China's car consumption environment is changing, and some brands have not made adjustments in time. The cost of losing the Chinese market is much more than sales, but also the possibility of exploring the future of the automotive industry
On November 16, 2012, Changan Automobile started its production line in Chongqing. Figure/New
Wen | Caijing reporter Guo Huaiyi, Li Haoyin, And Guo Yu
Editor| Lee Woo-yin
After selling the Acura RDX, the 4S store only had one show car left in its inventory.
The lack of inventory is not because it sells well, but precisely because it cannot be sold. The GAC Acura 4S store is located outside the West Fourth Ring Road in Beijing, open for five years, "the boss can't afford to lose, will not enter the new car, the showroom will be withdrawn." The sales staff in the store told the "Finance" reporter that the only remaining cash car was ready to be sold for 40,000 yuan cheaply.
Acura's sales in the U.S. luxury car market are second only to the BBA (Mercedes-Benz, BMW, Audi) and Lexus, but it has been cold in China. Acura's annual sales in the Chinese market have never exceeded 20,000 units, and in 2021 it will be less than 7,000 vehicles.
According to the incomplete statistics of the "Caijing" reporter, from 2018 to 2022, a number of joint venture car companies and brands have faded out of the Chinese market, including Changan Suzuki, Dongfeng Renault, Brilliance Renault Jinbei and so on.
These joint venture brands have their own problems, but not making timely adjustments to the Chinese market is their common failure.
In the past few years, this phenomenon has happened to second-tier brands. "One trick to eat all over the world", the strategy of selling a model to the world has gradually failed. Zheng Yun, senior partner of Roland Berger and vice president of Greater China and head of the automotive industry center, believes that in the era of traditional fuel vehicles, with the strong rise of Chinese brands, these brands lack resources, even if they want to reform, they are stretched.
From the perspective of market volume and growth, China's auto market is the best single market in the world. According to Ye Liang, EY's Leader of Advanced Manufacturing and Mobility in Greater China, it is hard to imagine that they will voluntarily abandon the Chinese market. In addition to selling cars, the Chinese market is also an important test field for global car companies to explore transformation.
Now in the era of intelligent networked vehicles, in the face of Chinese consumers who are willing to try early, even the world's first-line brands are facing the pressure of not advancing or retreating.
Compared with the inherent advantages of joint venture car companies in workmanship and comfort, young Chinese car owners may pay more attention to human-computer interaction and software. Zeng Weimin, senior global partner of Bain & Company, chairman of the performance improvement business in the Asia-Pacific region and leader of the automotive business in Greater China, told Caijing that if these elements cannot be integrated into the car, the market performance of the product will become more and more difficult. Therefore, many car companies have increased their investment in local research and development in China. "If you want to be more competitive in China, you have to be more Chinese."
After realizing this, can we know the unity of action and knowledge? Joint venture car companies are facing a big test.
What did you do wrong?
At the time of fading out, dealers can't afford to lose, choose to withdraw and leave, and consumers are also in anxiety.
The last Acura RDX in the above-mentioned Acura 4S store was taken away by a car owner, who had previously compared bmw X3, Mercedes-Benz GLC and Volvo XC60, and finally chose Acura. The new Acura owner told the Caijing reporter, "Watching the news that Acura is about to quit China, some are worried about what to do in the future after-sales." ”
Acura 4S shop Guo Huaiyi photo
The sales staff of the 4S store repeatedly assured him that there was no problem with the after-sales service, "After all, Acura is Honda's brand, and some parts are interchangeable", but the owner repeatedly asked to add a clause that "after-sales and maintenance are responsible for the 4S store" in the contract.
Acura's withdrawal from China has not been officially confirmed, and both Guangqi Honda and Honda China told Caijing reporters that they were not aware of the matter.
In order to open up the North American high-end car market, Honda Motor founded the Acura brand in 1986. In 2021, Acura sold 157,000 units in the United States, an increase of nearly 15% year-on-year, ranking fifth in sales in the luxury car market, behind BMW, Mercedes-Benz, Lexus and Audi.
This luxury brand for the North American market is not satisfied with China. In 2006, Acura officially entered the Chinese market. In 2016, Guangqi Honda officially established the Acura Division, and in July of the same year, the first domestic model Acura CDX was officially launched. However, in the years since, Acura's annual sales have not exceeded 20,000 vehicles, and in 2021, it is less than 7,000 vehicles, which is obviously marginalized.
In the view of Cui Dongshu, secretary general of the Association, acura's dilemma reflects the decline of the traditional fuel vehicle market, and he told the "Caijing" reporter: "Since 2018, the traditional fuel vehicle market has shrunk and declined sharply, and if the competitiveness of second-tier brands is not strong, their pressure will be greater." ”
Another joint venture car company, Changan Suzuki, ended the era of joint ventures in 2018. In September 2018, Changan Automobile (000625. SZ) announced that it intends to acquire 40% and 10% of the shares of Changan Suzuki held by Japan Suzuki and Suzuki China for 1 yuan, and Changan Suzuki will become a wholly-owned subsidiary of Changan Automobile.
