China - The Wild, Wild East for Car Makers
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China - The Wild, Wild East for Car Makers
Companies Are Ready to Do Anything To Succeed in the Chinese Market
Wall Street Journal - November 20, 2006
DaimlerChrysler AG Chairman and Chief Executive Officer Dieter Zetsche has a lot on his plate these days, what with big losses at the Chrysler Group and continued competitive pressures on Mercedes-Benz. But Saturday, Dr. Zetsche was far from those concerns, sharing a stage at the AutoChina motor show in Beijing with a hulking Maybach 62 and a Chinese opera singer with a voice powerful enough to stop the 12-cylinder super sedan in its tracks.
But Dr. Zetsche, like his rivals, will do whatever is required to succeed in China.
As far as the auto industry is concerned, China is the Gold Rush, the Internet boom and the Roaring '20s wrapped up in a shiny 21st century package. China's auto industry is the Wild, Wild East of globalization. Not since the early years of the American auto industry at the dawn of the 20th Century has a market this huge and this chaotic burst open so fast. The Chinese car market is booming, styling, soaring and sucking in great gobs of capital and jobs on its way to rivaling, and perhaps replacing, the U.S. as the gravitational center of the world auto industry.
For more than a decade, global auto makers have looked to China as the market of the future. Now, they all appear to agree: China is the market of today.
"No market is more important than China," says Wolfgang Bernhard, head of Volkswagen Brand operations, who flew into Beijing out of a squall of turmoil in Volkswagen's board room to help draw attention to three concept vehicles designed to demonstrate VW's commitment to tailoring new models to Chinese tastes.
Mr. Bernhard was just one of a parade of big auto company executives who have come to China in recent weeks to declare, in different ways, that they don't intend to miss out on the once in a century opportunity presented as China motors down the road to becoming the world's single largest auto market -- at 20 million or so cars a year -- within about 15 years.
But Chinese car makers stole the show at AutoChina, with glitzy displays, elaborate showmanship (Dongfeng put on a stage show worthy of Vegas, with costumed performers belting out "Oh, Susannah" among other Americana.) Chinese car makers are unabashed in celebration of the old values of motor shows, draping their cars with as many six foot tall, rail thin fashion models as Beijing agencies could supply.
The singing and dancing helps to overcome the fact that from a brand image perspective, China has a long way to go. Roewe, Landwind, Changan, Chery, and Great Wall, are just a few of the more than 100 car companies trying to grab a piece of the Chinese automotive gold rush and then make a name for themselves outside China. Some of these unfamiliar names had remarkably familiar faces, such as the Great Wall CoolBear, a cuddly green car that bears a striking resemblance to Toyota Motor Corp.'s Scion xB. Chinese car makers acknowledge their current designs aren't ready for the big show. But their ambitions to export are not dimmed by the discovery that their initial timelines will have to be stretched.
Meanwhile, the days when senior U.S. or German executives downplayed their interest in China as a manufacturing base are gone. Big companies such as General Motors Corp., Ford Motor Co., DaimlerChrysler and Volkswagen all are pushing ahead with ambitious plans to expand production and engineering in China, despite financial woes in their old-line home market operations.
"Ninety one percent of our revenue is based off Nafta," says Tom LaSorda, chief executive officer of DaimlerChrysler's Chrysler Group. "We know we have to shift that to other parts of the world."
That's one reason why Mr. LaSorda was in China last week, celebrating the expansion of DaimlerChrysler's production operation outside of Beijing, where workers earn about 2,500 yuan ($312) a month assembling Mercedes-Benz and Chrysler sedans for the Chinese market.
Chrysler is dramatically expanding its model lineup in China, and pushing ahead with talks with a potential Chinese partner to produce a small low cost car that could some day be exported to Europe, Latin America, Mexico, Canada and ultimately the U.S.
GM, an early mover and now highly successful in the Chinese market, used AutoChina 2006 to showcase a stretched version of the Cadillac STS sedan, called the SLS, that was specifically redesigned for the Chinese market. The SLS is one of a long line of GM cars sold overseas that prompts the question, "Why don't they sell that at home?" The SLS has about four inches (100 millimeters) more leg room in the rear seat and a more richly appointed interior, with real wood trim, higher quality leather and subtle lighting that washes the car inside with bluish light from invisible sources.
