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Time to develop a Chinese auto brand
2005-12-28
China Daily
Companies with powerful brand names are benefiting the most from globalization. This is particularly true in the auto industry.
Car owners often see their vehicle as an extension of their personality and social status. For that reason, they care more about the brand name of a car than a household item such as a washing machine.
It does not matter where a Mercedes is produced or where its components are sourced; it will always commend a higher premium than, say, a Lexus, although the latter is arguably a better car. There are people willing to pay more for a Jaguar than a Lincoln although both cars ride on the same Ford-developed platform.
Volvo has built up a reputation for safety and many consumers are willing to pay more money to buy its cars although less expensive alternatives have proven to be just as safe. Ferraris look fast in the parking lot. You would want one if you have a few million yuan to blow just to be seen in it.
I could go on but I think I have made the point.
Most of us know that China is a car crazy country. Many economists and auto analysts have predicted that China will overtake Japan within a decade to be the world's second largest car market after the United States.
But has anyone ever wondered why China does not have its own global car brand? Chery is trying hard but its brand value is still behind that of other foreign names and its smaller domestic competitors are not even in its rear view mirror in the branding race.
It is such a pity. When I first visited the Chinese mainland in the late 70s, I rode a Shanghai (the brand) taxi and thought it was really neat. The Beijing Jeeps are as macho or cute, depending on who is looking, as any of those four-wheel-drive derivatives that young people love so much. And, who has not dreamt of riding at the back of a Red Flag limousine with side window curtains drawn. I did.
Those were cars with distinct Chinese characteristics, designed by Chinese engineers and fabricated in Chinese factories.
China's automotive industry struggled in the past because of a small and under-developed domestic market. Domestic sales were simply too small to finance the large investments needed for modern facilities and to develop new models. Entering into joint ventures with the major auto companies in the United States, Europe and Japan has helped kick start a modern auto industry in China.
The effectiveness of this strategy has raised the question of the need for a Chinese brand. This has become a hot topic for discussion among economists, marketing experts and leaders in the auto industry.
If the answer is yes, which I think it should be, this is the time to make a serious bid to design and build cars that will once again proudly wear Chinese brand names.
The domestic market now is certainly large enough to support the development of a few domestic brands. To attract buyers, domestic manufacturers must produce cars that are competitive in all aspects to the foreign brands. Pricing alone is not enough to win market share. A new brand will have to stand the test on overall quality.
If it succeeds, the manufacturer should be able to sell enough cars in this growing market to generate the needed capital for further refinement and development. The ultimate goal must be to produce cars that can compete with the best from Japan and Republic of Korea (ROK) in the global marketplace.
Joint ventures with foreign manufacturers should be encouraged to re-invest a part of their profits into developing China branded cars for the domestic market.
It is understood that some joint venture companies have established design facilities in China. But making minor alterations here and there to make the products more suitable for the mainland market is not enough. These facilities should be equipped to design the entire car.
Developing a new model should not be all that technically challenging. But the cost of tooling up the factory for production is necessarily high, although much of the parts and components, including the engine, can be sourced from outside.
The question is which Chinese auto manufacturer is willing to take the first step.
Before you write off the idea as too risky, think Hyundai. The ROK car maker is giving the powerful Japanese auto giants a run for their money in the US market. Not too long ago, its products were largely dismissed as nothing more than tin boxes on wheels. Now, it is a serious player in the world market.
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