Suzuki Shu, then chairman of Suzuki Motors, said: "About 25 years ago, Suzuki Motors launched Alto in China. Since then, we have been deeply involved in the Chinese market. However, due to the shift to large cars in the Chinese market, we decided to transfer all our shares to Changan Automobile. ”
As a veteran joint venture car company founded in 1993, Changan Suzuki once had unlimited scenery with the success of Alto. In 2011, Changan Suzuki sold 220,000 vehicles, a record since entering China. However, as Chinese consumers increasingly favor large vehicles such as SUVs and slow product introductions, Changan Suzuki is becoming increasingly marginalized. By 2018, sales had reached only 30,000 units.
Data source: "Caijing" reporter based on public information collation
According to the statistics of the "Finance" reporter, from 2018 to 2022, there have been six joint venture car companies and brands withdrawing from the Chinese market, in addition to the above Changan Suzuki, GAC FCA's Fiat, Dongfeng Renault, Brilliance Renault Gold Cup have been lost in different forms.
These brands that have withdrawn from China have certain commonalities, such as Suzuki and Fiat, which are the brands that focus on small cars, while DPCA, which has the most significant sales decline, once concentrated in the small car and even hatchback market.
Bernd Pischetsrieder, then CEO of Volkswagen, had a classic statement: "We are taking complex cars, while Chinese consumers need simple cars." ”
On the surface, the fading out of China's joint venture brands often have slow product replacement, imperfect product lines and even poor management, but in the final analysis, there is still no model for the Chinese market, Changan Suzuki's car and GAC Acura's performance car, almost all of which are directly from overseas to Get China, so poor sales or even exit China is inevitable. And the lessons of these failures are becoming lessons learned by other joint venture brands.
"The strategy of 'eating all over the sky in one trick' has failed." In Zheng Yun's view, the second echelon of foreign car companies, can use limited resources, a car sold global is its best choice, but also lack of motivation to adapt to the local market demand; the Chinese market accounted for its global share is not high, resulting in the team's voice in the company is insufficient, it is difficult to obtain resources.
At a time when technology in the automotive industry is rapidly iterating, even explosive products cannot be simply copied and introduced into the Chinese market. After all, the models that have been launched behind have been difficult to compete with the new cars listed at the same time, and the novelty of consumers is also weak. What's more, even the latest products, the latest technologies and processes that are released simultaneously around the world are no longer exclusive to foreign brands.
The cost of losing the Chinese market
In 2009, China surpassed the United States for the first time to become the world's largest automotive market. So far, this laurel has not fallen on the side.
What is the cost of abandoning the world's largest automotive market?
In the eyes of Suzuki and other car companies, although the Chinese market is huge, it is not their focus, at least from the perspective of sales, the loss of these car companies is not large.
In 2018, Suzuki Motors, which withdrew from China, increased sales and ranked as the tenth largest car company in the world in 2018 with a record of 3.21 million units. Among them, the Indian market contributed more than half of Suzuki's sales. Similarly, fiat brands that withdrew from China in the same year, fiat Chrysler's global sales reached 4.84 million in 2018, unchanged from 2017 and seemingly unaffected.
"Giving up such a market is hard to imagine at the economic level." Ye Liang told Caijing that from the perspective of market volume and growth, China's auto market is one of the best single markets in the world.
Whether it can succeed in the Chinese market is related to the global competitiveness of major car companies, and some car executives have long realized this.
On the one hand, the Chinese market can bring huge profits, thus feeding back the global business of car companies.
"It's a slaughter of price and profit." In 2012, then-Fiat CEO Sergio Marchionne said volkswagen and its Audi brands made huge profits around the world, especially in the Chinese market, and then subsidized their European operations to hit competitors.
Similar to Marchionne was Philippe Varin, then PEUGEOT CEO, who told Morgan Stanley analysts that Volkswagen was using profits from China to cross-subsidize vehicles sold in Europe, drastically reducing the price of cars.
The complaints of Marchionne and Varan failed to affect Volkswagen. On the contrary, with its excellent performance in the Chinese market, Volkswagen is still the world's highest-selling car company, and only Toyota can compete with it, and what they have in common is that they all have a huge market share in China.
On the other hand, the Chinese market also has a layer of strategic significance for multinational car companies.
"China has the most forward-looking consumer expectations and business model test sites. International car companies want to transform successfully, and the Chinese market is a very attractive transformation pilot. Further, the transformation of enterprises has been verified by the Chinese market, and it is basically not far from the success of global transformation. Ye Liang added.
