Bloomberg Television, April 10, 2017
Bill Russo, managing director at Gao Feng Advisory, discusses Ford introducing pickup trucks in China and the outlook for the Chinese auto market. He speaks to Bloomberg’s David Ingles on “Bloomberg Markets.”
Bloomberg Television, April 10, 2017
Bill Russo, managing director at Gao Feng Advisory, discusses Ford introducing pickup trucks in China and the outlook for the Chinese auto market. He speaks to Bloomberg’s David Ingles on “Bloomberg Markets.”
By JOE McDONALD AP Business Writer
In this photo, taken, Feb. 19, 2017, a worker assembles a Haval SUV H3 model at the Great Wall Motors assembly plant in Baoding in north China’s Hebei province. Great Wall Motors became China’s most profitable automaker by making almost nothing but low-priced SUVs. Now it wants to expand into global markets. (Photo by ANDY WONG/AP)
BAODING, China (AP) — Wei Jianjun is the chief matchmaker in China’s love affair with the SUV.
A decade ago, the chairman of Great Wall Motors Ltd. saw opportunity as the bulky vehicles began shedding their image in China as a farm tool. Wei cut back on making sedans and poured resources into its fledgling line of Havals.
That gamble paid off as SUVs caught on with drivers who saw them as the safest ride on bumpy, chaotic streets. By 2013, with demand surging, Great Wall had become China’s most profitable automaker and Wei was a billionaire.
Now, Wei wants to make the Haval a global brand. It’s an ambitious goal that requires advances in safety and features for a company known until now mainly for low prices. Great Wall sells Havals in Australia, Italy and Russia, but exports were less than 5 percent of last year’s output of just under 1.1 million units.
“By 2020, we hope Haval can become the world’s biggest specialty SUV brand,” Wei said at a reception at Great Wall headquarters in this city southwest of Beijing to celebrate sales passing the 1 million mark.
That “globalization strategy” includes working toward meeting American safety standards, Wei said. But he gave no indication when Haval might export to the United States or major European markets such as Germany.
Great Wall is part of a cadre of small but ambitious independent Chinese automakers that grew in the shadow of state-owned giants such as Shanghai Automotive Industries Corp., which assembles vehicles for General Motors Co. and Volkswagen AG.
Without foreign joint-venture partners, the independents created their own brands and started exporting to Africa and Latin America.
Geely Holding Ltd., which owns Sweden’s Volvo Cars, plans to start U.S. and European sales of its new Lynk & Co. brand in 2019. BYD Auto, the world’s biggest-selling electric car maker, supplies battery-powered buses and taxis in the United States and Europe. Great Wall opened a European assembly plant in Bulgaria in 2012. It has similar facilities with local partners in Russia, Indonesia, Iran, Egypt and Ecuador.
SUVs have an outsized role in China, where their popularity has helped offset sagging demand for sedans and other vehicles.
Sales of domestic brand SUVs soared 58 percent last year to 5.3 million units out of total sales of 24.4 million in the world’s biggest auto market. They are growing fastest in the lowest price ranges, dominated by Haval and Chinese rivals. That has helped Chinese brands to claw back market share they were losing to global competitors.
The top seller was Haval’s flagship H6, starting at 89,000 yuan ($12,900), which has become China’s most popular vehicle to date. H6 sales surged 55 percent last year to 580,000 units while the overall market grew 15 percent.
“They are definitely one of the most successful car companies in China,” said Yale Zhang, managing director of Automotive Foresight, a research firm.
“This company has some very special strengths,” Zhang said. “Of course, it also has weaknesses, because their products are focused on one model. But they are correcting that. They have tried very hard to cultivate another star product.”
Great Wall’s 2016 profit rose 31 percent to 10.5 billion yuan ($1.5 billion) on revenue of 98.6 billion yuan ($14.4 billion). Wei, 52, ranked No. 36 on the year’s Hurun List of China’s richest entrepreneurs, with a fortune estimated at $5.9 billion.
Begun in the 1980s as a collective that repaired and modified vehicles, Great Wall was bleeding cash when Wei, then 26, left his father’s business making industrial machinery and signed a deal in 1990 to take it over and share profits with the collective’s members.
