Ferrari’s products are always the focus of the industry and the auto funs. Once the Italia race car maker launch a new car into the market, world wide the market will stat to boil. Italian expects the new Ferrari 458 Italia can also have a similar starting. But before most of the potential buyers can have a look at a real Ferrari 458 Italia, they heart the news about the burning case of the new car world wide. Days before the same thing happened in China.
Zhejiang province, a brand new Ferrari 458 Italia was running from Yuyao to Ningbo was caught into a fire and was ruined soon. This was the first Ferrari 458 Italia burning case in China. The owner spent 4.3 million RMB for this car but he only drove 1800km before the car killed itself in front of the owner. Fortunately there was not injury and death due to this.
People passing by shoot the burning and upload the video to internet. People can see how the whole Ferrari car started to burn into ruin.
Before this case in China there were four similar cases in the rest of the world. And the fire started from engine side in the rear. Ferrari is investigating but so far there is no an official statement on this issue. There is some voice from the market that the accident could due to a fuel hose loosen in engine cabin and this can lead to burning in case the cabin temperature raise high enough.
Yesterday CHANA Group released news on its premium brand image. And rumor follows quickly that the China’s fourth biggest auto group is going to launch high-end product next month. Insiders believe CHANA needs to enhance its brand image from a cheap van maker if the Chongqing based auto group wants more from China auto market.
The news said that CHANA’s new products will be positioned higher that Roewe550 which is a benchmark for many independent auto product. Wang Jun, assistant manager from CHANA Motor told media that the new product will use a fresh brand image and the product will be also positioned higher than CHANA’s current product such as CHANA Benni, CHANA Alsvin, CHANA, Zshine and CHANA Yuexiang.
Since CHANA took over van makers, it became a real big player in China. Even CHANA is doing sedan business with Ford in Chongqing, its public images as a cheap van maker is restrict it from expanding in premium products segments in China. Geely was very successfully improved its band image and quality reputation by its new brand EMgrand, and this model could be also a good choice for CHANA. Insiders said the general situation of CHANA is similar with Geely years before: Poor brand image but good quality. If CHANA can improve its brand image as expected, it will benefit not only its new premium products but also its van business.
But for CHANA it has nearly no experience in premium brand building. It could suffer for a long while after the new project launched.
From the beginning when in May this year, BYD Chengdu gold dealer withdrew back from BYD sales network and began to sell China Geely Englon brand cars, the events of China BYD Auto 4S stores withdrawing back from BYD sales network occurred one after another, and eventually evolved into a nationwide sales network withdrawing crisis. This year, in Chengdu, Beijing, Zhejiang, Shandong, Henan and other places, there are the events of BYD dealers withdrawing.
Why? All these events just are lead by BYD’s too fast grow target. Early this year, China BYD Auto has made a sales target of 800,000 cars from 400,000 cars in 2009, now BYD Auto has cut its 2010 sales target down to 600,000 cars, but it is still very high.
On the one hand BYD Auto substantially increased its dealers’ sales tasks, meanwhile increased its dealers’ car inventory largely. Because of the big pressure from the large car inventory the price war between dealers became very seriously, even if dealers have to sell their BYD cars under the losses. In China automotive industry, generally considered a reasonable inventory coefficient is lower than 1.2, which is that the number of stock is equivalent to 1.2 months of sales. Coefficient of more than 1.8 means the stock maybe hurt dealers’ financing chain. But BYD Auto dealers’ inventories can reach 3 months of sales, which is rather dangerous.
On the other hand, BYD Auto’s sales network expanded too fast, now BYD Auto has set four sales networks, BYD A1, A2, A3, A4 sale networks, and BYD has entered the automotive industry just for five years, but its dealers has reached as many as 1,200 dealers. So the competitions among BYD Auto dealers are very intense and their operation has become very difficult. For example, in Chengdu City, before 2009 there were only three dealers in BYD A2 sales network, but after 2009, dealers in BYD A2 sales network were gradually increased to five dealers. Now in Chengdu City, in BYD A1, A2, A3 sales networks there are totally 14 dealers. The local best-selling auto brand, Shanghai Volkswagen only has 13 dealers.
