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China’s auto brands poised for the Next Big Leap

October 19, 2017 4:59 PM
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The most striking aspect of Chinese President Xi Jinping’s speech in Beijing on Wednesday was its astonishing length at over three hours, which got attention on social media.

Yet, the significant aspect about his address at the 19th National Congress of the Communist Party was his intent to take China to the next level of growth. For a country that is already overwhelmingly powerful and is keen on asserting its supremacy across military, political and economic spheres, the President will doubtless be keen on increasing this might even further.

So what implications will this have on the country’s automotive sector, which is already all-powerful? Nationalism and a greater sense of pride in Chinese identity will be a big part of the next phase of the country’s growth story, which means homegrown companies will now look at aggressively expanding their presence globally.

Who would have thought over a decade earlier that a relatively unknown Geely would have a huge brand like Volvo Cars in its kitty? Today, it is one of the most successful case studies in integration where both brands have stood to benefit and are growing rapidly. More recently, Great Wall Motors was in the news for its apparent interest in acquiring the Jeep brand from Fiat Chrysler Automobiles. The latter flatly denied any such development though it was crystal clear that the Chinese automaker was definitely interested in the move.

SAIC has been a valuable ally of General Motors for many years and has helped the company emerge as one of the top players in China. SAIC also threw GM’s Indian operations a lifeline during the 2009 global slowdown, which paralysed Detroit’s motoring landscape. The Chinese brand recently kicked off operations at a facility in Gujarat that was originally a GM plant. Where its American partner exited India recently after struggling here for two decades, SAIC has decided to pick up the gauntlet and prove a point. Whether it succeeds in this intensely competitive market, where Maruti Suzuki is the monarch, is the million dollar question.

Dongfeng Motor was the knight in shining armor for France’s PSA Group, the maker of the Peugeot and Citroen brands, when it was struggling for survival some years ago. Today, it has a 14 per cent stake in the company and will be part of its global story both in China and across Asia-Pacific where countries like Malaysia and Indonesia could end up being the growth engines of the future.

It was also barely a couple of months ago when Piaggio and Foton Motor announced an alliance to make light commercial vehicles for sale in Europe. India is the other big manufacturing hub for the Italian automaker’s cargo range and teaming up with a Chinese brand for the European growth story is interesting in more ways than one. Foton, incidentally, was also planning to set up a truck plant near Pune some years ago but nothing much has materialised since then. Reports have also been doing the rounds that BYD Auto of China will play a significant role in India’s electric mobility story and it will be interesting to see if it ties up with companies like JSW who have also announced their intent here. In addition, Changan Automobile has been scouring for opportunities in India with speculation rife that it could even look at using a part of Ford’s plant in Gujarat, which has enough capacity to spare.

Today, with the Donald Trump administration reiterating that the US will give top priority to its domestic market first, Xi Jinping is naturally keen on establishing his country’s presence in the global arena. Beyond asserting its military strength and initiatives like One Belt One Road (OBOR), the automotive industry will also play a role in showcasing Chinese might.

The country is already the world’s largest producer of cars with over 25 million units annually, comfortably ahead of the US and nearly ten times India’s output making the subcontinent a distant number three in the rankings. Beyond growing its homegrown companies, which could involve acquiring big global brands, China is doubly keen on showcasing its prowess in electric mobility.

India has also been making news in this space thanks to its aggressive intent of making all vehicles 100 per cent electric by 2030 but this seems a tall order at least for now. In contrast, China has been going flat out and is promoting e-mobility with a vengeance thanks to an initial push through government subsidies. In the coming years, the country could be the centre of gravity for the world’s electric car market and will then go all out to sell technology globally.

Can India manage to weather the onslaught as it attempts to make its own e-vision a reality? The fear within industry circles is that Chinese components will end up finding their way into vehicles here with manufacturers naturally looking for cost-effective alternatives. Whether this translates into top-class quality is debatable and this is where Indian automakers will have their work cut out in coping with the challenge.

Xi Jinping’s vision of an even more powerful global standing for China has also been facilitated by a new set of geopolitical realities, which have paved the way for easier control. Beyond the US, which has now opted for greater protectionism and is looking more inwards, other countries are grappling with their own challenges. After Brexit, the UK looks increasingly vulnerable while Europe’s strongest twosome are Germany and France with other EU members not quite as formidable.

In Asia, there is no love lost between China and Japan, which also explains India’s stronger bonding with the latter. Likewise, South Korea has been at the receiving end of China’s ire, evident from the recent pressure on car brands like Hyundai operating in the country, even while there is a greater sense of indulgence with a more troublesome North Korea.

India had a recent border skirmish with China and still managed to hold its head high but will have to live with the reality of its products making their way into offices, kitchens, garage equipment, etc. Political headwinds will have little to do with economic realities since an SAIC investment in cars will eventually mean more jobs created, the dire need of the hour in India. This will be equally true for other brands like Changan, Great Wall and Foton, which are bound to enter this market eventually.

To think that nobody really took any notice of Chinese automakers in the 1990s, especially when some of them debuted at big international events like the Frankfurt Motor Show. Their names sounded odd and they seemed almost comical in an arena where big American, European and Japanese brands ruled the roost. How times have changed since then with the likes of Geely proving a point! And Xi Jinping will be doubly keen on reinforcing this message even more strongly in the coming years as he consolidates his own position as one of the most powerful politicians in the world today.

Source: thehindubusinessline.com

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