Page 2 of 2 China's auto makers hunt for
US key By Benjamin Shobert
able to export its way to success inside
the North American market, as will China.
Japan was successful by providing a
low-cost choice for the US consumer, as can China.
Japan enjoyed a more efficient manufacturing
methodology at a time when US automobile companies
did not, as China does. Yesterday, US automobile
manufacturers believed they could overlook the
Japanese threat; today, a similar blind spot
exists for US auto executives not
paying attention to Chinese
automobiles.
While this is compelling at
the surface, the analogies are likely to be
incorrect. Several key differences suggest that
the lessons learned by the Japanese automobile
sector have not yet been learned by their Chinese
counterparts. Bricklin, for all his foresight, is
indicative of a particular mindset that must be
changed for Chinese companies to be successful.
Bricklin's role as the middleman between
the US market and the Chinese manufacturing
infrastructure is only necessary as long as
Chinese companies settle for the role of captive
manufacturers and do not advance into areas of
product design and marketing. The ultimate
Japanese success in North America was no fluke; it
was the product of decade-long due diligence on
the part of several key executives within the
Japanese automotive industry.
These people
spent time in North America traveling the roads
they wanted their cars to be driven on, meeting
with dealers in an effort to hear the frustrations
from the car dealerships. And they planned. The
products the Japanese emphasized in North America
were not accidents. By spending time working to
understand the North American market, the Japanese
portfolio of smaller, more fuel-efficient, and
lower-priced vehicles found a market US
manufacturers had overlooked.
This
proactive effort to understand, explore and locate
the sector of the market being unaddressed is
missing from the Chinese automobile sector's
efforts in North America. Price will not be a
sufficient competitive advantage. It is unlikely
that the same general lack of awareness and
unresponsiveness will allow the US automotive
sector to be as surprised by the Chinese as they
were by the Japanese.
The fact that the
annual show in Detroit serves as fodder for
various popular business periodicals to write
numerous articles on the Chinese threat would
suggest that a special award be given to any US
auto executive caught unawares by this issue.
Chinese companies would do well to
remember that any number of low-priced autos have
found their way to US shores only to wither under
the organized response of government
protectionism, negative marketing and heightened
safety and quality concerns from the North
American consumer. If Chinese automobile companies
are going to be successful in the US, they are
going to achieve this success only by listening to
what the market is telling them it wants but
cannot yet get from existing products.
More important, it may very well be that
Chinese auto OEMs can afford to overlook the North
American market as a source of export-led growth.
The wide number of Chinese competitors in their
domestic economy would suggest that paying primary
attention to their own market's requirements is an
issue of critical importance. Additionally, it may
be that the more sophisticated needs of the North
American auto consumer are not well matched to the
current and mid-term capabilities of Chinese
manufacturers. Because of the number of people
employed by the automotive industry, the role
government plays in protecting this sector is a
somewhat rare challenge; however, the broader
transition from captive make-to-specification
manufacturing to active product design,
development and manufacturing remains an issue
that China's economy at large must deal with.
Bricklin clearly believes that China is
some distance away from successfully making this
transition, as his new business model involves him
interviewing 15 potential manufacturing partners
who will then be used purely as a manufacturing
source of designs from his company. If Bricklin
has his finger on the pulse of dissatisfied
portions of the automobile dealerships and
disaffected consumers who want product options the
US manufacturing sector is not providing, this
will prove to be a very successful venture.
All of this plays into the broader
question of the legacy from the China-price, the
various industries worldwide it has impacted, and
the next stage of globalization China must
navigate to perpetuate its growth. Few would
question that the early advantages of developing
economies is predicated on price and a willingness
to adapt to whatever requirements their cash-laden
partners come to them with. Undoubtedly, this
competitive advantage has contributed to China's
growth and popularity as a sourcing venue;
however, the global market has largely adjusted as
both multinationals and mid-sized manufacturers
have found their way to China.
Inflationary raw-material prices over the
past 24 months have marked the first time
companies could not simply count on year-over-year
savings due to purchasing activities from within
China. Over the next 12-18 months, it is likely
the global consensus will be that the savings from
China have predominantly been realized and that to
continue a presence in China requires other
motives.
As with every significant
advancement from a developing economy, the next
stage will require several paradigm shifts if
China is to continue its path forward. Of critical
importance is whether China can resolve its
unwillingness to focus on business intangibles
such as product design and consumer marketing.
These next phases of economic development in China
may require paradigms that are uniquely Chinese to
be torn down.
The remaining vestiges of
cultural socialism, namely the idea that the
market will adapt to what the manufacturer chooses
to make, are likely responsible for certain
struggles to value customer feedback and marketing
properly. The early stages of globalization hold
both potential and peril for China's
manufacturers: the potential to capture large
market share through advantages unique to them is
equally matched by the peril that they will be
forever trapped within the mindset that says
business will come to them, partners will seek
them out, and consumers will choose what the
manufacturer wishes to put forward simply because
of their low price.
Each of these lessons
is a paradigm that runs deep within the Chinese
culture, and which must be resolved if China's
promise is to be fully developed.
Benjamin Shobert is the managing
director of Teleos Inc (www.teleos-inc.com), a
consulting firm dedicated to helping Asian
businesses bring innovative technologies into the
North American market.
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