China wants market for all goods. Companies strive for a fantastic future in China. But the automotive industry is not coming to a fall which could bring huge risk for the industry at this moment. Those segments growing rates of automotive industry has been slowed to start sliding in China. According to industry association CAAM (China Association of Automotive Manufactures), the number of new cars sold in July made only 14 percent higher over last year. The same number in June was 19 percent. According to insiders in this filed, the trend will continue in the next half of 2010. “We expect for the next months a significant cooling”, said Henner Lehne, China expert consultant IHS Insight. For German car maker this is an even bad news. China is the biggest market to support those German automakers such as Volkswagen from sliding due to finance crisis and the attack by American. The number of new registrations in Germany fell in July by a third. Without China they have to discuss football in daily working time. In China these German automakers are expanding their business, in rapid steps. Alone Daimler is going to sell 300,000 cars in the country in five years – nearly five times more than 2009. China Government last year did much more than the European countries for auto industry. This increased demand by early additional purchases. Now the rising inflation rates is pressing the desire to buy cars. Despite the sliding trend, IHS global insight still expects a full-year 23% increase in car sales in 2010. For the coming 2011, the growth rate would declined to 10%. But this is still better than the situation in Europe. BMW was announced by China to make a 82% rose in July to13,852 vehicles. Sedan from BMW and Mercedes are popular among the growing Chinese elites. China is the biggest auto market in the world and this will be the case for a very long time. German has now a fantastic reputation by their reliable products sold in China in the past twenty years. But the market can not always hike like a socket. If the German automakers wants for in the market, it’s time for them to further the cooperation with local auto groups, listen more to the customers and enhance relationship with government.
China huge market potential for electric cars is attracting more and more oversea automakers’ attention. Because subsidies for electric cars in China are high, Japanese and European automakers are accelerating to enter China electric car market. At 2010 Beijing auto show, almost all major automakers have showed their electric cars such as Nissan, Mitsubishi, GM and China independent auto brand, BYD.
Nissan believes that by 2020, electric cars will account for 10% of shares in the global automotive market. Over the same period in China, new energy vehicles will account for approximately 20% of shares in China auto market. Nissan electric cars next year will enter China Wuhan auto market. First, Nissan will introduce 25 Nissan Leaf electric cars as the public vehicles. And Nissan will install 250 sets of General charger s and 2 sets of quick chargers in Wuhan city to create the operating environment for electric cars. At the end of June, Nissan Leaf electric cars in Japan and U.S. market have been sold by over 23,000 units.
This week GM officially announced Chevrolet Volt hybrid electric car was priced at 41,000 U.S. dollars in the United States auto market, and the users who buy Chevrolet Volt hybrid electric car also will receive 7500 U.S. dollars of personal income tax credit amount. China and Europe in the fourth quarter of 2011 will officially introduce Chevrolet Volt hybrid electric car. Many countries have introduced new energy vehicles subsidies, the subsidy of the United States is 7,500 U.S. dollars, the subsidy of France is 5,000 euros, and the subsidy of China is 60,000 CNY which is basically the same with other countries.
Geely formally taking over Volvo makes Li Shufu’s Talent Plan accelerated. How Li can comfort so many managers from different cultures in one company is what the whole industry is paying attention. China Business (CB) made an interview to Xu Feng, VP of Hewitt Associates Great China on topic of How China’s Private Business Step Forward to International Player. CB: Geely taking over Volvo makes people recalling Lenovo’s taking over IBM PC business years before. There are so many similarities between the two. In both cases, both external managers are involving into the combination process and do you think this is the best way for this issue? Xu Feng: To use external forces during the process of taking over another company is common. Actually despite the acquisition between state-owned enterprises, acquisitions in market level always need cooperation and synergy to make it succeed. Under such conditions, in case both sides are operating well the need to introduce outside force is limited. But once there is one side is facing cooperating issues, the need to introduce outside forces would be huge. Geely’s taking over Volvo is a signal of China’s private businesses are accelerating in process of globalization. But Chinese local talents are not as suitable at this moment for similar business. There is still room for them to improve global vision, multi-culture management. In this Geely case, China’s local managers performed a very limited roles in the whole process. I this there are three reasons. First, in the past twenty years China’s local managers were focusing too much on business itself. But for acquisition the requirements could be totally different than running a local company. It requires the managers to know more about Enterprises Rules, Culture, Law and Local customs. Second, local manager