Equipment Suppliers Association (OESA) recently presented on
February 4th its annual China Market update webinar, and as usual a
lot of great information was imparted to OESA members. The
presentations included a review of the "China Auto Market
Dynamics" by Yale Zhang, Managing Director of Automotive
Foresight in Shanghai, and a review of "China Compensation
Survey Results and HR Trends and Challenges in China," by
Steven Kueffner Director, International Consulting, at Towers
Watson in Detroit. Neither speaker disappointed the
For Mr. Zhang's presentation, he began with an overview of
current economic conditions in China, which not unexpectedly were a
major factor in driving the performance of the Chinese auto market.
China completed 2014 with a reported 7.4% GDP growth according to
Mr. Zhang, robust by most world standards but certainly below
China's historical performance in the 8-10% range. This
"slow down" was also accompanied by a slowdown in the
rate of growth of FDI in China, from 20% in 2013 to around 16% in
2014. (Although FDI growth showed signs of improvement toward the
latter stages of 2014.) Mr. Zhang also noted the steep fall in
gasoline prices in China as 2014 progressed, mirroring the trend
seen in the U.S. On the regulatory side, Mr. Zhang noted that seven
Chinese cities now have "car plate control" laws, and the
expectation of additional cities' following suit is expected to
pull forward auto sales in some markets in early 2015 as was seen
in late 2014. Another trend noted by Mr. Zhang was environmental
law changes that are accelerating the rotation of older/heavier
polluting "yellow label" cars out of the market.
In terms of the market itself, Chinese domestic vehicle
production reached 23.72 million units in 2014, up 7.3% from 2013,
again turning in a world market leading performance. Passenger
vehicles led the way, with commercial vehicle segments declining or
remaining relatively flat. China auto exports remained relatively
modest at 910K units, an increase of 6.8% from 2013. VW was the
leading brand on 2014 with 19.1% of the market in China, GM placed
second at 9.4%, and in total the top 10 brands accounted for about
69% of the domestic market. Altogether, Chinese domestic brands
accounted for about 34% of the market. As in the U.S., SUVs
performed very well in China in 2014, and accounted for more than
22% of the market in 2014. According to Mr. Zhang, a large factor
that will drive 2015 performance is the rate at which manufacturers
continue to push out product to dealers, a practice that was
employed very aggressively in 2014.
For Mr. Kueffner's presentation, overall in China salary
increases at surveyed firms were at a median of 8.5% (with 25% of
the surveyed firms increasing them by 10% or more, resulting in a
mean increase of 8.8%). In the four major Chinese cities, staff
turnover ratios averaged around 20-26%, with turnover rates being
lower at the executive and managerial levels and much higher at the
production level (reported to be 65% in Shenzhen according to
Towers Watson). Mr. Kueffner stressed the importance of reward and
recognition programs and characteristics of successful programs,
including simplicity and ease of access/administration. Mr.
Kueffner's presentation then shifted to the challenges in China
in attracting and retaining skilled employees, proving that the
China market is not unlike the other leading global automotive
markets in this respect. He noted some of the key drivers in China
of attraction and retention, with base pay and salary at #1 in the
eyes of both Chinese employers and employees. Finally, he noted the
challenges of delivering on some of the base pay programs that
companies have established in China.
All in all, China remains a key player in the global automotive
industry with some of the same opportunities and challenges that
the global automotive industry faces, in addition to
"China-unique" opportunities and challenges. Stay tuned
another robust automotive year in China in 2015.
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