China’s auto industry – the great leap forward, but to where?

　　Within the space of less than a decade China’s auto industry has made a great leap forward – overtaking the US as the world’s largest car market and developing a number of players of international scale. Even though restrictions at home are creating more challenging times, the potential for Chinese auto makers remains prodigious.

　　But – and there is a ‘but’ – Chinese makers, and this comment is particularly true for the indigenous brands, have still much to prove. They have to prove themselves not to their domestic consumers but to the world’s car buying public. There’s a perception that by being cheap that will be enough but that is not the case, or certainly not in the main car buying markets of North America, Europe and Japan.

　　There, cheap brands have been loser brands. Its not only enough to make the first sale (where low price can be a factor) but to win the second sale which is the real challenge. Compare brands like Proton – always cheapest but never successful – with Japanese or Korean brands which were cheapest but are no longer bargain basement and have made that massive step to being loved by Western consumers.

　　That is the mountain Chinese brands have yet to climb. So lets applaud their efforts so far – they have scaled heights which were unimaginable just a year or two back. But let them not think that they’ve reached the peak.

　　There’s no doubt that Chinese car makers are dreaming the dream of spreading their sales and success into foreign markets. Many are reaching out with investment in new plants in new markets. But if you look at those markets then there is need for a pause.

　　I looked at the markets being targeted by one indigenous maker and they spanned Eastern Europe, South America, the Middle East and parts of Africa. With the exception of Italy, South Africa and arguably Russia and Brazil none of countries on the list could be called sophisticated markets or ones which demand high standards of quality, safety and emissions.

　　I have no problem with this as an ambition but the real world, the real auto world, does not lie in those countries. For SAIC, Geely, Chery, Great Wall and the others waiting to become truly world players, there have to be bigger, more challenging targets. How will they win through in those more competitive environments?

　　There’s a lot of talk about Chinese makers moving from volume leaders to innovation leaders and I can envisage that beginning to happen in the not so distant future. China has the investment, R and D facilities and – more importantly – the overwhelming force of talented, well educated engineers to make it happen.

　　But an area where I do not see the same amount of effort or available skills is in marketing. Making a car technologically advanced with a low on the road price are two tremendous assets. But making that car desirable to an end consumer who – all the research shows – has amazing brand loyalty to marques which have been around for decades if not (as per Daimler, for example) for well over a century.

　　Breaking down those walls will be just as difficult as surmounting technical issues – the lesson of Lexus is there for all to see. Even with 20 plus years of Toyota marketing muscle behind it, even with outstanding cars which top every measure of quality, it’s a brand which still lags behind BMW, Mercedes or even Audi in the Western public’s perceptions.

　　So there’s a clear message to Chinese auto makers – keep going in the home market - despite the challenges there, look hard at ‘real world’ export markets but – above all – look very hard at your brand building and marketing plans to become truly aspirational.

　　Without that attribute you are going to find it very hard to reach that final pinnacle of global sales success which you so want.