article was written by guest writer, Martin Hayes. Martin is the Executive Chairman of AutomotivePR, one of the world’s leading specialists in public relations for the automotive industry. AutomotivePR now has a world wide office network that spans Europe, the USA and China.