Post on 26-Jan-2017
Automobile Industry in China German, U.S., and Japanese
Group Project International Business
M. BrussT. HobsonT. ZercherM. ChristensenL. Heaps
Agenda
Chinas Economy & Automotive Industry Volkswagen Toyota Ford Motor Company SWOT Analysis Nissan Motor Company SWOT Analysis General Motors in China Bayerische Motoren Werke (BMW) in China
FDI‘s in China Entrance to World Trade Organization 2003: largest amounts of FDI‘s 2014: China received $120 billion FDI inflows
Foreign companies entered the market
Boosted employment New technologies Increased productivity and exports Decentralization and modernization
Benefits for Global Producers
“Global auto producers in China could employ up to 40 percent less capital, which promises a 60 percent increase in their return on capital” (Gao, 2002, p. 149)
Consumer
Expected private consumption in China by 2020: $2 trillion
Urban middle class high quality products Large young population international
brands
Politics & Legal System
From command to market based economy
Allocation of amount of Capital Land Human capital
Introduction of higher standards
VW AG History in China
30 Years / 20 Million Vehicles
Volkswagen Group China Headquartered in
Beijing
Majority of Sales in North and East
Branding Strategy of VW
VW uses an individual branding strategy where each brand is marketed separately.
This should help mitigate the damage of the VW emissions scandal in comparison to an automaker, such as Honda that pursues an umbrella branding strategy.
VW’s Chinese Joint Venture Partners
FAW-Volkswagen Joint Venture between FAW and VWAG VWAG = 40% stake Produces Volkswagen and Audi
Shanghai Volkswagen Joint Venture between SAIC Motor and VWAG VWAG = 50% stake Produces Volkswagen and Skoda
Breakdown of VW’s Sales by Brand in China
Audi sold 513,000 vehicles in 2014. Skoda sold 281,412 vehicles in 2014. China was Skoda’s largest
market in the world. Bentley sold 2,560 vehicles in 2014. China was Bentley’s second
largest market only behind the US. Porsche sold 46,931 vehicles in 2014. China was Porsche’s
second largest market only behind the US. China was VW brand’s largest market in the world. VW AG sold 3.675 million vehicles in China in 2014. China was
VW AG’s largest market in the world in 2014. VW Finance China increased it’s market penetration rate in China
from 10.23% to 11% in 2014. VW had a 15.3% share of the Chinese auto market in 2014.
Largest market share of any automakers in China.
Impact of VW Emissions Scandal on Sales in China
MinimalDiesel = UnpopularOnly 1,950 cars have been recalled
VW Car Sharing Business
Ren Wei Ben Combat lack of parking spaces
Beijing = 5m vehicles / 2.5m parking spots
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)
Benefits Provides flexibility that taxi doesn’t Reduced weekend rates
Hourly rate billed monthly
VW Production in China 19 production facilities There are also plans to build two more new plants on
China’s coast. Goal: 5 million vehicles annually by 2019
VW’s joint venture companies are expected to invest 22 billion euros into new production facilities, and product development from 2015 to 2019. All financed by the companies’ cash flows. To meet their WACC these investments must generate at least 1.388 billion euros of FCF per year over 30 years.
In 2014 VW produced 3.528 million vehicles in China
VW Strategy Going Forward
“In future, the plan is also to significantly expand the existing R&D activities in China and to open up new business areas, primarily in alternate drive technologies.” (2014 10K)
VW and it’s JV partners will continue to partner with the Chinese Education Ministry to enhance vocational training in China.
Toyota in China
Toyota sold 1.03 million vehicles in China in 2014.
Toyota had a 4.29% share of the Chinese auto market in
2014.
Toyota entered China in 1936, but set up major operations
in 1995.
Toyota JV Partners
Toyota has two current JV partners
FAW Toyota Motor Sales- 50% stake
GAC Toyota- 50% stake
Toyota Problems in China
• Toyota has the most auto sales worldwide, but only holds a 4.29% slice of the Chinese market
• Toyota has not opened a new plant in China since 2012.