are capable in daily business operating but for those business they never do (e.g. communication, performance management.), they need time to learn. Staff in international companies need the coaching from management and this is what most local managers can not offer. Third, even China local professional managers are in shortage. For such a big market, China itself needs a huge amount of manager to run the business. At this moment, there is no much motivation for those international talent to grow. CB: There is a Chinese saying Stones from other hills may serve to polish jade, for Geely’s situation at this moment, there are quite a lot of work to do and suddenly so many external managers appear in the office for new business. How Li Shufu could use these external forces in a proper way? Xu Feng: For a long while, there external’s value and working methods could make conflict to the company. This is what will happen at the beginning. For example, China most local companies are results-oriented but there new manager may focus more on system and procedure building. The culture combination would last for a relative long time. For Li Shufu or for Geely, the most important is the first 100 days. This 100 days will determine the future of new Volvo. During the first 100 days, BoD supposed to help those managers to know the new environment, their new boss, and build connection and faith between new and old. At the same time BoD need to authorize them in proper level. The process need success and fresh air all the way. In the same tine the company need confirm the management team that the acquisition is a correct decision. For those external managers for sure some of them will make great success in the new company and also some will fail. For them I have some suggestions. First, to win the boss’s faith is the most important. Without the support from BoD you will have nothing. But it need time, you need some time to know the real company. Never say no at the beginning and this is a first rule. Second, for those private company in China, result-oriented is always the case. From the business itself the speed may be sometimes more important than the quality. Sometimes to work out something on time is more important than work our something perfect. Third, build your team. You can never figure it out by your own. You need think about not only external staff. Be aware the importance of internal old staff and always avoid take your formal company’s team members with you in the new company.
BYD Motor recently announced to cut its annual sales plan from 800,000 to 600,000 based on the latest market trend. This is an important measure for BYD in 2010 which is the “Year of Brand” for the new automaker in China. BYD First Half Performance: Campaign of both Sales Volume and Growth In the first half of 2010 the auto market performed pretty well but was still under the estimation of BYD. But the ambitious automaker still achieved a historical market performance. According to data and statistics from CAAM BYD was ranked No.1 among all independent automakers in terms of sales and sales growth rate. BYD F1, BYD F3 are selling pretty well in small cities with nice exterior and competitive prices. For the second half of 2010 insiders believe BYD can go on with the good performance and break a historical China independent automaker sales record. Adjustment is good for long term pricing and placing July 20th BYD launched its M6 which is a copy from Toyota Previa. The initial price range for the MPV is 139,800 to 239,800 yuan. Insiders said this is a beginning for BYD to break the price range of 100,000 yuan in China. The Shenzhen based automaker will choose more confident pricing strategy for its BYD S6 and BYD L3 models in the coming second half year. BYD said before that 2010 is the year of Brand for the independent automaker. In order to raise the cooperation’s operating efficiency and its dealers’ profitability, in 2010 BYD has a lot of work to do. At the moment BYD has four network consists of more than 1,000 dealers. But not every one in the network can make money by selling cars under the logo of BYD at the moment. More models launching might relieve the hard situation. Beneficial policies may restart the engine of China passenger car market in H2 Have a look at the 2010 China industrial polices for automotive industry, you will see how important Chinese government take new energy vehicles. Both the central government and local ones are releasing encouraging policies for these new models. If BYD wants more it has to do more in both China and the world outside. But by copying Toyota for sure it can not go outside successfully. To mass produce and sell its battery EV is the next fatal step for BYD.
BMW sold 82,000 cars under its brand logo in the first half of 2010. Due to the fantastic performing the car Germany automotive manufacturers is intending to reclaim German politician of the scrapping premium. Regarding the global CO2 emissions issue, the situation for those luxury car makers are getting worse and worse in global auto market. Except in one market, China in which those German Limo makers don’t need to worry about their future. China took over US and became the biggest auto market in the world in 2009. The biggest auto market is even growing at an increasable speed at this moment. German automakers are the biggest winner in the biggest auto market expanding. Due to the early diligent work in China Volkswagen is taking the chance to accelerate and it is expected to take over Toyota as the biggest automaker before 2015. BMW and Daimler are also benefiting from the highly expanding of China’s demand on luxury auto products.
