Car manufacturers need domestic support to achieve global success
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The Chinese automobile market is the largest in the world. China is second only to Japan in vehicle manufacturing having already surpassed United States. The growth rate and real time market suggests there is a very good chance that China will surpass Japan in a few years. Yet no Chinese brand can reach the status of global automobile brand of China.
China produced more than a million units of motor vehicles in first two quarters of 2009. And the Chinese domestic market has proved good enough to attract customers for these vehicles. A report shows that more than a million vehicles were sold domestically in November 2009 alone. But after a growth in 2008 the market share of domestic brands of China is still only 30 percent (approx.).
China only exported 0.3 million (approx.) units over the first two quarters of 2009, a high percentage of which were utility or commercial vehicles mostly exported to third world countries. Germany and Japan, typically export the same number of cars they sell domestically.
It is easy to understand why the Chinese export ratio is so low. In September 2009, Zhao Hang, president of the China Automotive Technology and Research Center, alleged that manufacturers are responsible citing issues with quality and after-sale service problems for the underwhelming performance. Zhao also stated that Chinese auto exporters lack knowledge of overseas demand, government policies, regulations and certification.
The Chinese government has always been a supporter of development and guided the country to today’s successful platform. The government has announced new guidelines supporting vehicle and auto parts exports to generate 10 percent of global trade in the sector by 2020.
Despite the supportive efforts of the government, there are still significant doubts that domestic car manufacturers can successfully create a strong brand value and consumer base. The major issues are the huge investment required for research and development, the rules related to intellectual property rights with trademark and patent and the unsound domestic consumer base.
Brand value comes with a strong domestic base, a good consumer base and potential customer preference. But most of the Chinese brands have failed to fulfill any of these criteria. For example, while Toyota has a brand value of 23 billion US dollars (approx.), Saic has a brand value of 2.5 billion US dollars (approx.).
Some domestic car manufacturers are trying to acquire the technology and intellectual property of the foreign brands, rather than developing it all themselves. Baic (a Beijing based automobile manufacturer) is trying to purchase the intellectual property for Saab's 9-5 and 9-3 sedans and some equipment from the General Motors Swedish Saab unit. But there is doubt that it will become an iconic Chinese brand even if the car becomes popular among the local market. Will people buy it for their faith in Saab or their belief in Baic’s ability to manufacture good motor vehicles? Most domestic brands cannot add more features into their car because they face very competitive pricing in the domestic market. Some domestic manufacturers cannot focus on technology improvement or research and development (R&D) because they can’t generate enough profit from their existing models. Others are reluctant to invest heavily on R&D because they are afraid of weak intellectual property rights or issues with the patent system.
One might say it is not the right time for Chinese domestic automobile manufacturers to try to seek place in the global market, it could also be argued that China already has their own domestic brands like Cherry, Geely or Byd. But how many Chinese citizens with an unlimited budget would buy a Chinese branded car?
Without a concrete local consumer base and market share, no company can survive in the global market. Without sustained global success no company can have a global brand value. And without a widely well accepted domestic automobile Chinese people will not see their own brand around the globe.
It is not all about the manufacturers, or the government. Once the manufacturer has created its product, it is all about the end user. It is about a culture and willingness. If the end users start choosing a Chinese brand, and actively report about the faults or shortcomings the manufacturers will react positively. Once the manufacturers react positively, the market situation will change. The government will govern and guide it to the global market. One may argue that domestic cars are not good enough, but there is always a best option available for you. By choosing a Chinese car you are supporting China’s automobile industry and inspiring other domestic brands.
The blogger is a Phd student from Bangladesh. This blog was published on 9:02 am December 17, 2009.
