Gottschalk: China automakers target europe

【Editors' Notes】 On September 23rd, the China-Europe Auto Symposium (CEAS) was held in Shanghai. Authorities and experts from various fields of European automotive industry gathered in China to share their insights and opinions. Prof.Gottschalk, the former President of the German Association of the Automotive Industry (VDA), offered valuable suggestions for Chinese automakers about how to develop business in Europe.

Xing Wenjun: Let us thank Mr. Markus Burri for the lecture once again with warm applauses. In 1995, China's Geely took part in an auto show. German spectators, including some people within the industry, estimated that as long as the Geely cars were 30% cheaper in Europe, Geely would certainly get certain shares in European market. But through the lecture given by Mr. Burri, we found that the biggest challenge to enter the European market is the issue of safety and emission standard rather than cost control. We can see that since 2005 some Chinese enterprises failed to export to Europe due to safety standard. So safety ranks first, while the matter of price is the last choice for European consumers. I think all the Chinese automakers should bear this point in mind. `

The next speaker is Professor Gottschalk, who was the President of the German Automobile Industry Association. And the theme of his speech is Conquer Europe，Strategies for Automakers and Suppliers. Let’s welcome Gottschalk.

Gottschalk: Hello everyone, thank you for your introduction. Ladies and gentlemen, good morning! I will introduce a very volatile Europe market to you. Europe is indeed a challenging market. I will guide you to find a solution. We know that some companies which have encountered several problems in Egypt or Ukraine are also facing some challenges in the European crash test. These reflected that Chinese companies have made some efforts to enter the European market. German market is the most demanding one in Europe.

Prof. Dr. Bernd Gottschalk, AutoValue GmbH

There are two ways for Chinese automakers to enter European market. First of all, you are welcomed to expand your business in Europe. Although the market volume of European automotive industry is big enough, we cannot deny a fact that there exist some trade barriers. Without doubt, the European auto market has great potentials to expand its market volume. However, I believe that the development of quality is much more important. There are some differences between the European auto market and the American market. Faced with the financial crisis, European auto brands such as Volkswagen and Opel are still growing. Basically, when Chinese automakers want to enter European market, there are two options. First of all, it would a long-term approach for Chinese enterprises to reach an acquisition deal with some troubled European automakers. Geely Group's Volvo bid is a good example. In addition, there are some integration projects between Chinese and European auto suppliers.

Let's have a look at European market. Upset by a variety of policies and plans issued by governments, European automotive industry is not in normal conditions. For Chinese automakers, it may not be wise to make decisions based on statistics of recent years.

Our major concern is German automotive industry, the largest one in Europe. German auto market ranks first in Europe in terms of sales, investment and R&D. Though Europe remains the home market for German automotive industry, automakers are paying much more attention to emerging markets. Currently Volkswagen has a leading role in German market. At the same time, Volkswagen represents the future development of German automotive industry. Moreover German leading automakers are taking steps to protect their high-end market, which refers to the high-quality and high-tech area. We can see that the price competitions in auto industry will become fiercer.

In addition, we can foresee recovery of the entire auto market from the current recession. China, India, Russia and other countries have implemented several proper incentives. Generally speaking, the focus of global auto markets has been shifted. It may take some time for auto markets to get rid of the current downturns.

I would like to point out that small vehicles have great potentials to gain more market shares. At present European auto market is also facing some challenges. I would like to talk about the development trends of European and German auto industries. Actually a post-crisis market would be totally different from the previous one. Though certain markets could eventually get rid of crisis, some differences would emerge as well. First of all, development of small cars would be surely changed to some extent. While high-end vehicles are faced with obstacles and difficulties, small cars will have a bright future. However, in my opinion, the high-end market will eventually recover in the future. But the recovery course may not be as fast and active as many people expect. I think majority of German brands still hold a leading position in high-end market.

In the future both high-end and medium markets are profitable. With the help of Green technologies, high-end vehicles will be attached with a new definition. While economic crisis has propelled consumers to choose a much cheaper car, Germany may not be a major production base of low-cost vehicles. We can see that some of the relevant technical standards are still demanding. I personally believe that Germany will not be a major market of Tata and other low-cost brands. Automakers have to meet high standards to win popularity among Germany consumers.

The problem of excessive capacity has emerged in global automotive industry. We all know that merger deals between different automakers will keep increasing and competition is going to be fiercer. What's more, the number of suppliers will decline and two thirds of the present suppliers will no longer exist by 2015. Basically, OEM business is over.

It requires hard work to meet the emission standards. At the same time, excessive capacity poses a major threat to all the automakers. We have to continuously improve efficiency. Reducing the size of a company may be a threat to existing technologies, but it will increase our efficiency. I suppose that BYD has opportunities to take a leading role in the market.

I think 80% of the profits should come from financial services and insurances. In Europe, only 20% profits come from production and sales. Financial services and auto insurances play a much bigger role in making profits. We have to focus on the issue of crisis management. Last but not least, it is extremely important to establish a decent relationship with auto part suppliers. Europe has several advantages in the sector of R&D. What's more, how to protect intellectual property rights and patents is also an important issue.

Chinese automakers may face some barriers and obstacles in Germany since the technological standard is quite high. Nevertheless, they can also discover innumerable opportunities. Crisis brings a chance into automotive industry. If you need any help, please feel free to keep in touch with me. (Qinghua)

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