• Out of 523 Toyota distributors as many as 95% are losing money
• When Yaris was introduced to the Chinese market in 2008 it failed to meet customer’s expectations of having road presence or daqi.
Toyota Problems in China (Cont)
Toyota being a Japanese company is a magnet for anti Japanese sentiment still remaining in China from WW2
Especially among consumers 80+, or in areas where the Japanese had sustained occupation.
Also various disputes more recently over islands off the Chinese coast with Japan have exacerbated relations.
Toyota’s Strategies to Turn Things Around
Toyota plans to invest $440 million in existing plants. This will increase production capacity by 100,000 vehicles
Must come up with some new marketing campaign maybe try and create cognitive dissonance in Chinese consumers minds about Toyota being Japanese
Ford SWOT Analysis - Strengths• Global platform consolidation and affordable mobility
blueprint delivers sustainable growth
• Strong market share in several regions could enhance brand
value
• Robust portfolio of automotive products provides competitive
advantage
• Significant research and development capabilities help launch
new vehicles
Ford SWOT Analysis – Weaknesses
• Frequent product recalls could affect brand image
• Decline in unit sales could impact market share
Ford SWOT Analysis - Opportunities• Growing global automotive industry could provide immense
opportunities to boost financial performance
• Focus on hybrid electric and fuel cell vehicle market
• Establishment of new plants to expand business prospects
Ford SWOT Analysis - Threats• Intense competition and pricing pressure could impact market
share
• Stringent environmental regulations affect business performance
• Fluctuations in foreign currency could impact profitability
Ford’s Global Electrification Strategy• Advanced technologies used in different products• The Different Options:• Hybrid Electric Vehicle• Plug-in Hybrid Electric Vehicle• Battery Electric Vehicle
• Fuel Efficiency & Reducing Greenhouse Gases• Non-Hybrid Vehicles fuel efficient as well• EcoBoost Technology
Ford’s Mobility Focus• Solution for transporting people without just putting more
cars on the road
• Interested in other modes of transportation
• To address this issue Ford has released:• MoDe:Flex• “Get Around”
Ford’s Other Strategies
• One Ford Plan
• Aggressive Growth Strategy
• Branding Strategy
• Cost Leadership Strategy
Ford in China
• Estimated 60-70% of Ford’s growth with be in Asia Pacific
• Currently 1/5 vehicles sold globally is in Asia Pacific
• By 2020, that number will be 1/3
• 4 New Plants under construction in China
• Expansion of Research and Development facility in China
• Where Regional Headquarters is located
Ford JV Partners• Changan Ford Automobile Company
• Ford owns 50%
• Jiangling Motors Company
• Ford owns 32%
• Changan Ford Mazada Engine Company
• Ford owns 25%
Ford’s Metrics in China• 1.116 vehicles sold in China in 2014• Total number of Ford dealers in China is 600
• Contributed $1.3 billion to Ford’s EBT in 2014• Accounted for 30% of Ford’s Total EBT in 2014
• 4.65% market share of Chinese market in 2014• Market share was only 2.64% in 2010. Only sold 483,000
vehicles in China in 2010.• 1.439 million Ford vehicles produced in Asia/Pacific region in
2014• China is a market in which Ford sells debt instruments to raise
capital.
