Honda Exec: Chinese and Indian Automakers Could "Blow Up The Distribution Chain"

Edward Niedermeyer
by Edward Niedermeyer
honda exec chinese and indian automakers could blow up the distribution chain

The prospect of US launches by Chinese and Indian auto brands like Tata and BYD have at least one of the established US-market players in a paranoid froth. Honda VP John Mendel revealed a few of the nightmare scenarios that keep him up at night to USA Today [UPDATE: more on Mendel’s fears at Automotive News [sub]]. One, inspired by BYD’s plans for a 2010 US launch without a distribution channel in place, is that newcomers could skip the dealer model altogether. Mendel worries that “warehouse stores or electronics stores” ( sound familiar?) could be used to cut dealers out of the loop, “blowing up” business-as-usual for US distribution strategy.

Mendel’s fear clearly owes something to the post-9/11 paranoia of asymmetrical warfare: a new enemy, exploiting its smaller size to wreak havoc on an already-fragile system. Happily for America and its fine car dealers, fears of such asymmetry are typically overplayed. An industry that lives and dies on volume isn’t likely to be dominated by a firm that rejects a large-scale, dedicated distribution network. A BYD could theoretically get a toehold by selling its EVs through some other retail chain, but there’s nothing in the history of the car game to suggest BYD could really become a Toyota-challenging global player (as it aims to) without securing a US dealer network.

Mendel’s second mania is based on a equally shrewd insight into the American psyche, specifically our love for all things disposable. Like his direct-marketing theory though, it takes the insight a little too far. The prospect of a US-market version of a Tata Nano has Mendel worried that Americans could become accustomed to the concept of a “disposable automobile,” to the detriment of established players like Honda. He quails:

If you’ve just spent a few thousand dollars on a car, and it needs repairs, maybe you won’t fix it. Maybe you’ll decide you want a new one in a different color, and just get another one.

Maybe. Or, maybe you’ll decide you’re tired of driving a Kei car and buy something that can go faster than 70 MPH. Besides, a US-market Nano would still cost well over $5,000, which is probably enough to discourage too much disposable car mania.

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  • John Horner John Horner on Jan 14, 2010

    One problem any newfangled seller of automobiles faces is how to deal with the trade-in problem. I suppose they could simply sell all of their trades to CarMax or at auction though.

  • Stuki Stuki on Jan 15, 2010

    How wonderful wouldn't that be! Buy a car from anyone, anywhere, without having to worry about dealer this and dealer that. I can see American Honda, which is already stuck in idiotic contracts with politician sponsored (or was it the other way?) car dealers being a bit worried, though. For the rest of us, regulatory arbitrage is always a good thing, just as it was when the Japanese brands "circumvented" the UAW. As pertains to disposability, the more cars rely on rapidly changing and changeable electronics and software, the shorter their reasonably up to date shelf lives will become. And if necessary electronics becomes what's limiting cars' longevity, over engineering the mechanicals becomes simply a waste.

  • Bob65688581 Small by American standards, this car is just right for Europe, and probably China, although I don't really know, there. Upscale small cars don't exist in the US because Americans associate size and luxury, so it will have a tough time in the States... but again Europe is used to such cars. Audi has been making "small, upscale" since forever. As usual, Americans will miss an opportunity. I'll buy one, though!Contrary to your text, the EX30 has nothing whatsoever to do with the XC40 or C40, being built on a dedicated chassis.
  • Tassos Chinese owned Vollvo-Geely must have the best PR department of all automakers. A TINY maker with only 0.5-0.8% market share in the US, it is in the news every day.I have lost count how many different models Volvo has, and it is shocking how FEW of each miserable one it sells in the US market.Approximately, it sells as many units (TOTAL) as is the total number of loser models it offers.
  • ToolGuy Seems pretty reasonable to me. (Sorry)
  • Luke42 When I moved from Virginia to Illinois, the lack of vehicle safety inspections was a big deal to me. I thought it would be a big change.However, nobody drives around in an unsafe car when they have the money to get their car fixed and driving safely.Also, Virginia's inspection regimine only meant that a car was safe to drive one day a year.Having lived with and without automotive safety inspections, my confusion is that they don't really matter that much.What does matter is preventing poverty in your state, and Illinois' generally pro-union political climate does more for automotive safety (by ensuring fair wages for tradespeople) than ticketing poor people for not having enough money to maintain their cars.
  • ToolGuy When you are pulled over for speeding, whether you are given a ticket or not should depend on how attractive you are.Source: My sister 😉