Hyundai’s lessons for Chinese companies in Germany
Chinese car companies have attempted to enter the German markets several times before, but the mistake has been the same each time – they try to sell on the same par as native manufacturers, when in fact they should be aiming their sights a little lower. Hyundai has a great lesson for Chinese companies hoping to enter Germany, or anywhere else in Europe. Hyundai’s sales in Germany last year increased by 17%, Toyota’s increased by a mere 5% whilst the market on a whole increased by 11%. So what’s Hyundai’s secret to success? It seems that making every generation of model better than the one before it plus making cars that are very favorable to local Co2 based taxation systems.
So what next for Chinese manufacturers? It seems concentrating on their strengths, i.e. high quality cars for low prices and increased amounts of new technologies at economical prices in markets surrounding traditional Western markets where perceived stereotypes against certain car brands are not as engrained as they are in certain markets.
In a market up 9% YoY in 2011, sales for Toyota Deutschland rose by only 5%. Hyundai, on the other hand, was up 17%, enough to push it past Toyota for the first time.
The German market is arguably the only major one in Europe that had a ‘normal’ 2011, with the usual big players realigning themselves into the positions they’ve held for decades. But there is one exception: a legacy of the scrappage boom of 2008 and 2009 was the surge of Skoda, and the Czech brand has been building loyalty amongst German buyers, taking seventh position in the market last year with an impressive 142,613 sales (related trivia that shows the wildly divergent preferences of Europeans: Skoda’s Italian market regos were a mere 14,332 last year).
I mention the German market total for Skoda to illustrate how far down the pecking order Toyota remains in this, easily the largest country for new vehicle sales in Europe. Japan’s number one finished 2011 with a total of 80,452 cars registered (versus 76,659 in 2010), while Hyundai managed to rise from 74,360 to an impressive 86,881.
The acclaimed new Yaris and a management reshuffle at Toyota Motor Europe signal that the company is serious about pushing back but it will have a hard task in Germany.
Hyundai Motor Europe has momentum and just keeps on showing what happens when you make sure every model is much better than the last one, with styling honed for the tastes of local buyers, with engines tuned ideally for a C02-based tax formula. TME would hate to hear it but it surely needs to study HME’s winning ways or be left behind, especially as the Korean brand is already gaining ground in Poland and Turkey – two regional markets where by contrast to much of Western Europe, incomes and aspirations of large, young populations continue to rise.
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What do you need to enter the German market? Safety, Safety and Safety.
If you archive these you have to think about the quality, design, fuel consumption and price.
If you finally compete with the price, the price tag has to be very low because Germany has a good strong used car market. On the other hand Germans would expect to pay less for a newcomers car.
Until now, the Chinese carmakers were unable to present safe cars. At the crash tests the Chinese cars collapsed. That means Chinese cars are not only cheap but risk their customers life. Anyhow it will be very difficult to create a better image of Chinese carmakers in Germany in the future. Their image is now below zero!
To have sucess in Germany start by other EU countries first and then when you’re good in those markets try Germany. Chinese have to build up reasonable strategies and not just choosing the suitable cliché to please your ego. This should be bussiness.
Safety, Quality, modern and efficient technology… This is important on every major car-market in the world, also in China. But ,except from modern styling, Chinese Automakers cannot offer any of the above. And the image of Chinese brands in China is also below zero… that is why they are currently loosing customers in China.
But, in the 70s everybody was laughing about the cheap new Japanese car brands, in the 90s we all thought a company with the strange name “Hyundai” (how to pronounce?!) will never sell well in Europe…
what I am saying is: Companies like Great Wall or Geely will get there sooner or later! and they will be succesful.
Kina kommer starkt om de förbättrar kvalitet och säkerhet.
Köp SAAB där finns mycket kunnande.
This is a wrong lesson posted here.
The true “Hyundai” lesson is that an auto company must be able to inject tens of billions of dollars to build up R&D capability and improve quality for 15 years before you see the result on your investment. Korean do this, Japanese do this, Chinese don’t do this.
Heck, Nissan is heavily investing in its R&D center in Vietnam, where they began recruiting and training young Vietnamese engineering graduates since 2007 to take place of graying Japanese engineer population and doesn’t expect to see the benefit of their investment in Vietnamese engineering talent until 2022. Why 2020? That’s how long it takes to train competent auto engineers and Nissan is willing to make that investment for 15 years.
Now, how many Chinese auto companies do you know are willing to make this kind of long term investment on quality improvement and engineer training? None!
You are an assh..e.
He may well be, but he has a valid point.
So please ask him to deliver some valid sources to show that Chinese are not cultivating their own internal talent.
For those of us who reside in China the examples are all around us. It happens so often that it’s hardly newsworthy.
@ Blofeld
Truth hurts.
For example, Chinese auto makers are a no-show at this year’s 2012 Detroit Auto Show, after having dwelling in the basement exhibition for several years. Why? The Chinese automakers have given up on entering the US market.
You are still an assh..e.
@ Blofeld
Denying the fact does not change the reality. I have been telling everyone here how the Chinese cars weren’t coming to the US and Europe for years, and it happened as I predicted. Why? Because Chinese “quick-return-on-investment” business culture is very different from that of Japan and Korea, where the corporations are run by owner-CEOs who make decisions based on a long-term outlook, often investing in technology and human capitals that won’t see a viable market for the next 10~15 years. This is why Japanese and Korean auto companies take college freshers and give them a 15-year training, while Chinese automakers try to steal engineers and technicians away from their competitors instead of training them inhouse.
China is just a big auto market due to its massive population, but not an auto industry power house. And this will not change as long as China’s “make a quick profit by any means” culture doesn’t change.
Could not agree more.
I worked in the automotive industry in Europe, USA and since five years in China…..
All i can say it is exactly as you mentioned. Nobody here is interested in true innovation or quality, the only thing that matters is the quick $$$ and going home on time.
I am amused to see posts where china is beeing compared to the success of Japan or Korea. Chinese are nowhere near the japanese devotion at work, sense for quality and craftsmanship.
No need to go to fight in Europe, just buy Volve.