Overseas companies should be wary of establishing “cultural imperialism” in China says one prominent ex-auto CEO, as the drive to consolidating the plethora of OEMs in the country looks to gather momentum.
There are currently around 100 OEMs in China, as Lear China VP and managing director, Charles Chang, recently outlined to the Global Automotive Forum (GAF) in Chongqing, with the supplier head estimating there would be more “unavoidable” mergers and acquisitions, which would “definitely” impact suppliers.
“Be a part of the country – do not try and and position yourselves as an over-bearing outsider,” former India Hyundai president, BVR Subbu, told the Chongqing conference. “There can not be cultural imperialism.
“Innovation is probably best nurtured where you have a cross-fertilisation of learning. China’s OEMs have to look at a phase of consolidation. I know you can’t have 20, 30, 50 manufacturers headed by ex-pat talent and hope to build a foundation.
“I believe a few champions backed by significant local technical talent is a foundation for [a] sustained, global driver which is an imperative. I believe the Chinese automotive industry is at that stage to take that great leap forward.”
However, Subbu cautioned against “blood-letting by compatriots” and “extreme price competition” internally in China as the country moved towards further M&A activity.
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“[That ] will not help brand China,” he added. “Hyundai and Kia were at loggerheads in global markets. When Hyundai took over Kia, one of the first things that happened, both companies were together exporting around 3m cars.
“Just a US$100 increase in the price of the cars made a difference of US$300m to the balance sheet. That kind of money brought in resources for continued product innovation.”
The ex-Hyundai boss also cited supplier improvement as key to building strong business. “Once you lay that brick of component quality, you start to lay the foundation,” he noted.
“What Geely has done is exceptionally good. It is what Tata Motors did when it took over Jaguar.”