PERSPECTIVES ON THE EVOLUTION OF THE AUTOMOBILE ...

Automotive Industry in China
most of their revenues come from JV sales. However, on the other hand, once they
are able to produce their own cars with a similar quality of those produced by the JVs,
they believe that Chinese consumers will prefer to buy Chinese brands.
JVs seem to be focused in the China market and we have not found any trace or
tendency of change. JVs state to have no plans and no interest in exporting massively
China made cars. However, we have seen Honda is already exporting cars and some
other JVs are setting plants only for export.
Nevertheless, we should not forget that they are still in the battle to win market share
in China. Although the JV’s have a big market share compared to the local companies,
the market is still very fragmented and the each time better performing Chinese car
brands are a real threat.
Furthermore, there are some things that the JV’s should take into account:
The risk of losing their know-how seems to be much higher than the potential
cost savings.
It seems quite sure that China made cars will not have the quality of the
European or U.S. made cars yet. This is because of the supplier’s standards
and raw materials quality.
The governmental pressures in Europe or U.S. to protect the automotive
industry are not negligible.
For big quantity exports the cost advantage of China is not enough to
counteract the transportation and logistic expenses. Exporting from China
only makes sense for small quantities. For big quantities it makes more sense
to localize the production.
c) New Players
Some of the New Players can leverage on the financial support of the government to
acquire or merge with other companies. We should not forget that mergers have many
risks, and that the resulting company may not be able to take advantage of the
potential synergies. Consequently, in one hand these companies could become bigger
and stronger but they could also lose competitiveness and fail in the process of
integration after the mergers. Bigger companies could have more necessity in
exporting. They could use the overcapacity built in China in recent years before the
actual recession, to sell abroad. However, their export sales will clearly depend on the
protectionist tendencies worldwide.
In fact some of the New Players are announcing on the press their interest in
conquering Europe and the U.S. market. The companies that seem more likely to
reach this goal in a short term are Geely, Chery, BYD and Great Wall motors.
Geely planned to sell cars in Europe in 2007 but it did not manage to reach the market
standards. Nowadays Geely is exporting to Russia, Ukraine and the Middle East. It
plans to sell in Europe starting from countries that have no major car industry of their
own like the Netherlands or Austria. Later it plans to export to developed markets
Port of Barcelona Chair of Logistics 44