Contents - Knowledge

Report
Automotive Industry in China
General Motors
Andrew Marx
Andrew Johnston
Contents
Intro & Background
Entry into China
Competitive View
KSF’s & Industry Trends
Chinese Market Features - Impact on GM
Challenges
What we want you to Remember
Vision of General
Motors
"GM’s vision is to be the world leader in
transportation products and related services.
We will earn our customers’ enthusiasm
through continuous improvement driven by
the integrity, teamwork, and innovation
of GM people."
Company Introduction
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One of the world's largest automakers was founded in 1908.
Global headquarters in Detroit
208,000 employees in 157 countries and produces cars and trucks in 31
countries
GM Brands: Buick, Cadillac, Chevrolet, GMC, Daewoo, Holden,
Jiefang(FAW), Opel, Vauxhall and Wuling(SGMW).
Vehicles Manufactured Locally through Shanghai GM (JV with SAIC)
The Shanghai GM plant December 15 1998 (Buick first)
JV with SAIC and Wuling (microvans and 34 percent owned by GM)
In August 2009 JV with FAW to produce LDCV, and produces Jiefang
GM increased its sales in China by 68 percent to 230,048 vehicles in March
2010, outsold its U.S. sales of 188,546 by 22 percent.
GM Research and Technology Centre in Shanghai with SAIC, Green
innovation
The last emperor of China owned a Buick (Strong Brand Recognition)
Contents
Intro & Background
Entry into China
Competitive View
KSF’s & Industry Trends
Chinese Market Features - Impact on GM
Challenges
What we want you to Remember
Why JV as Entry Strategy?
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Required by Government
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GM Shanghai formed through JV with SAIC in 1997
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SAIC Motor Corp. Ltd. is the largest listed vehicle company in the Chinese A-share stock market.
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The main business SAIC include R&D, production and sales of vehicles (including passenger and
commercial vehicles) and components closely related with vehicle development (including powertrains, chassis, electronics and electric parts)
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SAIC player in automotive finance business
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In 2009, SAIC Motor sold more than 2.72 million vehicles, continuing its leading position among
major automotive groups in China. GM sold 1 001 360.
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JV makes good business sense (Cultural divide, access to market, technology sharing and
innovation)
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Very successful due to mutually beneficial relationship NB!
Recent Developments
• General Motors (GM) SAIC announced a joint powertrain
development program. Small displacement (1.0-1.5-liter)
engines and a matching dual-clutch automatic transmission
• Splitting development costs
• Produce an engine/tranny combination that is 20 percent
more efficient
• The new powerplants will be both direct injected and
turbocharged to create a 10 percent boost in fuel economy
• Partnership builds on long history of innovation and
collaboration
• Small displacement gasoline engine family targets heart of
market
Contents
Intro & Background
Entry into China
Competitive View
KSF’s & Industry Trends
Chinese Market Features - Impact on GM
Challenges
What we want you to Remember
Top 10 Competitors in China
General Motors
Sales in ‘09 in China
8%
7%
Shanghai VW
7%
15%
8%
9%
9%
Chery
17%
BYD
Beijing Hyundai
FAW VW
10%
10%
Dongfeng Nissan
Manufacturer
Sales
FAW TO
1. General Motors
1001360
Geely
2. Shanghai VW
876 180
3. Chery
605 260
Guangoi Honda
4. BYD
601 500
5. Beijing Hyundai
541 430
6. FAW VW
526 660
7. Dongfeng Nissan
494 090
8. FAW Toyota
453 280
9. Geely
390 630
10. Guangqi Honda
379 450
In 2010 GM has sold 1,976,913 units, selling
200 000 units in the month of October alone
Market Information
7%
1. Shanghai GM
5%
6%
2. Shanghai VW
4%
3. Chery
4%
Market Share
4. BYD
5. Beijing Hyundai
57%
4%
3%
3%
4%
3%
6. FAW VW
7. Dongfeng Nissan
8. FAW Toyota
9. Geely
10. Guangqi Honda
Other 42
2009 GM Owned 46% share of Small cars
6%
Car Type model Mix
5%
41%
21%
Small Cars
Basic' Cars
Mid-Size Sedans
27%
MPV's
SUV's
Products in the Chinese Market
JV with FAW: Jiefang
The Jiefang brand from FAW-GM, GM’s light
commercial vehicle joint venture, is showing
its newest product
Strategic Differentiation
Suppliers
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Suppliers of Vital importance (Quality and Cost)
Relationships are key
Conflicting Interests
JV comes in handy (SAIC produces parts, and well
connected in industry)
Quality and low cost parts result in cheaper
better cars
Proximity is key (lower distribution costs)
Reliable
Low bargaining Power
Primary Activities
Internal Value Chain Analysis
Secondary Activities
Administration & Infrustructure (Accounting) Function
Human Resources Management
Dealer & Supplier relations Management
Research
& Product
Design
Manufactu
-ring of
Parts
Assembling
&
Operations
Supply
chain
mangage
-ment
Marketing
& Sales
Customer
Service
Contents
Intro & Background
