China Auto Show 2014: Where Too Much Success Can Be A Bad Thing – Forbes
The Chinese auto sector, once a darling industry of the country’s policymakers and key recipient of the 4 trillion yuan stimulus package, seems to be losing some love in recent years. Perhaps nowhere will this be more evident than at this year’s iteration of the China auto show that kicks off in Beijing on April 20.
Whereas in years past the halls would have echoed with carmakers talking up the grand prospects of the China market, with references to Warren Buffet’s bet on BYD BYD and Geely Automobile’s acquisition of the Swedish Volvo –those noises have since wound down considerably.
Firstly, the Chinese government has become far more cautious in terms of handing out largesse. The good old days of getting piles of money pumped into the auto industry aren’t likely to happen again due to increasing fiscal restraints. Secondly, China as a whole is suffering under a blanket of polluted air and cars are thought to be one of the primary sources of the pollution. Instead of talking about adding more wheels on the road, policymakers are shifting into reverse and looking for ways to cut down on the number of cars on the road.
The three hot topics of questions put to the car bosses at events like these have normally revolved around the production of green cars, promoting Chinese-branded vehicles and the expansion versus share growth formula in China. While the bigger picture has changed fundamentally, those same topics are taking on a different light. Or to put it another way, some of them are not even hot topics anymore.
1. The future of green cars? Not BYD. Tesla probably.
The communications manager Shanna Hendricks replied in email that Tesla “will not be attending the Beijing Autoshow in any capacity this year.” But certainly the ordering status in China and the pricing of Tesla’s Model S have been widely reported by various Chinese media outlets. How successful will Tesla be in its appeal to Chinese customers and how timely will it deliver its products are currently under the limelight.
But let’s not forget that before Tesla the rising star was Hong Kong-listed BYD, which had dominated the headlines between 2008 and 2010. Wang Chuanfu, the founder of BYD, was the target of countless journalist, seeking to draw out the secrets of his connection with Warren Buffett and his strategy for mass producing pure electric cars.
Unfulfilled promises of seeing BYD ‘WOW’ the world by churning out millions of electric cars both within and outside of China have left many to wonder how the others are going to make it. It’s a shift of focus from the East to the West – whether a U.S. carmaker will overtake BYD to popularize the pure electric cars with stable battery technology?
2. How about Chinese-branded cars? There’s really nothing special to talk about.
It’s been the norm in China that foreign branded cars are more appealing to customers. To drive a Beetle or a Buick is an indication that you belong to a higher social rank. The stereotype of mediocrity attached to driving Chinese-branded cars means Chinese carmakers will need to double their efforts in marketing those products. In the absence of policy support, the segment has been losing steam. At one time, there were aspirations of selling made-in-China models in America and Europe, but the most likely candidates of Geely Automobile, Chery Automobile and Brilliance China have scaled back on those claims.
Adding to the above empty theoretical talk is the backup of figures. Official numbers from the China Automobile Association of Manufacturers showed that the market share of Chinese-branded cars dropped to 40.3% last year from 41.9% in 2012. Almost 60% of the market was taken by German, Japanese, American, Korean and French brands. In fact, Chinese-branded cars are struggling to pass the 50% benchmark.
3. Aggressive expansion? Wait a minute. Combating pollution is the new priority.
While U.S. officials will be applauding Ford’s contribution to employment in Ohio and General Motors General Motors is expected to issue the news on Tuesday about adding jobs in Michigan, the more urgent task for the Chinese government is to clear the air. It’s certain to be a tug-of-war between incentives to boost GDP against the need to protect the environment. But as cleaning up the sooty air is a national policy, local governments have yet to respond to the clarion call.
So the big trend? The local governments will have to limit the number of new car plates issues as a way to reduce the number of car owners. Given the far from perfect transport system in China, people have come to view the utility of driving a car as a necessity. But the unfavorable policy toward owning a car plus the unresolved congestion problems mean drivers will still have to succumb to the inconvenience of public transportation for some time.