On Sunday, April 20, 2014 I attended Press Day at the Beijing Auto Show. This was the last day of an intense week of meetings across China, talking to management of auto companies and doing channel checks with auto dealerships.
I visited the Shanghai Auto Show last year (Shanghai and Beijing alternate years for hosting) and my impression was that the level of interest and crowd in attendance was comparable.
The Beijing Auto Show was held in a large exhibition space close to the international airport. It was organized in seven large exhibition halls showcasing passenger vehicles and interspersed by outdoor space used for tire makers and accessories stands. Outside, close to the main parking lot, commercial vehicles were on display. Nearly all of the Chinese and international auto industry is represented at this show.
The Chinese Light Vehicles market is huge, surpassing 20 million units per annum (passenger vehicles only) and continues to by grow double digits. In fact, at current growth rates, the Chinese market will double in 7-10 years and will be larger than the U.S., Canada, Europe, Russia, and Japan combined.
It’s no wonder why all the global manufacturers are in China and why companies manufacture vehicles in China to reduce costs and avoid import tariffs. Imports are growing slower than the market and, eventually, only niche products will be imported (e.g. Ferrari, Lamborghini, etc.)
The government has mandated that foreign and local companies join forces to manufacture vehicles in China and all the foreigners have established joint ventures (JV) to localize their products in the country.
The JVs are very successful because Chinese consumers increasingly buy foreign-branded vehicles and continue to shift demand towards luxury cars and SUVs. Minivans and domestic brands are seeing their market share eroded over time.
Chinese consumers generally like big, comfortable vehicles embellished by a prestigious brand plate. It seems that performance, fuel consumption and handling are much less important. Safety is becoming more relevant to consumers in recent years.
The passion for big vehicles is adequately supplied by global manufacturers that sell extended wheelbase versions of their products in China. The BMW 3, 5, and 7 as well as Audi 4, 6, and 8 and Mercedes C, and E all have the “L” version made specifically for the Chinese market. The extended version looks fine and has acreages of space but the handling is not comparable to the “normal” version, but handling does not sell cars in China, size does!
The Press Day at the auto show was well attended and the crowd concentrated around the three German luxury brands: Jaguar, Land Rover and Great Wall.
Great Wall is a local, privately-held manufacturer (unlike many Chinese auto companies that are state-owned enterprises) and is based in Baoding, outside Beijing. Its claim to fame is its ability to gain sales close to 1 million vehicles per annum by being the leading SUV manufacturer in China.
During the show, Great Wall unveiled its new H8 (a large SUV with a size comparable to a BMW X5) and the H2 (a smaller SUV comparable to a BMW X1). It also presented the H8 Coupe, a nice SUV designed by an international team based in China. Many companies have design bureaus outside their home country (e.g. Hyundai in Germany) and Chinese manufacturers are implementing a similar setup.
The most impressive display of strength was the Volkswagen group that occupied an entire hall. Inside, visitors could enjoy a comprehensive display of VW, Audi, Porsche, Skoda, Lamborghini, and Rolls Royce vehicles. All eyes pointed at the newly launched Porsche Macan which is believed to sell very well in China.
Overall, the Beijing Auto Show was impressive enough to represent the might of the largest auto market in the world and has become the most important venue in the global sector.