Auto sector growth sustainable
By Luo Man and Alexander Wan


China's auto industry is growing up, but the enormous profit margins of yesteryear may be gone forever, said a group of CEOs and industry watchers at the 10th CEO roundtable, with the theme "Auto China," organized by China Daily in Shanghai Thursday.



Instead, the Chinese auto market of the future will take more of its profits from derivatives, like financing and post-sale products, than directly from production.

"Market growth over the years will continue slightly ahead of GDP growth," said Dr. Christoph Stark, Honorary Chairman of the roundtable and President and CEO of the BMW Group in China. However, "the one thing we all agree upon... is that those days of high profits, for the time being, are over."

"I see generally the trends of a maturing market," said Stark. "I think the market will become more similar to... markets in other parts of the world."

"Everybody still sees (China) as the most attractive market and nobody wants to miss out," Stark said. "Everybody is holding on for the China magic to come back."

But the magic, while not altogether gone, is fading and the industry, instead of racing forward with its pedal to the floor is proceeding at a slower, but steadier, speed.

The tide of mergers and acquisitions, price fluctuations, new models and new companies is likely to continue for a while though.

"Has the Chinese bubble burst? Our view is that the bubble is a long way from bursting in the next five to ten years. We have quite a bullish view in the longer term," said Paul Gao, a partner at consultants McKinsey and Company China.

However, the huge profit margins of 2002 and 2003 have probably gone for good, Gao said.

Three main factors are likely to determine the future growth of the auto industry: Deregulation, infrastructure and consolidation.

These are likely be affected by other factors, such as environmental protection and China's huge employment needs, which may pose a challenge to the immediate growth prospects of both Chinese and foreign manufacturers.

"It's a hot topic in China right now. Perhaps the hottest topic," said Stark. "To my mind one word keeps coming up and that's change."

Growth

If one wanted to describe the Chinese auto market with a single word, then fluidity might best fit the bill.

According to Stark, change is the mainstay of the market, both in growth rates and market share.

"We have an almost dramatic increase in new companies and new models. Anyone who has been to the Shanghai Auto Show can see that," he said. The Shanghai Auto Show ends today and has brought together just about every auto manufacturer in the world. "I think now we have the largest number of manufacturers in China worldwide."

Stephanie Koenig of Internationaler Messeund Ausstellungsd GMBH, organizer of the Auto Shanghai 2005 Show, agrees," For the first time we've seen major global brands coming in as groups. We've seen a lot of new technologies, products and concepts displayed at this A level show."

At the same time, local companies are following the Korean model of developing local and foreign markets simultaneously.

However, one of the challenges for automakers may well be developing new business models that combine both growth and profitability.

"Mass market brands in other markets have done a very good job in destroying shareholder value, by achieving growth without profitability," said Gao.

"The question for many of them is what are they doing differently in China to ensure they are achieving profitable growth. Unfortunately, most of these companies are not doing anything different."

He said a quantum leap is needed in the industry, like the two during the last century that caused shifts in the auto market paradigm.

The first, Gao said, was the development of mass production by Henry Ford. The second was Toyota's innovative production system, which ensured reliability and elevated Japanese auto makers to the world stage.

"Unless (Chinese manufacturers) can figure out the third revolution in the auto industry... they will never be able to catch up," Gao said. "They don't have the required capacity to play the same game."

Foreign automakers also face different challenges in coming years.

 
China Daily CEO Roundtable

 

Roundtable celebrates its first anniversary

Yesterday heralded the first anniversary of the China Daily CEO Roundtable events, an initiative from China Daily to promote collective learning among CEOs of multinational companies on strategic business and economic issues in China.

Following the success of the previous nine roundtables held in Hong Kong and Beijing, yesterday's roundtable was the first to be held in Shanghai .

With a theme of "Auto China", the 10th roundtable was held on the last day of Auto Shanghai 2005 and focused on strategic issues relating to all aspects of China's automobile industry. Over 35 CEOs and senior executives from the global players in automobile manufacturing, components, technology, logistics, finance and consulting participated.

It was probably the first such event of its kind in terms of focus, seniority and relevance.

China Daily CEO Roundtables are positioned as a platform for CEOs and senior executives of the world's largest companies to address and share executive insights, working practices and management experience that is relevant to their operations in China. Attendance is by invitation only and the delegates make up a who's who of their respective industries or organizations. Leaders from governments, academic life and NGOs are also invited to share their thoughts on policy and market development issues. The hope is that the delegates will become members of a unique network sharing knowledge and expertise in China business operations.