The company launched a sedan in 1993. Its popular Deer brand pickup trucks were its first hit, in the late ’90s.
Its CEO, Wang Fengying, is a former saleswoman who worked her way up the ranks, becoming the first woman to lead an automaker a decade before GM Chairman and CEO Mary Barra.
Wei has a reputation for military-style discipline.
“He wants a quick decision and a thorough execution,” Zhang said. “This style is very different from large automotive companies, which can be a huge bureaucracy. This company definitely doesn’t have that weakness.”
Most of Great Wall’s 60,000 employees work at its Baoding factory complex, a 13-square-kilometer (5-square-mile) mini-city of assembly lines and workshops in long, pale yellow two- and three-story buildings.
A test track that wraps around the complex is banked to allow drivers to push vehicles to over 200 kph (125 mph).
“It’s an orderly, organized, very disciplined operation,” said Bill Russo, managing director of research firm Gao Feng Advisory. “You think, this isn’t China; this is what I would expect to see in Switzerland or Germany.”
Wei has emphasized product quality, in one case hiring Korean auto industry veterans to show Great Wall how to make better body panels, according to Russo, a former Chrysler executive. That has paid off by raising Haval’s image from entry-level to a mass-market brand that can charge higher prices.
“They have cracked that glass ceiling,” said Russo. “Their quality level is better than the basic Chinese car companies.”
Still, Great Wall’s market is increasingly crowded as Chinese rivals roll out dozens of new SUVs. Global brands including VW and GM are preparing to invade Haval’s segment with their own low-cost models.
Competitive pressures have reached a “deep red level,” Wei said.
The company is responding by trying to move up-market.
Haval opened a Shanghai design studio in 2013 and a Technology Center in Baoding, housed in a sleek glass tower with reflecting pools and a 23-story lobby. It includes engineering workshops, a wind tunnel and a low-pressure chamber that can mimic operating conditions up to 5,000 meters (16,500 feet) in altitude.
In November, Great Wall unveiled a premium brand, Wey, an alternate spelling of Wei’s name. It has yet to say how it will attract buyers to models expected to be priced above 200,000 yuan ($29,000).
Haval has struggled to lure drivers to its higher-priced models, such as its top-of-the-line H9, a seven-seater starting at 210,000 yuan ($30,600), that sold just 11,500 units last year. The H8, another full-size model, sold only 7,500 units.
In November, the company rolled out an updated H6, designed by a 50-member team led by Pierre Leclercq, a Belgian-born BMW veteran.
“The H6 is an extremely important product for us,” said Leclercq, the company’s senior vice president for design.
The company’s next rising star is the H2, a four-seat compact SUV that sold 197,000 units last year. But it starts at 87,000 yuan ($12,700), a step down in price instead of toward a higher market segment.
Great Wall also faces pressure from Chinese government rules that require improved fuel efficiency by 2020. That will hurt brands such as Haval that lack smaller models to improve the average of their product lineup.
In response, Great Wall has developed an electric car, the C30 EV, a compact sedan it says can go 200 kilometers (120 miles) on one charge. The company has yet to say when it might go on sale.
by Bill Russo
I recently attended the Consumer Electronics Show in Las Vegas, where traditional automakers, suppliers and several technology firms were showcasing their vision of the future of mobility. Of particular interest were the many demonstrations and announcements related to autonomous vehicles. Early forms of this technology are finding their way into commercial applications in the form of “assisted driving” features which incorporate cameras and radar/lidar to provide the car an extra set of eyes to sense its surroundings and inform the driver of risks. Rapid advancement of technologies needed to fully automate the driving process is also evident, indicating that robotic forms of transportation will be possible within at least 2 industry product cycles (5-10 years).
The following is a Q&A which offers a perspective on the future of mobility and the design and function of autonomous vehicles.
Autonomous Driving will completely redefine the comfort and convenience of transportation. In our current paradigm, comfort is designed around the driver and occupants in an externally focused manner: with eyes to the road. The space around the front seat occupants – both driver and passenger – is oriented to the information needed to manually drive the car to its destination. Autonomous vehicles will experience fewer accidents, over 95% of which are attributable to human error. Cars can therefore be lighter, with less structure without compromising occupant safety. Traffic jams will be less common since autonomous vehicles will be able to leverage vehicle-to infrastructure and vehicle-to-vehicle connectivity in order to avoid congestion and smooth the flow of traffic.
