Friday, December 13, 2013

China’s Auto Market is Marked by Battles Among Foreign Firms

Zalc
“China’s Auto Market is Marked by Battles Among Foreign Firms”
 http://online.wsj.com/news/articles/SB10001424052702304014504579249770530375650
December 10, 2013

            China’s auto industry has recently become increasingly competitive for foreign companies such as Ford, Volkswagen, Hyundai and many more. The foreign carmakers have taken control of the Chinese auto market away from most local car manufacturers in the last three years. Recently, they are beginning to take the market away from each other in hopes of generating a greater market share. China being the world’s no.1 auto market with such a large population has increasingly captured the eyes of foreign auto companies. The sales for China’s passenger-vehicle sales rose 15% between January and November. The earlier year the market share of foreign auto manufacturers was 58.7% compared to 60% this year.

            
With such an intense auto market, the competition for the consumer has increased significantly for the auto companies. GM China President Bob Socia stated, “it is totally about having the right product.” That is exactly what the foreign care manufactures have, the right product. GM sales have ironically decreased this year, however. Currently, there are 524 car models offered by 96 brands in China, which will be increased the following year by 238 more models. In the United States alone there are about 294 models sold by 45 brands, for a comparison. Although the growth of these foreign auto manufacturers has not come about without an expense. About 9.5 billion Yuan or $1.6 billion were spent on advertising in the first 10 months of this year, 8% more than the previous year.
           
           “In China, auto culture is far form being established. Buying cars is somewhat like taking friends to restaurants. Most people are unlikely to go to the same restaurant the first tow or three times,” said Mei Songlin, VP and Managing Director of J.D. Power China. Foreign auto manufactures must consider this reality. If the companies are currently spending $1.6 billion on an industry that is not sure what it wants, what will they be forced to spend in the future? At the same time these companies must also focus on the changing taste of the Chinese population and the vast amounts of people to advertise and sell to. The cultural differences and implications have a huge impact on these foreign companies, which has obviously been researched extensively. If these companies had not been able to understand the foreign culture and market of China, they would have never been able to sell as much as they do. The auto turnover is a concern, however. How will these companies foresee or even prevent such high turnovers of their own autos? Will the Chinese government change any policies that will alter the manufacturing techniques and policies of these companies? Working in such a complex and large environment such as the Chinese auto industry is difficult for any company, experienced or not.

 

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