GM Vice President for Design Ed Welburn says the SLS isn't planned to appear in the U.S. market, but the upgraded interior reflects the brand's future. "What we're doing on other Cadillac products will be even more expressive than this," he says.
The Chinese car-market boom, like other booms in other industries, creates excitement and anxiety in almost equal measure.
The chaotic market, with dozens of tiny companies trying to undercut the big joint-venture car companies dominated by the mature international players, gives non-Chinese auto executives headaches.
Headaches also come from the bad traffic and smog in China's big cities that's sure to get worse as the number of new cars and tracks hitting the road annually surges toward 7 million this year and 10 million within a few more years.
Atsuyoshi Hyogo, Chief Operating Officer of China Operations for Honda Motor Co. steps to the window of his Beijing office, and points to a building topped by a big "Amway" sign, about 200 meters away through hazy sunshine. "For 30 days a year, we cannot see that sign," he says.
On the street below, cars dodge and weave along one of the frequently clogged multilane highways that ring the city center. Because of the design of the on and off ramps, the traffic getting onto the road has to cross the flow of traffic seeking to get off. Crossing a busy Beijing throroughfare is an aerobic workout for any pedestrian who wants to survive. If that's not exciting enough, consider that most drivers in China have had their vehicles for five years or less. Traffic fatalities are believed to exceed 100,000 a year.
Mr. Hyogo says China should look at environmental and safety regulations in Europe and the U.S., and then go beyond them, to demand more from the industry. "China is not a small player any more," he says. "You are a big player. You have to lead the world."
Mr. Hyogo concedes that tough regulation and demanding technology standards could force out many of the smaller Chinese companies -- which would benefit a technically advanced competitor such as Honda.
Looking out at the smoggy Beijing skyline, Mr. Hyogo's position seems reasonable. But reality is something else, something closer to the jangling atmosphere of excitement a few miles away at the AutoChina exhibition, where a nation of 1.3 billion is ready to stop dodging cars, and start driving them.
Wall Street Journal - November 20, 2006
DaimlerChrysler AG Chairman and Chief Executive Officer Dieter Zetsche has a lot on his plate these days, what with big losses at the Chrysler Group and continued competitive pressures on Mercedes-Benz. But Saturday, Dr. Zetsche was far from those concerns, sharing a stage at the AutoChina motor show in Beijing with a hulking Maybach 62 and a Chinese opera singer with a voice powerful enough to stop the 12-cylinder super sedan in its tracks.
But Dr. Zetsche, like his rivals, will do whatever is required to succeed in China.
As far as the auto industry is concerned, China is the Gold Rush, the Internet boom and the Roaring '20s wrapped up in a shiny 21st century package. China's auto industry is the Wild, Wild East of globalization. Not since the early years of the American auto industry at the dawn of the 20th Century has a market this huge and this chaotic burst open so fast. The Chinese car market is booming, styling, soaring and sucking in great gobs of capital and jobs on its way to rivaling, and perhaps replacing, the U.S. as the gravitational center of the world auto industry.
For more than a decade, global auto makers have looked to China as the market of the future. Now, they all appear to agree: China is the market of today.
"No market is more important than China," says Wolfgang Bernhard, head of Volkswagen Brand operations, who flew into Beijing out of a squall of turmoil in Volkswagen's board room to help draw attention to three concept vehicles designed to demonstrate VW's commitment to tailoring new models to Chinese tastes.
Mr. Bernhard was just one of a parade of big auto company executives who have come to China in recent weeks to declare, in different ways, that they don't intend to miss out on the once in a century opportunity presented as China motors down the road to becoming the world's single largest auto market -- at 20 million or so cars a year -- within about 15 years.
But Chinese car makers stole the show at AutoChina, with glitzy displays, elaborate showmanship (Dongfeng put on a stage show worthy of Vegas, with costumed performers belting out "Oh, Susannah" among other Americana.) Chinese car makers are unabashed in celebration of the old values of motor shows, draping their cars with as many six foot tall, rail thin fashion models as Beijing agencies could supply.