Convenience always shapes our choices when it comes to transportation. Human beings are inherently explorers and some of history’s greatest inventions – wheels, bicycles, steamships, trains, cars, and airplanes – have allowed us to be mobile over greater and greater distances. Over time, each of these inventions added more and more convenience-oriented features to make the experience of mobility more “painless”. Mobility devices are themselves a convenience which allow us to get where we want to be without walking. All forms of public and privately-owned transportation are solving this basic problem of minimizing our travel time. Each solution became commercially viable by offering a benefit versus other forms of transportation that some people were willing to pay to either use or own. For example, trains reduce travel time across a country from months to days, and commercial aviation reduced this to hours. We can now circle the world by jet in a little more than a day, a journey the first explorers could not complete in several years, if they lived to tell the tale. In recent history, owing to the invention of the internal combustion engine powered car (Carl Benz in 1886), and the moving assembly line (Henry Ford in 1908) the car became the primary means for the average person to satisfy their daily commuting needs. In the increasingly urbanized world of the 21st century, we will experience the next evolution in convenient human mobility: personalized, autonomous mobility on-demand.
Such technologies act as “support” systems for drivers which allow more tasks to be “delegated” to the car. For example, cruise control allows a driver to focus less on maintaining a constant speed and thereby improves the driving experience. Routine or mundane tasks like parking or adjusting speeds while driving on highways are already becoming mainstream. Lane departure warning, parking assistance, and cruise control are features that allow the driver to focus less on routine tasks and focus on the actual experience of driving. Over time, the number of tasks that can be handled by the “smart car” will increase in order to reduce “pain points” of driving and making the overall experience more convenient, safer and therefore more enjoyable for the occupant.
With Autonomous driving, a new paradigm can be established to re-focus the passenger on how to productively use their transportation time. Observing the outside of the car moves from a requirement to a choice – especially for the user of a mobility service. Space that is allocated to providing driver information can be repurposed from a driver-passenger perspective to a “connected user” perspective. Beyond mobility, a fully autonomous vehicle’s key benefit will be the experience it gives to the user, and the primary benefit which comes from delegating the task of driving to the car is PRODUCTIVE TIME. As such, while the purpose of the car as a transportation device has not changed, the very concept of how to treat and offer convenience-oriented features to the occupant is different: the autonomous vehicle is built with a “user-centric” mindset, as opposed to a “driver-centric” mindset.
An autonomous car, especially one used in longer-distance (>10km) commuting distances will need to be able to transform travel time into productive time through convenient services which may include infotainment (watching news/video, gaming), online communication (social networking, e-mail, conference calls), or online-to-offline services (discounts or promotions based on mobility patterns). In the world of personalized, autonomous mobility on-demand, the car essentially becomes a connected rolling space that transports us between the places we live, work, and play.
For people born in the late 20th century, it will be difficult to reimagine this new form of mobility. Most of us from this period see a car through a nostalgic lens: our most prized possession outside of our home, and the one that we can take with us to showcase our lifestyle and aspirations. For many, this will never change.
However, mobility is being revolutionized by digital technology. The rapid emergence of ride-hailing services such as Uber, Lyft, Ola, and Didi Chuxing are transforming the car into a transportation service device. It is in this mode that we can see a great fit for autonomous forms of mobility – as the operators of such services will benefit from not having to incur the cost of a driver, along with the lower maintenance and repair cost of autonomous vehicles. Users of such services expect to be driven and are not seeking the driving experience in any case.
The most surprising aspect of this type of vehicle will be that it affords its users the opportunity to turn inward and use their time productively. Future cars used for short commuting will be smaller and occupy less physical space: they simply pick people up and drop them off and do this with minimal “extras”. These will be summoned by an app on a mobile device. Longer commuting will be done in autonomous vehicles which have spaces designed to address the productivity needs of the occupants: with connectivity and consumption of content at the core. Such cars may be booked or offered through a “subscription model” to give the users some flexibility in the service offering. The shift in this paradigm will surprise people the most since these vehicles will be designed from a pure passenger experience perspective which will include how to entertain or delight the user during the journey.