Entry into China
Competitive View
KSF’s & Industry Trends
Chinese Market Features - Impact on GM
Challenges
What we want you to Remember
Key Success Factors
Industry Success Factors
Importance Rating
GM’S Score
Competitive
Advantage
Low Operating and Production Costs
8
8
MEDIUM
R&D
7
10
MEDIUM
Economies of Scale
10
7
MEDIUM
Guangxi - Employee relationships, satisfaction, retention,
productivity
8
9
MEDIUM
Good Dealer Network
10
10
YES
Brand Recognition and Reputation
8
8
MEDIUM
Fuel efficiency
10
10
MEDIUM
Understanding Customer needs
10
10
YES
Broad Product Range
6
10
YES
Quality and Reliability
10
10
MEDIUM
Partnerships and JV’s
10
10
YES
Understanding of Local Culture
10
10
YES
Understanding regulatory and legal environment
10
10
YES
Global Reach and Experience
5
10
YES
Clear Focus and Strategy
10
10
YES
Reliable Suppliers
10
10
YES
GM Key Success Factors
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JV
Four popular models from GM’s Shanghai GM and SAIC-GM-Wuling
joint ventures finished in the top three of their respective segments
in the J.D. Power Asia Pacific 2010 China Initial Quality Study, which
was published on October 29.
Product Range
The Chevrolet New Sail ranked second in the Premium Compact
Segment.
The Chevrolet Spark ranked second in the Compact Segment.
The Wuling Sunshine ranked second in the Mini Van Segment.
The Buick LaCrosse ranked third in the Upper Premium Midsize
Segment.
Strategy and Focus
“GM's performance demonstrates our capability to design and build
best-in-segment quality,” said Kevin Wale, President and Managing
Director of the GM China Group. “This is part of our commitment
to offer the highest level of value to our customers across China.”
Important Trends and Facts
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Depleting Natural resources
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Increased environmental and alternative energy focus
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Strong competition on Innovation and quality (trying to outdo each other)
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“Copy and Improve”
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2005 Market 10 million to grow to estimated 75 million in 2015
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Increased competition due to market size, everyone is going to want a bigger share
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Overall slow-down in vehicle sales
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Tax and subsidies for small vehicles to end resulting in sales increasing during December, and slowing during first
quarter of 2011
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Rising oil prices, call for better fuel efficiency
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Growing Middle Class
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Expanding highway and road Network
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Small cars = 2/3 of total cars sold, GM = 46% share
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Vehicle Penetration = 5/1000
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In 2007 8.5 million Chinese people bought cars (5,5 mil were private, and 3 were for commercial purposes)
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52 Carmakers in China, Government focus on Concentration (International companies 85% market share)
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Foreign companies (not china based) are buying parts from china increasingly
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SAIC bought $500 000 000 worth of shares in GM
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Growth of Vehicle Market 46% from 08-09 (due to poor sales in 2008 – recession)
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Population in China 1 330 141 295
Green
• Concerns about pollution and fossil fuels deepen
• Centre for advanced auto research that will be part of a
$250 million corporate campus GM is building in Shanghai.
• Collaboration with SAIC, Government and academic
institutions about ways the country can reduce its reliance
on fossil fuels
• Chevrolet Volt (Best available electric vehicle)
• With auto sales this year up about 25% over last year's
pace, the government and consumers increasingly are
worried about environmental damage. And China is only at
the early stages of its adoption of the automobile.
Contents
Intro & Background
Entry into China
Competitive View
KSF’s & Industry Trends
Chinese Market Features - Impact on GM
Challenges
What we want you to Remember
Evolution of the Chinese Auto industry
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Stage
Description
1994 - 1996
‘Foundation stage’ – vehicles need to be made with 60 – 80%
local content
1997 - 2000
‘ Attacking difficulties’ – target outputs, development of 3 large
scale producers and basic R & D capabilities developed
2000 - 2010
‘Rapidly Developing’ – Industry to be self sufficient and
internationally competitive. Target output of 6 million vehicles
by 2010
Before the communist party came to power in 1949 there had been eight
years of war against Japan. Virtually no motor industry to speak of at the time.
