How many industry experts can picture the Wuling Sunshine, the world’s best selling vehicle? Registrations for March are not yet available but Chinese market sales of this micro-minivan in January and February 2009 were more than double what the US number one light vehicle, the Ford F-Series, managed. The SAIC GM Wuling joint venture can barely keep up with demand, thanks mostly to sales in rural areas. Contrast that with the huge incentives Ford needs to keep adding to its giant F-Series pick-ups to keep them selling.
It’s ironic that amongst the welter of new models at the current 2009 Shanghai motor show, both Ford China and Wuling had few novelties. Like the most profitable OEMs of today; Porsche, Volkswagen, BMW and Honda, what the leading firms of tomorrow know is that a relatively small number of highly-focused brands and models is what helps make a company successful.
It’s easy to be dazzled by the bright lights of China and equally, despairing for the future of Ford but consider this: at some point, the US economy will start to recover and Ford should be perfectly placed to reap huge profits, thanks to pent-up demand, low manufacturing costs and, by 2010, an outstandingly competitive product portfolio. By contrast, how many Chinese OEMs are making adequate money as the domestic market booms? Apart from Wuling, most of the players seem only to be concerned with lifting market share rather than ROI.
The majority of China’s car makers seem to be acting like Kia, Nissan, Mitsubishi, Daewoo, Mazda, Ford and GM and even Toyota in the days when each seemed to be indulging in an orgy of new models, new brands, new factories and huge R&D spending. Each eventually has had to learn a painful lesson, but when will there be a reckoning for Geely, Chery, Dongfeng, SAIC, FAW Haima and Great Wall?
The huge number of new domestic brand models at the Shanghai show – electric, fuel cell and hybrid prototypes; new divisions; ambitious concept cars; ever more self-developed engines and transmissions – should be ringing alarm bells. How is all this R&D and planned production being paid for and will any of these models deliver healthy profits? Most observers look on, seemingly in awe of the plans of Chinese OEMs, but not really seeing what’s going on. Brand-building is starting but there is little definition of what’s what.
How will the consumer understand what distinguishes each of the many new Riich, Rely and Karry vehicles when many of them are the rebadging of existing Chery models? This is a needless, profit-hurting expansion of an already bloated model range. Geely and Great Wall have also fallen victim to this ‘bigger is better’ myth.
One of the many factors that caused GM’s North American operations to become awash with red ink was the refusal by management to recognise that too many brands were chasing the same customers. As the philosopher George Santayana’s disputed but nevertheless insightful quote has it, “those who cannot remember the past are condemned to repeat it.”
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.