The commercialization path for more complex and fully autonomous driving will be very different than what we seen so far. In the current owner/driver-centric business paradigm, new features have to be sold to customers who accept the value proposition of the technology and are willing to pay for it. Early-stage technologies typically come with a heavy price premium and are typically introduced to “premium” brands where customers are less price sensitive. However, barring regulatory intervention, this will likely limit adoption of technologies including electric and autonomous vehicles as there are cheaper alternatives (conventional engines and human drivers).
The game-changer for both electric and autonomous vehicles comes from the convergence of On-Demand Mobility (ODM) with electric and autonomous vehicles. ODM players, such as Uber and Lyft are highly investing in autonomous vehicles as a means of lowering their operating costs and unlocking the potential to participate in the Digital ecosystem through offering the users of its services access to content and O2O services. This will create a new pathway to commercializing and scaling up the autonomous driving technology in a way that has not been seen before: as we have seen with other “smart devices”, hardware innovation is backed by the digital ecosystem and thereby eventually becomes mainstream for everyone.
Comfort and convenience are solutions to mobility “pain points”, and the degree to which people experience these pain points varies greatly based on where we live.
Mobility pain is much higher in densely populated urban cities like New York, London, Paris, New Delhi, Mexico City and virtually all major cities in China. The driving experience in highly urbanized countries like China can be horrific. Cities like Beijing experience gridlock conditions at several times during a day, and suffer from severe environmental impact from the tailpipe and other emissions. Electric and autonomous mobility on demand would be a welcome solution to address these mobility pain points.
Adoption of autonomous driving technology will improve flow of traffic, reduce accidents and improve the quality of life in an increasingly urbanized world. Scaling up this technology through the convergence of ODM with electric and autonomous vehicles in these cities will accelerate a transition from a transportation model where we own an under-utilized asset that is used 1-2 hours per day to a model where autonomous cars, directed by a smart-city transportation grid, are deployed on demand to where they are needed. This is a far more efficient system where we will witness a shift from ownership of hardware toward paying for the utility that is derived from the hardware.
Autonomous vehicles deployed by on-demand mobility services fleets will be able to communicate with each other, and will be directed to and from users and their destinations by a Smart City transportation network. These cars will be highly utilized assets, which minimizes the amount of city space which needs to be allocated for parking lots for cars which sit idle for more than 22 hours a day. Cars can be routed around the traffic, minimizing the traffic jams that define the life of residents of cities like Los Angeles and Shanghai. Smart, connected, and autonomous mobility devices backed by advanced algorithms used to govern the mobility patterns will improve the livability of cities in an increasingly urbanized world.
Autonomous driving will have a tremendous impact on our environmental footprint. The technologies required to power and govern a network of personalized, electric and autonomous mobility on demand (A-MOD) have the potential to transform the lives of people all over the world. For example, these increasingly electric-powered vehicles will be also be part of the energy storage grid, we could very well moderate energy consumption and potentially shrink our carbon footprint. Transportation innovation has reshaped the history of mankind, and the transportation revolution of the next decade will set the course and has the potential to improve the lives of all generations to follow.
Bill Russo is the Managing Director and Automotive Practice Leader at Gao Feng Advisory Company, based in Shanghai. He has 30 years of automotive industry experience and has lives and worked in China since 2004. He was formerly the leader of Chrysler Group’s business in North East Asia.
Shanghai, China, December 1, 2016
Bill Russo, the Managing Director and Automotive Practice leader at Gao Feng Advisory Company will chair the Connected Mobility Roadshow conference in Shanghai – hosted by Messe Frankfurt.
The main players in the mobility industry are currently re-evaluating their positions, for connected mobility promises huge potential: by 2020, the market for interconnected cars is expected to have increased by 45% – ten times the growth of the general automobile market. It is estimated that in five years, three quarters of all new cars will be able to connect, and, from 2025, autonomic driving could be possible outside of protected areas.
Shanghai, China, September 1, 2016
As the development of automotive electronics and telematics is gaining speed, intelligent car applications are gradually and successfully integrated in our daily lives.
The numerous advantages of latest technologies do not only include an improved driving experience or enhanced safety, but also the evolution towards less fuel consumption and more sustainable driving.