Ford’s Strategy going forward
“Our strategy in Asia Pacific is to invest in
growth through both new and expanded
plants, new products, and the introduction
of Lincoln in China” (2014 10K)
Nissan’s Global Strategy• Implemented aggressive strategy
• Encompasses strategy for emerging countries
• Strategy for lower-priced/compact vehicles
• Promoted leadership strategy
• Based on zero-emission & smart community concepts
• Supported Partnership Strategy
• Renault-Nissan Alliance
Nissan in China• Nissan has three different brands Infiniti, Nissan, and Renault
• Attended 13th Beijing International Automotive Exhibition
2014
• Premier of New Sedan
• Cutting edge vehicles: BladeGlider & Autonomous Drive
Car
• Nissan’s flagship sedan Teana
Nissan’s JV Partners
• Dongfeng Motor Corporation
• Consists of 2 Subsidiaries:
• Dongfeng Motor Group
• Dongfeng Automobile Corporation
• Zhengzhou Nissan Automobile Co, Ltd
Nissan Metrics in China• 142,925 employees in China through Chinese Joint Ventures in
2014.• Sold 1.22 million vehicles in China in 2014.• China contributed $1.21 billion to Nissan’s EBT, and accounted
for 25.59% of Nissan’s total EBT in 2014.• Sales in China came to $8.97 billion in 2014.• 5.09% Market Share of Chinese market in 2014.• 6.22% Market Share of Chinese market in 2012.
GM Generic Strategy
GM pursues multiple generic strategies based on brand. Cadillac and Buick employ a differentiation strategy. Chevrolet and GMC employ a cost leadership strategy. Baojun - the China specific GM brand - employs a cost
leadership strategy.
GM Branding Strategy
To complement its existing brands, GM has several additional China specific brands:
Baojun -Means “treasured horse” in Chinese Makes low cost vehicles that compete primarily with
similar Chinese automakers. Jiefang produces commercial vehicles and exports
commercial vehicle kits for export. Wuling produces light trucks and vans. It also produces
vehicle component parts.
GM’s Joint Venture Partners
GM has many joint ventures, this demonstrates their strong presence in the market.
GM China Metrics
GM sold 3.54 million vehicles in China in 2014. It was GM’s 2nd largest market in 2014 only behind the US.
Sold 900,000 Buick’s in China accounting for 75% of all Buick’s sales worldwide.
GM has the second most sales in China based on vehicles sold of any automaker in the world.
Chinese earnings accounted for 48.66% of all GM EBT
Their total market share is 14.60% and has been growing (though not smoothly) at an average of .47% annually.
GM China Goals
Plans to invest $14 billion in Chinese Joint Ventures from 2015 through 2018.
Increase vehicle sales volume in China by 40% by 2018
GM Strategy going forward
GM China is working to reduce vehicle related child injuries and raise public awareness of child safety in and around vehicles with the recent launch of Safe Kids China.
Accelerate integration of OnStar into GM vehicles and grow number of customers using the service in China.
Expand product line breadth in China
BMW Generic StrategyBMW is made of three different brands and pursues separate generic strategies for all three.
BMW pursues a differentiation strategy Rolls Royce pursues a focused strategy on the
extremely high end luxury car market. So, we believe it employs a focused differentiated strategy.
Mini pursues a focused strategy in the subcompact car market
BMW in China
China accounted for 21.6% of BMW’s sales by volume in 2014. China was also BMW’s largest market in the world by volume in 2014.
There are six BMW models specifically built for the Chinese market.
In 2014 BMW opened more than 40 new BMW dealerships and 30 new Mini dealerships in China.
BMW Metrics in China
BMW had 19.95 billion dollars in sales in 2014 in China.
China contributed $598.5 million to BMW’s EBT, and accounted for 5.18% of BMW’s overall EBT.
BMW has had sustained growth in market share, increasing at an average of .24% annually.
BMW’s Joint Venture Partners in China
BMW Brilliance Automotive Ltd. 50% stake.
Produces BMW vehicles for the Chinese market. This joint venture began in 2003 and marked the
moment when BMW went from an imported car to a truly market-present automaker in China
BMW does still import some resources and vehicles (started this practice in 1994)
BMW China Goals Though they expect growth rates to trend lower they still
expect market growth to remain above the global premium segment
BMW is cautious of what it calls “Normalization” of auto sales in China in the coming years
Considering all of this, BMW expects growth rates between 5-8% in the coming years
Greatly expand their product offers to continue to benefit from the changing Chinese market
BMW Strategy going forward
2020 vision includes unit sales of 2,745,000 from Mainland China
BMW expects further growth in the luxury car market as well as household income continues to grow