Review of Chinese Automobile’s Overseas Expansion

By Roomy

Edited by Zhou Changxian

Looking back at China’s automotive industry’s overseas expansion in recent years, I would describe it as “confused and cruel.” At that time, China’s automobile industry barely understood how to produce cars and yet saw ambitious seekers of gold coming from abroad with the desire to dominate the global market, these seekers began to dominate the Chinese domestic market, slowly becoming the kind of sharks that swallow up everything in sight. With dreams of dominating the entire automobile industry, China’s fledgling car industry believed that they had the potential to measure up to the likes of Volkswagen, General Motors, and Toyota in terms of global expansion.

China’s car industry rushed into the global market, without fully understanding it merely shouting loud slogans. As we all know now, due to the lack of deep cultivation and operation of overseas markets, the valiant initial batch of Chinese automotive companies’ ambitious dreams were shattered, leaving behind plenty of bloody lessons. This was known as the “export” 1.0 era.

If you don’t know anything and blindly rush around, the result will inevitably be “confused and cruel,” leaving behind only a handful of survivors amidst a thousand failures. So, after more than ten years of accumulated experience, does China’s auto industry now know how to expand overseas?

After listening to the words of Zhao Aimin, Secretary of the SAIC International Committee and Deputy General Manager, I feel that the answer is “yes and no.”

This statement isn’t contradictory, but rather has two meanings: one part of the car companies understands, while the other part remains ignorant; and secondly, only certain markets are understood, while many others are not.

We acknowledge that Chinese car brands possess a strong sense of national sentiment that is inherent. As Wei Jianjun, the steward of Great Wall once said, “Create a car that drives towards the world and allows the world to recognize the quality of Chinese automobiles.” Similarly, Li Shufu of Geely and Yin Tongyue of Chery are heroes with dreams, and within their chests runs a passion that drives them to accomplish their goals or die trying. They wish to use a “global car” to push Chinese automobiles onto the world stage.

What a wonderful phrase “global car” is. These pioneers of China’s automotive industry, who were struggling to survive, to those that have sharpened their skills, at some point or another have envied Volkswagen’s Golf, and coveted Chevrolet’s Cruze.

Wei Jianjun once dreamed of making the third generation of Haval H6 a global car, and Li Shufu hopes that Borui could lead Geely to “travel around the world.” However, most of the time, reality is not so easy to make one’s dreams come true.

Even with the development of new energy vehicles and the Chinese vehicle industry’s transition from “export” to “expanding overseas,” up until now, China’s automobile industry still has not produced a mature and highly acclaimed global car of its own.

The reason behind this is simply that, although they may have understood some aspects of the market, they haven’t understood others entirely.## The beginning of Global Cars, following local customs

How difficult is it to create a global car? How can Chinese car brands create a global car model?

SAIC Motor, which began preparing for the “going global” strategy in 2011, hopes to answer these questions on their own. Of course, the ultimate success depends on long-term tests.

The definition of a global car is simple, which is a vehicle model sold in multiple countries and important markets worldwide. For example, Golf, Corolla, and Focus were typical representatives of global cars in the era of fuel vehicles, carrying brand reputation and global sales.

So what are the standards for a global car?

First of all, quantity matters. The premise of quantity involves the competitiveness of the product itself and the value chain system of global enterprise layout.

In other words, global market demand must be considered in the product development process under the support of globalized development resources and systems. It is not just about selling and being done with it. This was a problem during the era of “going global 1.0”.

The concept seems simple, but when it comes to execution, it can be quite difficult. Zhao Aimin said he has been struggling for a long time.

From the very beginning, SAIC aimed to make the MG4, or MG MULAN, a global car. Therefore, in the initial stage of product definition, the focus was on global consumers, integrating the needs of global customers or mainly European customers on the input side.

It may seem like a simple concept, but in reality, it is extremely difficult to execute. There is a lot of detail work required, such as market research and market adaptation. Zhao Aimin gave some examples: “The UK does not want sunroofs, Australia wants sunroofs, the UK does not want cameras,” and many other differences in car concepts and usage scenarios, which can be completely opposite in some cases.

However, there are countless different market demands, what should be done? Joint ventures entering the Chinese market must pay attention to “localization,” and Chinese cars going global must learn to “follow local customs”. It is necessary to slowly understand and learn.

“When we go to a place to do business, why should others pay for your product if you are unfamiliar with their needs?” Zhao Aimin said. The premise must be to respect the local market and consumer habits.However, it is important to know that methods matter. Relying solely on personal guessing will only result in frustration. Just like Toyota’s Corolla, under the umbrella of global car identity, the market demand has been refined, differentiated into the European, American, and Japanese versions.

“To have a car that can be as popular as the Golf model in Europe, in the future era of electrification around the world, was our original intention,” said Zhao Aimin. Based on this initial intention, SAIC almost spared no effort in creating this global car.

Developed in accordance with the European five-star safety standards, with the unique structural design based on the SAIC Nebula Pure Electric Exclusive System Platform, integrated with youthful sports genes and pure electric elements… In addition to these product hardware, SAIC has also put in a lot of effort in many aspects.