Therefore, the September Automotive Roundtable in Shanghai will discuss promising trends of future cars in China and its latest applications in several areas, such as Driver Assistance Systems, Autonomous Driving, Automotive Multimedia & Communication, Connected Vehicles and Online Services in China.
– in cooperation with Autoköpfe –
– Strategic Partner: EU Chamber –
When: Thursday, September 01, 2016, 6 pm
6:00 – 7:00 pm: Registration and Networking Dinner, incl. buffet dinner
7:00 pm: Presentation:
By Mr. Roger Looney, VP of Vehicle Engineering – Vehicle Systems Development, including Electric Drivetrain & Autonomous Driving, Qoros
Roger Looney has 30 Years experience in automotive tooling, engineering and design and over 20 years experience in Asia. Current goals include utilizing that knowledge and experience to develop world class, exciting vehicles of the future.
Specialties: Automotive Product Development and Launch, Electronics, Hybrid & EV development, Asia Mergers and Acquisitions, Six Sigma, Product Development, New Business Development in Asia, Team Building in China, Low Cost Country Sourcing, Contract Development and Negotiation in China, Korea, Japan.
7:20 pm: Presentation: Integrated Mobility, Transportation Redefined
By Mr. Bevin Jacob, Head of Biz Dev, APAC, Continental Intelligent Transportation Systems
An ‘Internet of Vehicles’ enthusiast, Bevin Jacob envisions building and incorporating “Mobility Services” to improve Consumer’s digital lifestyle. He has 16 years of active involvement in building “Connected Solutions” for Mobile, Telematics and Multimedia Devices. Bevin enjoys working with highly motivated teams to bring about disruptive innovations in connected vehicles business.
7:40 pm: Panel discussion: Future Cars
Moderator: Mr. Bill Russo, Managing Director, Gao Feng Advisory Company
Bill Russo is the Shanghai-based Managing Director and the Automotive Practice leader at Gao Feng Advisory Company. His over 30 years of experience includes 15 years as an automotive executive, including 12 years of experience in China and Asia. He has also worked nearly 12 years in the electronics and information technology industries. He has worked as an advisor and consultant for numerous multinational and local Chinese firms in the formulation and implementation of their global market and product strategies. While the Vice President of Chrysler North East Asia, he successfully negotiated agreements with partners and obtained required approvals from the China government to bring six new vehicle programs to the market in a three-year period, while concurrently establishing an infrastructure for local sourcing and sales distribution. Mr. Russo has a Bachelor of Science in Chemical Engineering from Columbia University in New York, and a Master of Science in Manufacturing Systems Engineering from Lehigh University in Bethlehem, Pennsylvania. Mr. Russo is a highly sought after opinion leader on the development of the China market and the automotive industry.
Panel additionally includes:
Ms. Vanessa Moriel, Managing Director Asia, Liase Group
Vanessa Moriel is Managing Director Asia with the LIASE Group, a global retained executive search firm & talent management consultancy that specializes exclusively in automotive and mobility companies.
Ms. Moriel has been providing CEO & top management placements and succession expertise for global automotive companies across the Asia-Pacific region for close to 15 years. She previously worked for Schlumberger, the London Consulting Group, Frito-Lay (Pepsico) and Fiducia Management Consultants.
She holds a Bachelor’s degree in Chemical Engineering for the Institute of Technology and Superior Studies of Monterrey and has completed an Executive Program in Strategy and Organization from the Stanford Graduate School of Business.
Mr. John Shen, Managing Director, Accenture Strategy, Greater China
Mr. Shen Jun has more than 20 years of industry and management consulting experience. He is now Managing Director with Accenture Strategy Greater China. Before he joined Accenture, Mr. Shen was Senior Partner at Roland Berger Strategy Consultants and has been leading the Automotive Competence Center (ACC) in Greater China. Mr. Shen has served many leading MNC/local companies in automotive industry, covering a wide range of topics. Mr. Shen has in-depth knowledge and expertise in the functional areas of corporate strategy, merger and acquisitions, operational benchmark, organizational restructuring and sales and marketing management (especially on branding, channel optimization, pricing and new product launch), etc.
