China to Foreign Automakers: Yankee Go Home!
It’s an open secret in Chinese industry circles: within the next six to eight years, the domestic auto industry wants to stand on its own technological feet, instead of relying on U.S., European and Japanese joint venture partners. At after-work hangouts, such as “ Schindler’s Anlegestelle” around the corner from Volkswagen Group China’s headquarters in Beijing’s bar and embassy district Sanlitun, fare-well parties for managers heading home are already decreasing. In the name of the almighty efficiency, most foreigners have already been replaced by supposedly cheaper Chinese. And now, no more pussy-footing around. According to Gasgoo.com, which read it in the Beijing News, which cited a faceless industry analyst, Chinese industry giant FAW is “focusing its human, financial and material resources on making cars of its independent brands.” The joint venture partner of Volkswagen, Mazda, and Toyota “aims to sell two million vehicles by 2010, and half of them must be FAW’s own-brand vehicles.”
In 2007, FAW sold 1,465,000 vehicles, which include 620k own-brand vehicles. According to China Knowledge, the FAW Group reported very robust auto sales growth of 17.1 percent for the January-September 2008 period. However, their own-brand vehicles are overweight in the commercial sector; passenger car output is dominated by joint venture models. From January to September, FAW sold 382,845 VWs (and Audis), 283,464 Toyotas, and 90,485 Mazdas. Even FAW’s “own brand” models are mostly based on foreign platforms.
In related news, FAW has announced that they will fold their own and formerly illustrious “Red Flag” brand for good, and rename it to “Shengshi” (“Days of Prosperity”). Chairman Mao’s ride, repositioned as a capitalist’s tool. The Red Flag brand had anemic sales of 788 units in the first six months of 2008. Its flagship HQ3 is based on the Toyota Majesta. New models in the “Days of Prosperity” lineup will be developed by the Austrian engineering house Magna Steyr, designer of Mercedes-Benz’s “4MATIC” and the BMW X3. As hard as the Chinese may try, some foreigners will be around for a while.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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"the risk of your venture being nationalized on a whim and/or your ex-pat employees being tried and convicted of whatever the government can make stick." That's Russia, whom has a bone to gnaw on vs. the West. I don't think there are any examples of that in China. It's obvious to anyone that's walked in the central business district in Beijing, that there are tons of US/European companies making big bucks in China. Funny that you mention Sanlitun, it wouldn't exist if it weren't for the rich expat community. And not just rich relative to the local population, rich compared to the average Joe in the US. When those expats return, they aren't driving a Malibu.
“the risk of your venture being nationalized on a whim and/or your ex-pat employees being tried and convicted of whatever the government can make stick.” Exactly. Got the countries confused. Foreigners are being treated like royalty here. This may sound like heresy, but heck, I've always been a heretic: I have lived and owned businesses in Europe, in the USA, and in China. On all three continents for a long time, successfully, and intensively. Nowhere have I experienced more freedom and less interference than in China. In Europe, you get taxed, regulated, and controlled to death. In the US, lawyers make your life a misery once you make some money. Don't dare to get married or sell auto parts. If you love capitalism, you'll adore China. They say "Happiness is an American house, a Japanese wife, and a Chinese cook." Hey, I traded in the house for the other two. And thank God, I did it just in time, two years ago .....