J.D. Power’s Humphrey Remains Bullish on China Auto Market

John Humphrey

John Humphrey

The Chinese automotive industry has received a lot of buildup over the past several years related to the strength of the economy, and the potential of the market, according to John Humphrey, senior vice president of global automotive at J.D. Power and Associates. In a presentation at the recent J.D. Power and Associates 2013 International Automotive Roundtable in Orlando, FL, Humphrey discussed the outlook for China.

China’s Economic Strengths May Outpace Risks

Industry forecasters* are expecting vehicle sales in China to reach 21 million units in 2013, up 10% from the 19.1 million vehicles sold in 2012. China was able to withstand the recession of 2008-2009, and actually grew quite aggressively during that period due to government incentives and stimulus. On the whole, China was far more effective in dealing with the recession than was the U.S. market, and that has pushed the industry ahead.

Going forward, the potential for China remains substantial. In the past, China’s success has been export-driven. In the future, there will be economic growth inland to the Tier 2, Tier 3 and Tier 4 cities, and there will be a shift towards increased domestic consumption that will bode well for light-vehicle purchases. In terms of risk, environmental concerns remain a great one, especially air and water quality. On top of this, vehicle gridlock in many of the Tier 1 and Tier 2 and Tier 3 cities has been a problem for some time, and is not easily solved in a short period. Continue reading ›

How Subaru Lost its Joint Venture in China

Marvin Zhu

A year ago, Fuji Heavy Industries, as well as several other global carmakers, chose not to locally produce vehicles in China. Fuji Heavy was said to be seeking a local partner to establish a joint venture. According to rumor, Great Wall, well known for its SUVs, was one possible candidate, as Subaru’s most popular model in China is also an SUV—the Forester.

Beijing Auto (BAIC) was also closely linked because the company needed to expand its product portfolio to compete against other state‐owned giants, such as SAIC, FAW and Dongfeng. In addition, some smaller players—such as Huatai,Youngman and several others— were also mentioned.

However, it was eventually revealed that Chery was the last remaining company in the running to partner with Subaru. A JV would use Chery’s new plant in Dalian to make the first model, which was likely to be the Forester. Chery could learn a lot from Subaru’s engine technology, and might even develop a new brand based on the new technology.

Unfortunately, according to a recent announcement from Fuji, the company has dropped plans to manufacture vehicles in China, after failing to secure the Chinese government’s approval for a joint venture. Since then, Fuji Heavy cut its global sales targets and instead decided to increase its manufacturing capacity in the United States and in Japan. Continue reading ›

Will a Factory Alliance Help Peugeot and GM in Europe?

David Sargent

In late February, Automotive News and wire services reported that a possible alliance between General Motors and PSA Peugeot Citroen* was in the works. It would feature a broadening factory alliance. In another recent report, Peugeot, which is Europe’s second-largest automaker after the Volkswagen Group, also announced plans for a stock rights offer of 1 billion euro ($1.34 billion) to raise cash to offset a significant increase in its debt. GM will likely buy shares equal to a 7% stake in Peugeot when stock is offered, Reuters reports. Like Peugeot, GM is looking for ways to turn around its unprofitable Opel Division in Germany.

Sharing Vehicle Development, Platforms and Parts Will Lower Costs

Is an alliance between PSA Peugeot and GM a good idea? The concept of sharing vehicle development, platforms and parts is, in principle, a good one. Both automakers have very similar lineups and so there is considerable room for sharing costs across multiple vehicle lines. The key concern would be if the co-developed models become so similar that they simply cannibalize sales from each other and/or either automaker’s products lose their “identity.” Continue reading ›

Automakers Change Their Strategy in China Market

Marvin Zhu, a senior analyst with LMC Automotive, who writes for China Automotive Monthly published by J.D. Power Asia Pacific, offers insight about the changing strategies of automakers in China.

Automakers in China are changing their way of thinking in a market that is diversifying. Foreign brands are starting a new campaign to expand capacity.Volkswagen Group is going to set up new plants in Ningbo and Xinjiang, while Nissan Motor Co. will add a Dalian plant for Infiniti. General Motors, Ford, PSA, Hyundai, Honda, BMW and Toyota Groups are all going to have new plants ready for vehicle production in 2012. As these companies’ performance in other markets is expected to be less than robust, the booming Chinese market is much more of a sure bet. Continue reading ›

Frankfurt Motor Show Provides a Cornucopia of Products and Raises Some Questions

Charles Mills

This year’s Frankfurt International Motor Show, known as the IAA* in Europe, was well attended by the international press. There was lots of money spent on displays and concepts spread throughout nearly a dozen exhibit halls in this major German city, which is the home of the European Central Bank. There was lots of talk at the biennial show by automakers, especially Europe’s major manufacturers, who provided a veritable cornucopia of new cars and trucks for every potential buyer’s need.

Big and small; fast and slow; and products that were kind of green to completely clean propulsion were on display. There was high tech and, well, just tech. The IAA had it all and more. And yet, some really big questions persist. For instance, I wondered, can that premium roadster that can travel from 0-100 kilometers per hour in around 4 seconds really be called a “green” car? Continue reading ›

Risks Apparent as China Remains Preoccupied with Size and Speed

 

Marvin Zhu

China’s government has earmarked a previously unimaginable 2 trillion yuan (about $300 billion) to build the world’s largest national high-speed railway network. So far, only about half of the total planned route distance of 25,000 kilometers (16,000 miles) has been completed. One of the most recent additions to China’s high-speed railway marvel is an express train between Beijing and Shanghai, which opened in June 2011, some two years ahead of schedule.

China’s ambitious “great leap forward” in industrialization and modernization has been understandably making headlines around the globe. However, these glowing platitudes abruptly turned somber on July 23, 2011, when one of the celebrated Beijing-Shanghai high-speed railroad trains crashed, killing 40 people and injuring some 200 others.

While bad weather and a subsequent system failure were found to be the main causes of the crash, some people speculate that the haste with which the railway was built—driven by thought of generating fast profits and political goodwill—should not be overlooked as a mitigating factor. China has been operating for some time on a progressively “build bigger, go faster” agenda, one where safety and reliability are not always given top priority.

Automotive Industry Caught in Bigger, Faster Tailwind

For more than a decade now, the “build bigger, go faster” mantra has prevailed in China’s automotive industry as well. Ever since China supplanted the US as the world’s largest automotive market in 2009, industry players have been in a fierce race to expand. Over the past two years alone, trillions of yuan have been invested in the car-making business, as automakers race to ramp up production. This frenzied expansion is expected to raise China’s vehicle production capacity to 31 million units by 2013, nearly doubling total sales recorded in 2010. Continue reading ›