8:10 pm: Q&A
Where: Courtyard by Marriott Shanghai Jiading 上海绿地万怡酒店
3101 Huyi Highway, Jiading District, Shanghai 201821, P.R.C
Fee: 250 RMB/Person for annual spinsors, incl. buffer dinner, free flow soft drinks and beer
350RMB/Person for non-sponsors, incl. buffet dinner, free flow soft drinks and beer
(Please note only cash or pre-payment via bank transfer is accepted)
Hotel Room Information: The participants of Automotive Roundtable can enjoy the special rate of the hotel room: Superior Room: 550 RMB/night (incl. 1-2 breakfast). To book the room, please email to:
Ms. YILIA JIANG
Assistant Sales Manager
Tel: 86.21.3991.6816, mobile: 139.1831.2521
and indicate rate code of “Automotive Roundtable”.
Seats are limited! If you like to attend, RSVP via email
In case you register but cannot attend, please cancel your reservation before August 30. Otherwise you will be invoiced for the event.
Thanks to all our sponsors and our media partner!
If you are interested in sponsoring, speaking or participating, please feel free to contact us at: firstname.lastname@example.org.
Gao Feng Insights Report, August 2016
We are pleased to share with you our paper titled: The Explosive Growth Opportunity in China’s Automotive Aftermarket. In this report, we examine one of the major discontinuities shaping the future of the Chinese auto market: the rapid expansion of the independent aftermarket (IAM).
China’s automotive market is transitioning from a period of rapid growth in new car sales to a slower pattern of expansion going forward. While this slower pattern of growth is a concern for automakers and suppliers, the market remains at historically high levels of sales, and the car population continues to expand at double digit rates annually. In addition, the average age of the vehicle population is rising. Add to this a recent push by the Chinese government to allow sales of original equipment service (OES) parts by independent service providers, coupled with the emergence of digital platforms for accessing services, the conditions are ripe for discontinuous expansion of the independent aftermarket.
All of these factors are contributing to an explosive expansion of the automotive aftermarket services business in China. In this environment, automakers and suppliers are seeking ways to offer a clear and differentiated value proposition in order to succeed in the aftermarket, and they must act quickly to compete with new entrants who are seeking to disrupt the traditional service model.
We welcome your comments and feedback on our briefing paper or in general about our firm. We would be glad to meet you in person to share our data and perspectives in a fuller manner. Please let us know if you are interested in meeting and discussing directly how we can help you to operationalize these insights.
Thought leadership is core to what Gao Feng does. We will, from time to time, share with you our latest thinking on business and management, especially as it relates to China and China’s role in the world.
Managing Director, Gao Feng Advisory Company
Senior Associate, Gao Feng Advisory Company
Senior Consultant, Gao Feng Advisory Company
The Financial Times, June 19, 2016
Under Geely, the carmaker is back in profit and selling well in China. But is it big enough to compete with its rivals?
There is nothing exceptional about the shiny grey chassis on display in western Sweden. Its wheels, suspension and engine are all where you would expect to find them. But it stands out because of what it represents: tangible evidence of progress in one of the most daring industrial stories of recent years.
Known as compact modular architecture, it is a shared platform destined to underpin the small vehicles made by both Volvo Cars, the Swedish premium manufacturer, and its owner Geely, the Chinese mass-market brand. “This is a bridge between the two companies,” says Mats Fagerhag, head of the joint venture that created the platform. “Everything is nice words before you start a common project and face hard facts.”
Bill Russo’s quote:
“The most important thing [Geely] has done is to help Volvo become a China-centric company,” says Bill Russo, a Shanghai-based consultant. “Geely has shifted Volvo from being a marginally global company situated in Scandinavia to being a global one centred in China.”
Shanghai, China, June 27, 2016
West Bund Art Center
2555 Longteng Ave, Xuhu
|The Big Data Behind the Internet of Vehicles|
|The traditional automotive industry, where technology innovation has primarily been focused on powertrain and safety systems, must now contend with new forms of mobility services that are transforming the manner in which we experience the product. The particular conditions of urbanization, an ever-expanding middle class population, pollution, and congestion are uniquely challenging in China, which may create opportunities for innovative new mobility solutions for China.