In 2018, Suzuki's car strategy was not suitable for the Chinese market and was considered the biggest reason for its exit. But in addition to clinging to the car strategy, Suzuki's conservatism in the field of new energy is also a major reason.
In September 2018, because there was no production of new energy vehicles within one year, Changan Suzuki became one of the 30 enterprises announced by the Ministry of Industry and Information Technology to enter the special publicity period, and if it could not pass the verification of the Ministry of Industry and Information Technology, Changan Suzuki would be revoked from the new energy vehicle production qualification. Although Changan Suzuki eventually retained its qualifications, it was not until 2021 that Suzuki Motors finally began the road to electrification transformation.
How to stand firm in the Chinese market?
Although there are successive joint venture car companies leaving the market, more brands are unlikely to abandon the Chinese market. Adjusting product strategies and enhancing local R&D capabilities to adapt to the Chinese market is a more common choice.
Dongfeng Motor Group Co., Ltd. and France's PSA Group, a joint venture, DPCA Motors, has suffered a heavy decline in sales. In 2015, when the sales volume of DPCA peaked at its peak, it sold 710,700 units, and by 2020, DPCA sold 50,300 units, only 7.08% of its sales in 2015.
Chen Bin, general manager of Dongfeng Dragon Automobile, once told Caijing reporter bluntly, "The product has not adapted to the Chinese market and consumers. The distribution of product grade differences is unreasonable, 'under the top match is the version of the beggars'; in terms of intelligence and networking, it has not kept up with the rapid development of China's needs. ”
In pain, Peugeot Dragon's new product Versailles has made a series of adjustments for the Chinese market, including adaptive development of configuration, experience and performance. In 2021, with the hot sales of the Versaille racing model, the sales of DPCA returned to 100,000 units, doubling the year-on-year growth rate, and it was one of the car companies with the highest year-on-year growth last year.
A source close to the two sides of the joint venture told Caijing that DPCA has worked hard for a year in the past, exchanging its achievements for Stellantis (NYSE: STLA, the joint venture of DPCA) confidence in China's market. According to the previous company's plan, the cumulative sales volume reached 180,000 vehicles, and DPCA could achieve breakeven.
Fiat Chrysler and Peugeot Citroen have opted for group heating, and in 2021, the two companies officially completed their merger. The combined Stellantis is doing its best to support its two joint ventures in China, DPCA and GAC FCA. Among them, DPCA relies on the Yuan + plan to emphasize after-sales service experience and products closer to Chinese consumers, which has shown itself a clear recovery momentum.
Joint venture car companies still have advantages in workmanship and comfort in the car, but the next generation of young Chinese car owners, they may pay more attention to the human-computer interaction and software in the car. Zeng Weimin believes that if these elements cannot be integrated into the car, the market performance of the product will become more and more difficult. Therefore, many car companies have increased investment in local research and development in China, because if they want to be more competitive in China, they must be more in line with the needs of the Chinese market.
It is in this context that in addition to product planning, local research and development is also an important point of force for joint venture car companies.
In March 2022, Mercedes-Benz established its second R&D center in China in Shanghai, and Hubertus Troska, a member of the Board of Directors of Mercedes-Benz Group AG (FRA:MBG) and responsible for the business in Greater China, said: "China has become a key technology innovation center and a major driver of industry transformation. There is no doubt that a strong R&D presence in China will drive us to lead the development of electric drives and automotive software. ”
At the same time, Volkswagen Anhui's new comprehensive experimental center R&D test site also broke ground in Hefei. Dr. Lu Erman, Chief Technology Officer of Volkswagen Anhui, said that by building a new R&D testing ground, Volkswagen will accelerate the development of local solutions in China.
Ford China established the Intelligent Connected and Digital Experience Team (ECDX) in January 2021. Fang Yuliang, vice president of ECDX, told Caijing that unlike Ford's architecture in other parts of the world, Chinese domestic customers have higher requirements for in-car digital experience than foreign countries, so according to the domestic market and customer requirements, the two teams of intelligent network connection and DX digital experience are merged together to become an ECDX team with Chinese characteristics.
"Ford HQ was very supportive. They will share the advanced technology in vehicle research and development with us, and in terms of user experience, we have a greater voice in China. Fang Yuliang said that the requirements of the Chinese market in terms of customer experience far exceed those of the European and American markets. Whether it is software, user experience or human-computer interaction, China is more advanced and more accepted by users.
Ge Wandi, CEO of Volkswagen Anhui, also said: "We may have greater flexibility and autonomy at the R&D level, and we can directly start research and development of technologies that meet the needs of the next stage of the Chinese market, without waiting for confirmation from the headquarters." ”
At present, traditional joint venture car companies have realized the importance of the Chinese market and have shouted out: from made in China (made in China) to made for China (created in China), and then it depends on the color geometry of the implementation.