So far, over 300 CEOs and senior executives have taken part in the previous 10 roundtables, which have covered a broad spectrum of topics such as macro economics, regionalization, finance, lifestyle, branding, entertainment and the automobile industry.

Future CEO roundtables events include:

May 13, Corporate Social Responsibility in China, Beijing

May 16-18, CEO Roundtable/FORTUNE Global Forum Supplement: "Growing with China", Beijing

June 24, Asia News Network Editors and CEO Summit, Beijing

July 8, China Banking, Shanghai.

For enquiries about invitations, strategic partnerships and customized events, please email Alexander Wan, Executive Director, China Daily CEO Roundtable at: alexwan @chinadaily.com.cn

 

 
Copyright 2004 by Chinadaily.com.cn
All rights reserved.
 

The 10th China Daily CEO Roundtable

 
 
Honourary Chairman
 
 

Dr. Christoph Stark
President and CEO BMW Group Region China

 
     
 
Host Chairman
 
  Madam Huang Qing
Deputy Editor-in-Chief, China Daily
 
     
 
Moderator
 
  Mr. Alexander Wan
Executive Director, China Daily CEO Roundtable
 
     
 
List of Delegates
 
Name Campany   Title  
Mr. Ooi Hoeseong
AFG Trust Regional CEO Asia  
Mr. Joel L. Epstein American International Group, Inc (AIG)
AIG country manager, China  
Mr. Michael D. Laske
Chief Representative AVL LIST GMBH President, AVL LIST GmbH-China  
Mr. Abehard Schrempf

BMW Brilliance Automotive Ltd. President and CEO  
Ms. Ma Jinghua
BMW Brilliance Automotive Ltd   Senior Manager, Public Relations  
Mr. Freeman H. Shen
President BorgWarner China  
Dr. Peter Kilgenstein
Bosch (China) Investment Ltd. RBCN/EO Executive Vice-President , Original Equipment Sales  
Professor Zhang Jianwei
China Automotive Technology & Research Center Vice-President  
Dr. Wayne W. J. Xing Ph.d. China Business Update/CBU-Auto Editor, publisher  
Mr. Thomas Appelt
Coming (Shanghai) Co, Ltd General Manager -China, Environmental Technologies  
Mr. Li Ting CTS Corporation Director of Sales & Marketing - China, Automotive Products  
Mr.Kurt Fasser
Delegation of German Inudstry & Commerce Shanghai Senior Advisor  
Mr. Ted T. Lee Deloitte Touche Tohmatsu CPA Ltd Managing Partner, Global Client Services, Assurance and Advisory Services  
Dr. Dominik Declercq European Automobile Manufacturers Association Beijing Representative Office Chief Representative  
Mr. Richard Lee
Ferrari Mascrati Cars Int. Trading (SH) Co. Ltd Chairman & CEO  
Mr. Marco Anchisi
Ferrari Mascrati Cars Int. Trading (SH) Co. Ltd General Manager  
Mr. Joseph A. Gasan   Gasan Group of Companies   Chief Executive  
Mr. Ashvin Chotai   Global Insight   Director, Asian Automotive Inudstry Research  
Mr. Tiger Tang   Guangzhou Economic & Technological Development District   Vice Director of Forign Direct Investment Promotion Office  
Ms. Stephanie Koenig   International Messeund Ausstellungsdienst GmbH   Project Manager  
Ms. Karen Chen   Lamborghini Shanghai   Executive Director  
Mr. Wu Wei, Ph.D Lujiazui Function District Administration of Shanghai Pudong New Area Deputy Director  
Mr. W. Keith Lomason II Manga Automotive Technology & Service (Shanghai) Co. Ltd Executive Director  
Mr. Paul Gao McKinsey & Company, China Principal  
Dr. Zhao Hua Wang Michelin (China) Investment Co., Ltd Vice-President, Government Relations & Legal Affairs  
Mr. Alexis Vannier PSA Peugeot Citroen Press Relations Manager China  
Mr Alfred Wewers Thyssenkrupp Ag. P. R. China Representative Office Chief Representative for P. R. China  
Mr.Ken McCall TNT China Chief Executive Officer, China  
Mr. Xiangzhong
Qian
Valeo Group China Headquaters Marketing Manager  
Mr.Zhou Li China Daily Group Director, Editor's Office  
Mr. James Leung China Daily   Chief Advisor, Shang News Center  
 
Photos