Blog: Dave LeggettChinese media dinner

Dave Leggett | 16 January 2009

Dinner last night was at a restaurant in London with several UK motoring media colleagues and a delegation of Chinese media representatives on a visit to Britain. It was certainly an interesting occasion with a few insights for both sides. The underlying thing that sticks with me is the simple realisation that the journalistic profession in China operates to a different set of standards and values to that in Britain. Steve Cropley (Autocar's editor) delivered a particularly eloquent description of how editorial independence works here. There aren't quite the same traditions at work in China. There's a sizeable cultural difference - also in evidence in terms of the way the economy is run and how companies behave.
Anyway, here are some points/observations/thoughts I took away:

  • Audi has done its homework in China. The stretched A6 'L' hits the spot with high-end customers who have a driver and sit in the rear. By contrast, BMW is missing the spot with its brand positioning because driving dynamics are not such a big deal for these guys sat in the back reading China Daily. This is a problem area for sports saloons in general.
  • At the other end of the market, pricing and affordability is key. Toyota has not got that right in China with its Yaris, which is too expensive.
  • BYD's claims need to be taken with a pinch of salt. Its success to date in its domestic market is with conventional ICE technology vehicles based on cheap copies. But it is a sharp company when it comes to marketing. Why show cars in Detroit? Because being there sends a powerful message to the domestic market ('they are selling cars to Americans, so they must be good enough for me'). Geely did the same thing a few years ago - exhibiting at Frankfurt and Detroit - and it worked very well for them in China, we were told.
  • One bit of advice offered to them: if you are showing cars at Western auto shows, maybe keep the blatant copies off the stands if you want to appeal to Western consumers or prospective distributors and dealers...(there again, if they are there for home consumption marketing purposes, maybe that's why they are on show in the first place).
  • Car copies go down well in China: 'It's based on a Toyota Aygo, but it's a lot cheaper.'
  • China's economy is not too exposed to the credit crunch. China's banks didn't join in the US sub-prime party the way our own Northern Rock did and its consumers don't have much debt either. They generally prefer paying cash for things rather than taking out credit - also a feature of the car market there. Where the Chinese economy is exposed is in its export business. The manufacturing sector is therefore taking a hit as demand for cheap Chinese goods in the West declines. And that is negatively impacting consumer confidence and causing Chinese economic growth to slow further. But it's not a problem of credit availability in China the way it is elsewhere in the world.
  • The view was expressed that yesterday's government stimulus package for the auto sector will make a very positive impact. Sales of cars this year in China were forecast by one of the Chinese representatives to be up 10% on last year.
  • There was some debate about the Chinese OEMs' attitude to developed overseas markets - ie the US and Europe - and what strategies they might employ to enter them. Will they follow the Japanese and Korean example and come in at the cheap end of the market and gradually build from there? Thinking about the UK market, as an example, it's very different now from how it was in the 1970s when Octav Botnar took it by storm with well-equipped cheap Datsuns. It's not so fertile for the pile 'em high, sell 'em cheap approach. The value proposition alone probably wouldn't be enough to make a big impact. But are the Chinese OEMs in a hurry in any case? If you are making a good return on serving the domestic market with cheap product (copies and 'copies plus') and exporting batches to other Asian markets, South America, CIS (and that all adds up), would you be in a hurry to spend vast sums on product development for cars to sell in more sophisticated and demanding markets with their tougher regulations? If there's 'no hurry' what might the timescale be? Ten years? Twenty? Or is that all hokum and they are in fact planning a mass Japanese-style export drive of cheap cars within five years?
  • Or will they simply skip 'Japanese model market entry phase 1' and go straight to all-new sports or luxury brands, having watched Hyundai's successful Genesis rollout. In that scenario it's a case of mainly value cars at home plus some export markets, allied to high-margin high-quality brands specifically for sophisticated overseas markets. Would that be better to maximise profits?
  • How does Britain's auto industry look to the Chinese? To paraphrase one comment: 'I thought you had sold all your brands and were a bit washed up, nothing left, but this visit has revealed that there is a whole lot more going on.' They had been all over the place - TRW, Cosworth, MIRA (three names I can recall being mentioned over dinner)...and were clearly impressed with the high level stuff they saw. It might not always be British owned, but we do have considerable expertise here, at least. They could see that, although I sensed they still couldn't quite understand why there are no major British-owned car brands left active even in the British market (and no, Morgan doesn't quite count). Join the club.

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