The singing and dancing helps to overcome the fact that from a brand image perspective, China has a long way to go. Roewe, Landwind, Changan, Chery, and Great Wall, are just a few of the more than 100 car companies trying to grab a piece of the Chinese automotive gold rush and then make a name for themselves outside China. Some of these unfamiliar names had remarkably familiar faces, such as the Great Wall CoolBear, a cuddly green car that bears a striking resemblance to Toyota Motor Corp.'s Scion xB. Chinese car makers acknowledge their current designs aren't ready for the big show. But their ambitions to export are not dimmed by the discovery that their initial timelines will have to be stretched.
Meanwhile, the days when senior U.S. or German executives downplayed their interest in China as a manufacturing base are gone. Big companies such as General Motors Corp., Ford Motor Co., DaimlerChrysler and Volkswagen all are pushing ahead with ambitious plans to expand production and engineering in China, despite financial woes in their old-line home market operations.
"Ninety one percent of our revenue is based off Nafta," says Tom LaSorda, chief executive officer of DaimlerChrysler's Chrysler Group. "We know we have to shift that to other parts of the world."
That's one reason why Mr. LaSorda was in China last week, celebrating the expansion of DaimlerChrysler's production operation outside of Beijing, where workers earn about 2,500 yuan ($312) a month assembling Mercedes-Benz and Chrysler sedans for the Chinese market.
Chrysler is dramatically expanding its model lineup in China, and pushing ahead with talks with a potential Chinese partner to produce a small low cost car that could some day be exported to Europe, Latin America, Mexico, Canada and ultimately the U.S.
GM, an early mover and now highly successful in the Chinese market, used AutoChina 2006 to showcase a stretched version of the Cadillac STS sedan, called the SLS, that was specifically redesigned for the Chinese market. The SLS is one of a long line of GM cars sold overseas that prompts the question, "Why don't they sell that at home?" The SLS has about four inches (100 millimeters) more leg room in the rear seat and a more richly appointed interior, with real wood trim, higher quality leather and subtle lighting that washes the car inside with bluish light from invisible sources.
GM Vice President for Design Ed Welburn says the SLS isn't planned to appear in the U.S. market, but the upgraded interior reflects the brand's future. "What we're doing on other Cadillac products will be even more expressive than this," he says.
The Chinese car-market boom, like other booms in other industries, creates excitement and anxiety in almost equal measure.
The chaotic market, with dozens of tiny companies trying to undercut the big joint-venture car companies dominated by the mature international players, gives non-Chinese auto executives headaches.
Headaches also come from the bad traffic and smog in China's big cities that's sure to get worse as the number of new cars and tracks hitting the road annually surges toward 7 million this year and 10 million within a few more years.
Atsuyoshi Hyogo, Chief Operating Officer of China Operations for Honda Motor Co. steps to the window of his Beijing office, and points to a building topped by a big "Amway" sign, about 200 meters away through hazy sunshine. "For 30 days a year, we cannot see that sign," he says.
On the street below, cars dodge and weave along one of the frequently clogged multilane highways that ring the city center. Because of the design of the on and off ramps, the traffic getting onto the road has to cross the flow of traffic seeking to get off. Crossing a busy Beijing throroughfare is an aerobic workout for any pedestrian who wants to survive. If that's not exciting enough, consider that most drivers in China have had their vehicles for five years or less. Traffic fatalities are believed to exceed 100,000 a year.
Mr. Hyogo says China should look at environmental and safety regulations in Europe and the U.S., and then go beyond them, to demand more from the industry. "China is not a small player any more," he says. "You are a big player. You have to lead the world."
Mr. Hyogo concedes that tough regulation and demanding technology standards could force out many of the smaller Chinese companies -- which would benefit a technically advanced competitor such as Honda.
Looking out at the smoggy Beijing skyline, Mr. Hyogo's position seems reasonable. But reality is something else, something closer to the jangling atmosphere of excitement a few miles away at the AutoChina exhibition, where a nation of 1.3 billion is ready to stop dodging cars, and start driving them.
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