For example, the use of ADAS functions. “SAIC’s ADAS is a truly global ADAS and is a full-featured module. It’s not just a simple comparison of a configuration table. The roads in the UK are different from those in Europe, and ADAS needs to be reconfigured. The road signs in Italian and English are different, and need to be adapted accordingly. Therefore, we need to expend great effort to do these things.”

During this process, SAIC invited overseas dealers, and local partners continuously discussed, overturned and discussed again… selecting the features that local consumers might be most interested in, and then the technical center made adaptive improvements to the vehicle.

After testing the MG MULAN, the British car magazine Car-Magazine gave a good review, stating that “MG has produced a desirable car, definitely one of the bigger surprises of 2022.”

It is precisely because of this good reputation that, including the MG MULAN, all SAIC Group models for foreign markets are already being sold in nearly 100 countries. Sales exceeded 1 million units last year, and will reach 1.2 million units this year. MG MULAN’s sales are expected to exceed 150,000 units this year.

“For going abroad, we must have a very strong spirit to do this, and we must be imaginative when formulating plans,” Zhao Aimin said.

Of course, this is just the beginning of becoming a “global car.”

Charge forward, without singing praises.“`

“We’re not at the level of international big brands yet, and our brand power is not at that level either. But we know what we want and where we’re going, and we’re very confident,” said Zhao Aimin. This confidence comes from SAIC Group’s industrial chain system, something that currently not all domestic OEMs possess. “The support capability of the SAIC system ensures that we can do well in every market, at least steadily and step by step without too much concern. This is crucial.” As for how this system is built, and how cars are transported overseas and how to lay out the overseas market, this is a matter of different opinions. SAIC Group began developing global cars and diving into various markets seven or eight years ago, after addressing questions like “Is the product ready? Are people ready? Is the ideology ready?” As they continued meticulously in this system, what achievements have they made so far? “Europe is profitable, Mexico is profitable, South America is profitable, the Middle East is profitable, Australia is profitable, and basically all major markets are profitable. Because we’ve been doing this for 3-5 years, we should make money too.” Of course, Zhao Aimin also admits that these are just temporary achievements and there is still a long way to go before becoming a true “global car”. Becoming a “global brand” is even more difficult, and it’s not something that a single car can achieve. This is not only SAIC Group’s responsibility, but also the responsibility of Chinese car companies. It’s undeniable that Chinese cars are entering the era of going global. Apart from new brands like NIO, XPeng, and Voyah, old carmakers like SAIC, Geely, FAW, and Great Wall have gathered in Europe with new products and new technologies, hoping to compete with global giants on a level playing field. The common path for many domestic carmakers is to first set foot in Norway and then use this as a springboard to conquer Europe. “Participating in global competition” has been a wish for many years, and generations of people have been striving for it. “For Chinese brands, only by becoming a ‘global brand’ can they win,” said Zhao Chuanzhang, the project manager of Lisi’s strategic positioning consulting project. However, the reality they face is that electric cars, which are very popular in the Chinese market, have a difficult start in Europe and their sales in Norway are not ideal, so they can only focus on the Asia-Pacific market. For example, small tech-savvy carmaker XPeng has not been able to produce enough volume in Europe because they couldn’t accurately grasp the needs of Europeans. ”
“`

Zhao Aimin also mentioned in an interview that many consumers overseas will not choose Chinese electric and intelligent technology. For instance, many physical buttons have been replaced with APP menus, and consumers have feedback that “it is too complicated and hard to find.”

Helplessly, SAIC Motor reserved nine buttons on the MG MULAN model based on the driver’s habits, and the layout of which buttons on the left and right sides were fully considered.

“Chinese independent car companies have not succeeded in going overseas, especially high-end brands,” said a market analyst. The current overseas sales have not truly opened up. Lu Fang, the CEO of Voyah Automobile, also stated that “selling only a few hundred cars is not truly going overseas, and some models directly transplanted to Europe have not had a good effect.”

Although Zhao Aimin is happy that one out of every three “Chinese cars” sold overseas is made by SAIC Motor, he is also cautious. Every week, he has four-hour meetings with the product team, hoping that SAIC Group can make a “sample of Chinese cars going overseas” to help Chinese cars explore the global market with fewer detours.

In Conclusion:

Going overseas is a long-term process of exploration for Chinese cars, and everything is still in its infancy. Zhao Aimin sincerely hopes that competitors can “do more and say less.”

His concern is not without reason.

Recently, the Turkish government announced that it will impose a 40% tariff on new energy electric vehicles imported from China, which is aimed at Chinese car companies’ entry into Europe. Turkey produces 1.5 million cars per year, of which 70% to 80% are exported overseas, mainly to Europe. This conflicts with Chinese car companies’ strategy of taking over Europe.

“After a government meeting, all tariffs were increased by 40%, so what was the result? Our peers must be stunned. Electric cars drifting on the sea will suddenly increase high tariff costs. What can we do?”

Finally, Zhao Aimin gave competitors five words, “advance fiercely, but don’t sing high.” In fact, this is the attitude that all overseas car companies should maintain before becoming global cars and brands. Only in this way, can we avoid repeating the “confusion and cruelty” of the past.# 汽车分类

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This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.