The conventional hardware-centric, sales-driven, asset-heavy and ownership-based business model with sporadic customer interactions is now competing with a connected, on-demand, and often personalized mobility experiences. This new form of “connected mobility” is driving new technologies in the world of navigation, analytics, driver safety, driver assistance and information virtualization.
Innovations such as these, originating from both traditional OEMs and new mobility solutions platforms, many of whom are Chinese, could pave the way to a an entirely new business model for China’s auto industry.
Mr. Bill Russo, Managing Director, Gao Feng Advisory Company
China Central Television China 24 Program,, April 25, 2016
A link to Bill Russo’s appearance on CCTV’s China 24 program. Topics discussed included New Energy Vehicles, China’s auto market outlook, and vehicle exports. Beijing Auto Show story begins at 8:25, and Mr. Russo’s appearance starts at 11:42.
The Financial Times, April 24, 2016
Carmakers are gearing up for a year of intense competition in China as the world’s largest auto market by sales faces both slowing growth and changing tastes in the form of electric cars and sports utility vehicles.
This time last year, global executives were bracing for a potential slowdown and a “new normal” of moderate sales growth to match a slowing mainland economy.
Fears became reality when the stock market rout last summer in China sent consumer sentiment into a nosedive. Sales dropped year on year from June to August, before a tax cut for small-engine vehicles in October propped up sales to finish 2015 with a growth rate of 4.7 per cent year-on-year.
After a bumpy run, global carmakers at the biennial Beijing International Automotive Exhibition, which opens on Monday, are keen to prove they are well positioned in China’s rapidly maturing market.
Shifting consumption patterns have made SUVs one of the country’s most promising growth segments, with sales surging by more than 50 per cent in the first quarter of 2016 compared with the same period last year, in contrast to sedan sales which declined 1 per cent.
That mirrors the growing popularity of gas-guzzling SUVs elsewhere in the world as fuel costs have followed the price of oil lower.
The shift has helped established a beachhead for local automakers, according to Bill Russo, a Shanghai-based consultant.
“For sedans, multinationals had the advantage but for utility vehicles seven out of the top 10 models are Chinese brands” thanks to their lower costs, he says. The trend is here to stay, he adds: “Utility is like a drug — once you have it, you’re hooked”.
The move has put pressure on foreign brands as local carmakers have also improved their quality significantly in recent years, according to analysts.
“Multinationals are in a dilemma over whether to cut costs to compete,” says Yale Zhang, a Shanghai-based consultant.
Domestic automakers are looking to expand on their newly privileged position. IHS Automotive predicts production of 50 new SUV models to be launched in China this year and says that 78 per cent of these will be domestic brands.
Global automakers are already revving up efforts to regain ground by bringing their most successful top-end models from home. Ford, for instance, will use the Beijing Expo to launch its F-150 Raptor in China, a popular pick-up truck in the US, as part of efforts to “inspire a generation of off-road enthusiasts,” says John Lawler, chief executive of Ford Motor China.
But bigger is not the only way carmakers hope to do better in the Chinese market: electric cars also remain a priority for any auto brand looking to get ahead.
While they are still only a small segment of the overall market, greater numbers of “new energy vehicles” are a strategic goal for Beijing even if the demand is not yet there.
The government is aiming for yearly sales to top 3m units by 2025, after growth of nearly 300 per cent in 2015 to 330,000.
Li Keqiang, China’s premier, said in February that the government would step up support for the electric vehicle industry by shifting funds away from subsidies for production to rewarding companies that come up with new technologies and hit sales targets.
“Everyone is under pressure to show their latest NEV [new energy vehicle] models” at the Beijing Expo, says Janet Lewis of Macquarie. But margins will remain low for electric vehicles for a few years to come, she adds. “Right now, selling NEVs is not a profitable proposition.”
A survey from McKinsey suggests that electric vehicles are gaining traction, helped by government policies that make it easier to get a licence plate for electric vehicles in China’s largest cities.
As in the SUV segment, foreign leaders still face local competition. LeEco, a Chinese tech company, became the latest to enter the space, last week announcing a new all-electric concept car christened LeSEE.
“These [technology] companies are almost on par with Silicon Valley,” says Clemens Wasner at EFS, a consultancy. “In a western country their entry into the market would not be economically viable, but in China it might be.”
Click here to read this at FT.com