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Pivoting to a new round of development: GAF discusses industry future in Chongqing (I)

CHONGQING – More than 900 people attended the 7th annual meeting of the Global Automotive Forum (GAF 2016) on June 6-7 here for the second consecutive year. GAF 2016, organized by CCPIT-Auto, discussed the theme of Pivoting to a New Round of Development – China Opportunities: The 13th Five-Year Plan and Made-in-China 2025. Following are highlights from the event.Editor

 

Wang Xia: auto industry to change more in the next 10 years than the last 50

The auto industry will change more in the next 10 years than it has in the last 50, said Wang Xia, chairman of CCPIT-Auto, in his opening speech.

“The rise of Chinese brands will change the industry landscape and will be beneficial to both Chinese and international consumers,” said Wang.

Wang predicted that new energy vehicles could soon become mainstream automotive products in China, the popularization of smart connected technologies opens more value space for automobiles, the internet not only brings new vehicle manufacturing power but also elevate the socialized characteristics of automobiles, and the success of Chinese brands will bring benefit to global consumers.

 

Hubertus Troska: fundamentals still good for further growth

Hubertus Troska, member of the board of management of Daimler AG with responsibility for China, said in his speech that he continues to be positive and optimistic about China because the fundamentals are still good even though growth has slowed, and Daimler’s strategy will continue to increase local production of its Mercedes-Benz products, which currently accounts for about two-thirds of sales in China.

“We need to put even more efforts to understand the trend and dynamics of the market and to be very close to our customers to put the right cars and services into the Chinese market,” said Troska.

Troska believes that the industry is witnessing more change than ever and the main driver of that change is digitalization, and the industry needs to find answers to three questions: where will consumers buy a car, online or offline; whether they need to buy a car at all because of sharing and who’s going to drive the car, drivers or computers.

“We will see some trends coming out of China earlier than the rest of the world,” said Troska. “We need to be very close to the customer base here and understand what are the right products and services for this market.”

With regard to competition from internet companies, Troska said they should not be underestimated. “In China we have super strong Chinese internet companies and we take them very seriously. Our challenge is to really get up to speed and be close to our customers and also partner with these strong internet companies because they are strong in what they do,” said Troska.

 

Zhu Huarong: Chinese brands need to improve on profit, not just for applause

Chinese auto brands have won applauses recently, but still they are unprofitable, according to Zhu Huarong, president of Chang’an Automobile Co., Ltd.

“Chinese brands should strengthen their own competitive capabilities to become profitable through various ways, which is vital for their development,” said Zhu. “Chang’an’s 1.5 million sales bring meager profit, and there are still tough problems when facing future competition,” said Zhu. “Things like e-commerce, car rental, telematics, auto financing and insurance have laid foundations or provide possibilities for Chinese brands to profit in the future.”

Besides that, there are several other abilities that Chinese brands urgently need to have to face fierce competition. They are the ability to build classic products and services, the ability to quickly respond to market and consumer needs, and the ability of integration of big data.

Zhu pointed out despite the fast growth of the Chinese auto market in the last decade, Chinese brands remained fragile. There are some general views in the society that Chinese brands are competitive, which is wrong, according to Zhu. Chinese brands compete mainly in low-end market where vehicles are priced below ¥80,000 ($12,308). When it comes to vehicles that are priced above ¥100,000 market, they take a mere 20 percent market share.

Another problem for Chinese brands is that they have similar costs in vehicle production with their foreign counterparts, but their prices are much much lower than that of foreign brands. Zhu cited an example that except for A00-class vehicles, prices for A0- and B-class Chinese vehicles are more than 50 percent cheaper than their international counterparts.

Chang’an aims to achieve a sales target of 3.4 million units by 2025 and build itself into a world-class auto company, according to Zhu. “We believe only by becoming a world-class auto brand, can Chang’an be sure of not being knocked out by competition,” said Zhu. 

 

Michael Ableson: future of personal mobility to be connected, autonomous, shared and electrified

Michael Ableson, vice president of strategy and global portfolio planning at General Motors, said that the future of personal mobility will be connected, autonomous, shared and electrified.

GM, according to Ableson, is active in China with car sharing pilot programs. It currently is working with Shanghai Jiaotong University with 16 EN-V 2.0 vehicles operating in the campus that get 2,000 rides a month. It has also deployed a self-developed sharing program at its China campus, which is used already by 700 employees.

Abelson disclosed at a media Q&A session after his speech that currently ride sharing only accounts a tenth of a percent of total vehicle miles traveled in the U.S., so there are still a lot of opportunities left to be tapped.

 

Feng Xingya: GAC to implement “1513” strategy to elevate core competency

Guangzhou Automobile Group Corp. (GAC) will uphold the principle of “collaboration and innovation within inside, open to and cooperate with outside” and fully implement its “1513” strategy to elevate core competency and achieve sustainable development, according to Feng Xingya, executive vice president of the company.

The “1513” plan refers to one aim to build an internationally renowned, respectful and trustworthy company; strengthen and consolidate efforts in five areas: R&D, vehicle, accessory, trade service and financial service; one key task of developing home brands and breakthroughs on electrification, globalization and internet connectivity.

GAC came to the strategy after a thorough analysis of the Chinese auto market and opportunities and threats when facing the future.

Though the Chinese economy ended its three-decade long fast growth, the 13th Five Year Plan period would still witness the Chinese auto market growing from 25 million to 31 million units with annual growth rate reaching 5 percent. The number of Chinese families with annual disposable income standing at $16,000 to $34,000 would be 167 million and another 20 million near the $34,000 threshold. They would be the potential car buyers. Almost half born in 1980s and 1990s, they pursue more on differentiated service and consumption experience. Thus, businesses such as aftersales services, used car service, car rental, auto financing and insurance would boom in the near future, according to Feng.

The shift from mobility industry to service industry and coming of intruders will inevitably force traditional OEMs to compete in more areas and push for future trends such as telematics and smart technologies, and GAC cannot be spared of that, said Feng.

He suggested Chinese automakers try hard on developing home brands and expand globally.  

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