1971 China rejoined the UN and fears of war began to subside
1976 Chairman Mao died
1978 at the at the Third Plenium of the Chinese Communist party, Deng
Xiaoping was endorsed as the de facto leader
1979 opened up to the rest of the world, focus shifted from Politics to
Economics
1994 selected automobile industry as one of the ‘pillar industries’ to drive the
national economy
GM Growth
Company Life-Cycle
CHINA
USA
Key : High - Medium - Low
6
Porters 5 forces
3
8
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10
Threat of New
Entrants
Bargaining
Power of
Suppliers
Bargaining
Power of
Buyers
Threat of
Substitute
Products
Intensity of
Rivalry among
Competitors
Growth Industry
Switching costs
not very high
Buyers have
many options
There are many
substitutes
The price, quality,
durability
Has reached
economies of
scale
Many Suppliers
needed in
production
Low switching
cost for buyer if
not satisfied
Public transport,
walking and bike
riding
Lack of
differentiation in
products
High capital
needs for R&D
and
manufacturing
Overheads
There are many
separate
components, thus
can source from
many suppliers
Buyers create the
industries
revenue, sales is
predominant
revenue stream
Dependant on
your geographic
location, in China
public transport
relatively good
Lots of innovation
in the market,
low cost is
primary factor of
differentiation
Access to
Distribution
Channel limited
Power lies
52 producers
primarily with the with a total car
producer
unit sales of
13million
Bike culture is
huge due to low
cost and
efficiency
Margins are low
as big growth
market, lots of
opportunity
Geographic Distribution of Producers
Distribution of Local Suppliers
Purchasing Power of the customer
• Driven by the car price relative to the household disposable
income and ability to finance or lease vehicles through
financial service providers
• Growing incomes of China, especially the emerging urban
middle class
• Far greater selection of vehicles in the market, stimulating
interest and demand
• Trend towards smaller sedan type vehicles
Demographics
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Population
1,330,141,295 (July 2010 est.)
Age structure
0-14 years: 19.8% (male 140,877,745/female 124,290,090)
15-64 years: 72.1% (male 495,724,889/female 469,182,087)
65 years and over: 8.1% (male 51,774,115/female 56,764,042) (2010 est.)
Population growth rate
0.494% (2010 est.)
Birth rate
12.17 births/1,000 population (2010 est.)
Life expectancy at birth
total population: 74.51 years
male: 72.54 years
female: 76.77 years (2010 est.)
Key : High - Medium - Low
SWOT
Strength
Weaknesses
Opportunities
Threats
General Motors today has
manufacturing operations
in 32 countries and its
vehicles are sold in 192
countries
Loose sales and revenue in
certain market places due
to very differentiated
market approach. Large
range and offering
Exposure to both
developing and developed
Nations gives them volume
and growth potential
Price wars in the market
erode market share and
revenues putting pressure
on production and labour
costs
JV with SAIC has been
mutually beneficial and
genuinely a win-win
situation for both parties
60% of all sales are small
vehicle sales with small
margins, neglecting other
high margin markets
Industry is in growing
rapidly and are well
established in the market
Lack of control of
legislation and
unpredictable changes by
the Chinese Gov
Large operations
worldwide encourage
economies of scale and less
cost per unit on R & D
spend
Resource needs are so
great that they must import
all of their steel and other
components
Opportunity to acquire
smaller companies in the
industry to increase their
market share and
economies of scale
New entrants into the
market, it is growing rapidly
and an attractive prospect
for all vehicle companies
world wide
Break down of
Production costs of GM
Contents
Intro & Background
Entry into China
Competitive View
KSF’s & Industry Trends
Chinese Market Features - Impact on GM
Challenges
What we want you to Remember
Challenges
• Tax and Subsidy Policy Changing
• 60% of sales resulting from SMGW (Wuling)
• Pending Price war (Many competitors and ever decreasing
prices, quality no more differentiating factor)
• Broad Range of vehicles (may not be able to be competitive
in price war)
• Meeting Demand (Balance growth)
• Margin on small cars THIN!
• Maintaining Sales Growth (55% higher in 2009 than 2008)
• Aggressive expansion by competitors
• Innovation theft
Intellectual Property
•The Gm Spark was released 6months later at a price of $1500 more than the
Chery QQ
•Due to more expensive assembling cost, higher price and later release the Chery
QQ outsold the GM Spark by 6 – 1.
•Incident was of particular interest as the JV partner of GM in China, SAIC, also
hold a 20% stake in Chery
•QQ filed a patent in China a year prior while GM never filled a patent for their
design in China and therefore had no claim in court
•Chery denied having copied the GM design, claiming they had developed the QQ
independently “with a little inspiration from the GM Spark”
•China's SAIC buys $500M in GM stock – 18th of November 2010
Contents
Intro & Background
Entry into China
Competitive View
KSF’s & Industry Trends
Chinese Market Features - Impact on GM
Challenges
What we want you to Remember

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