The Global Automotive Forum 2014 was held in
Wuhan, China October 16-17. This was the fifth annual convening of
the event by the China Council for the Promotion of International
Trade (CCPIT), the last two of which have been held in Wuhan. The
official title of the program was "The Vision for the
Transformation of China's Automotive Industry," and the
theme was centered on the path of the Chinese automotive industry
to true globalization. The three of us had the opportunity to
attend with representatives from the Michigan automotive community,
and wanted to share some observations including how they might
impact the industry here and in China.
One focus of the conference was on accelerating the path to
"going global" through mergers and acquisitions. A couple
of the panels focused on this subject, both at an OEM and supplier
level. One panel noted the important guidance and support provided
to Chinese companies looking to go outbound in the [Overseas Market
Regulation] issued in August 2014 by the Ministry of Commerce, and
the streamlined process for obtaining "certificates of
outbound investment" as part of that process. Mr. Chen Lin of
the Ministry of Commerce encouraged companies considering M&A
Be practical and have a clear vision and strategy suitable to
the company (walk before you run)
Have a clear view of the financing needs for the business both
in China and overseas and the need for capital reserves, and
Make strong efforts in cross-cultural integration.
Mr. Ellis Chu, Director of China M&A at Bank of America
Merrill Lynch, identified the current period as evidencing the
"most intent" he has ever seen for automotive companies
wanting to go outbound.
Another loud and clear theme of the conference focused on
branding. Several panelists brought a branding and design
perspective to their comments. They noted that all successful
automotive brands bring attributes and cues with them, that
reinforce and establish the "brand promise" they connote.
For example, the brand promise for Dodge is performance; for
Mercedes it is engineering quality. What is the "brand
promise" of the Chinese nameplates? It is too early to tell
but if one were generated now it would likely be linked to
"low cost" with dubious or unknown quality
characteristics, it was noted. Chinese companies were encouraged to
create "signature elements" in their branding according
to Mr. Silvio Angori, CEO of the Pininfarina Group in Italy, to
produce a brand identity that reinforces a quality image.
Also discussed at the confence was the status of the Chinese
automotive supply community. While it was acknowledged that a
quality and capability gap exists between Chinese and N.A.
suppliers (in some cases which may be as much as 10 years), it was
acknowledged that the gap is narrowing and is smaller (or
non-existent) in some components vs. others. All speakers discussed
their intentions and commitment to become more localized in their
China supply and to build more capability in the China supply base,
and be true "Chinese" companies vs. the "China
operation" of an overseas auto supplier. Mr. Edouard de Pirey,
Valeo China President, summarized: "you need to be Chinese in
China." How do Chinese suppliers close the gap faster? Mr. Jay
Kunkel, President of Asia-Pacific at Lear Corporation, offered the
following advice to Chinese suppliers:
Become part of a global engineering network
Engage in M&A including technology acquisitions
Build management depth and
Develop quicker decision-making processes.
A final theme from the conference was "New Energy"
vehicles and the progression of the Chinese automotive industry on
that front. This panel included the Mr. Wang Chuanfu, Chairman of
BYD China, who encouraged people to think about alternative energy
vehicles not just as a way to battle the growing air quality
challenges in Chinese cities and to comply with emissions
requirements, but more as a way to combat energy supply
All in all, we were warmly received by our hosts [see inset],
and we have no doubt that the Chinese automotive industry will
continue on its march to globalization, even if the current path
has more economic uncertainty than a couple years ago. The
groundwork will be laid; it may take a while for the exact path to
become clear. When one looks at the Korean government's
automotive focus and the resultant creation of the global
juggernaut Hyundai/Kia, it is natural to consider the many
strengths of the Chinese automotive industry and economy, and its
government resolve, and expect that China will create one or more
truly global automotive brands in the future. The trickier
questions are who, how and when?
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