Top executives from General Motors (GM), BMW AG and Shanghai Automotive Industry Corporation (SAIC) presented their Chinese development strategies, expressing common concerns over energy resources at a 2005 Fortune Global Forum panel in Beijing on Tuesday morning.
The discussion was themed "Auto Industry in Asia: An Open Road," but participants all focused on China, the world's third largest market with the greatest potential. As the panel chairman, Alex Taylor III, a senior industry editor of Fortune magazine, said the auto sector cannot be ignored when talking about doing business in China.
In the past two years, the auto market has seen rapidly increasing production and slowing sales after an initial car craze following China's entry into the WTO in 2001. However, G. Richard Wagoner, GM president and CEO, believed that such a downturn is quite normal, saying that the market is currently adjusting; a large proportion of cars sold will be small and economic ones, and more Chinese will become car buyers.
Wagoner forecast that the production value of the country's auto industry in 2005 will rebound, with a growth rate of about 10 percent, and car sales will be 1.2-1.8 million.
He predicted that sales of small and low-price cars will increase even faster.
GM is working with SAIC, a top three automaker in China, and they have launched seven joint ventures in car assembly, sales and research and development (R&D). GM's sales in China already exceed 500,000, and China is now its second largest overseas market after Canada.
BMW, on the other hand, has paid more attention to quality and brand image, according to Helmut Panke, the company's chairman of the board of management.
The quality of BMW cars should be the same no matter where they are produced, otherwise its brand image would be hurt, said Panke. "Our products mainly target the high-end market, and our Shenyang plant aims to do the same."
Compared to the two auto giants above, SAIC still needs to catch up despite its rapid expansion in recent years.
"We must forge our own core competitive advantage on our way to becoming stronger," said Hu Maoyuan, SAIC president.
The company's 2002 development strategy set three goals: for annual car production to exceed 1 million; to be listed as a Global Top 500 Company; and to achieve annual production of 50,000 independently developed and own branded cars.
Hu said it has completed the first two goals and strives for the third. To achieve it, he stressed strengthening cooperation with foreign partners and the manufacture of its own branded car.
Although some Chinese brands are now exported, Hu admitted the existence of a huge gap between Chinese automakers and foreign auto giants.
"China's comparative advantage is mainly due to its low production costs, so it only grabs the low-end market," he said.
During the discussion, Hu described a model that could change this: to foster homegrown brands by acquiring foreign R&D and management teams.
SAIC acquired Ssangyong Motor, the fourth largest automaker in South Korea, in 2002 and was recently involved in the UK's Rover acquisition case.
Building their own brands is very important, no matter whether in low- or high-end markets, said Wagoner. He affirmed the development model, citing the examples of Samsung and Lenovo.
"Although it took a lot of time, they finally made it," he said, adding that Chinese automakers should have a long-term perspective.
However, Wagoner said that GM's current China strategy is to "achieve localized production."
Although divided in development strategy, all three top executives said they put clean and renewable energy sources at the top of their agendas.
Pollution caused by car emissions and a strained oil supply make the R&D of clean and renewable resources an urgent task.
"Automakers are responsible for maintaining the industry's sustainable development," said Hu.
Both GM and BMW are researching options, with GM specializing in hydrogen fuel and BMW in mixed fuel.
Hu said SAIC will take its social responsibility seriously and devote itself to addressing these issues, giving priority to mixed fuel considering the huge costs of hydrogen fuel.
"We hope that mixed-fuel cars will be running on Beijing's roads in 2008," he said.
Wagoner was less forthright in his optimism: "Currently, we need to reduce emissions and create a unified global emission standard," he said.
(China.org.cn by staff reporter Tang Fuchun, May 18, 2005)
