China and India could reshape the global auto industry and pose a significant competitive threat in coming years, car industry executives said in Detroit this week.
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“They are a very credible threat and we discount anyone at our peril,” American Honda sales chief John Mendel told news agency AFP at the motor show.
He added that, while the globally competitive nature of the automotive industry requires mass economies of scale, the relatively young Chinese and Indian manufacturers are ramping up quickly. And, with Chinese automakers buying brands like Hummer and Volvo, they are gaining access to a valuable distribution network, critical technology and “instant credibility”.
Indian and Chinese manaufacturers are also showing what they are capable of on their own. Tata Motors showed its Nano budget car in Detroit (away from the main show venue) while Build Your Dreams Motor (BYD) from China this year displayed it four-door electric e6 sedan on the main show floor and vowed Tuesday to become the first Chinese automaker to enter the United States at the end of the year.
Meanwhile, AFP noted, both countries are becoming increasingly important markets for top automakers with China passing the United States in total sales last year and Indian volume expected to double by 2016.
Toyota’s US auto operations chief Don Esmond is sceptical either BYD or Tata would make a significant mark here in the short term. “It’s not so easy to come walking into a market and develop a product and distribution network,” he said.
“A lot of it’s going to depend on who does the best job of listening to the customer and has the ability technically to deliver the product. Whether it be Toyota, GM, Ford or Chrysler, we have more resources, more manufacturing capacities and more technical development available here so we should be able to deliver a better product.”
Nissan Americas head, Carlos Tavares, disagreed. “I think it’s a mid-term prospective… not 10 years,” he said, noting Hyundai and Kia success in breaking into the US market, overcoming quality concerns and becoming major players.
He added affordability would be a key driver in the industry in the coming years and China and India will offer automakers an important testing ground for pushing the boundaries.
“What we can learn from China and from India is not so complex. It’s about determining the level of quality the consumer expects. It’s then about reducing operating costs which will bring you to fuel efficiency.”
Ford chief executive officer Alan Mulally was concerned that the real competitive threat could come from unfair trade practices. “We expect the auto world industry to continue to evolve,” he told the Automotive News conference that followed the show media days.
“There is no reason that if we get to global trade rules that we can’t compete with the best of the world.”
Warren Harris, president of automotive engineering consultant Tata Technologies, said, however, that the lack of flexibility inherent in a massive and decades-old company could give younger and more innovative rivals a leg up.
“Just the willingness to innovate in and around the value chain… this is where the Chinese and the Indian OEMs are going to have an advantage,” said Harris, whose firm helped develop the Nano.
“If you look at the American OEMS, they have the technical know-how and the distribution networks that would be the envy of the Chinese and Indians,” he told AFP. “But, if they’re not going to match the Chinese and the Indians for innovation, then that advantage is not going to be enough.”