Chinese buying largely and expensive For example, BMW sold with 82,000 vehicles in the first half of 2010 in China. Compared to the same period last year, BMW made an increase of almost 100 percent. In addition, BMW are selling its most expensive and luxury models in the country. In addition, due to the weak Euro those German automakers nearly doubled their profit in the first half of 2010. For them it’s no necessary to cut any price even everyone in China knows RMB is appreciating. In sum, BMW boost on Tuesday, according to the figures presented between January and June sales by 13.5 percent to 27.8 billion euros. The bottom line is like the Bayern a net profit of 1.2 billion Euro. In the same period of the car maker still had to suffer a loss of 31 million €. From these values, the analysts were pleasantly surprised. Primarily the result of the second quarter - the best quarterly result since two and a half years - surpassing forecasts by more than half. The company’s shares were subsequently moved to strong and other European car values upward. BMW is actually not the only company benefiting from strong Chinese market and the simultaneous recovery of the U.S. market. The two main competitors in Munich, Mercedes and Audi, have in recent days already show great numbers. As reported, earned the VW subsidiary Audi in the first half of 994 million euros and thus contributed more than half of consolidated profits of VW. And Daimler (Mercedes-Benz) could earn a net profit of 1.9 billion euros, while in the same period last year it was a loss of 2.3 billion euros. The Stuttgart company raised its profit forecast as a result the second time this year and aiming at an operating profit of six billion euros. Savings over crisis With these results, the German car companies are sometimes even more than the record numbers from the boom years before the crisis. The reason for this is that were carried out in the crisis in part painful cost-cutting measures. For example, BMW reduced its workforce since the fall of 2008 to about 10,000 now to 95,000. The various levels of management were thinned vigorously. “Without the auto crisis, I would not have made it,” BMW CEO Norbert Reithofer commented once. The income gains of the car manufacturer now also awakening desires of the policy. Shall require members of the CDU and FDP a subsequent participation in the costs of the scrapping premium paid in the previous year. As part of that premium for the purchase of new cars five billion € zugeschossen in taxes. The Association of German car manufacturer has the claim as “summer theater back.
Yesterday Geely eventually got Volvo from Ford and this is one month in advance than originally designed. It looks that Geely was efficient on this issue even the whole process is not short. From June 2009 Geely was involved in the rumor to take over Volvo from Ford Motor, till this August the long taking over actually made a global advertising for Geely and Volvo. Geely is now one of the hottest topic in the world auto industry. Whatever the basic attitude towards the taking over of Volvo by a Chinese automaker, audiences accepted this truth yesterday. The Sweden luxury brand is now owned by Geely, a private automaker from China’s coastal Zhejiang province. But Indian can buy Jaguar and Land Rover why not Chinese to buy Volvo? China automotive industry is now widely cooperating with global automakers in China, the biggest auto market in the world, why Chinese can not take over a Volvo? This even is not the end. Bigining last month, Geely officially denied the guess of Geely’s nomination of new Volvo’s BoD. But Stefan Jacoby is now officially nominated as the third member of Volvo’s new BoD and CEO. Geely is also managing to take majority share of London Taxi and target London Olympics 2012. Suddenly Geely learned how to marketing itself globally. Volvo’s problem is the limited productivity and sales which make the cost of R&D much higher above reasonable level. Li Shufu should also knows this and he expressed this issue as “Volvo has a problem of selling its cars.” This is the reason why Li choose Stefan Jacoby who is good at sales and marketing globally. In China market? It will very difficult for Geely not to make a big money in China by Volvo.
The biggest news in China auto industry is the delivery of Volvo by Ford to Geely today. The final delivery put the venue topic of Volvo’s new plant in China in top-line, and also the first model. Accroding to Li Shufu, in order to make Volvo profitable and competitive in China, a plant with 300,000 productivity will be built in China. Since the benefit to host such a factory is so obvious, when Geely taking over Volvo was still a rumor, China local journalists are talking about the venue. From the beginning six cities were involved in the rumor. Recently quite a lot of journalist friends also called and ask for my rumor. My rumor is the venue has been confirmed: Chengdu, Sichuan province. For Geely to make the venue a secret at the beginning was reasonable. But to make it still confidential today, it’s no good to Geely. As for the model to be introduced the first phase, S60 is most likely the one. Volvo SUV model such as XC60 will also come very soon.
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