Chinese carmakers turn to innovation amid a slowdown
Guillaume Saint says the Chinese car industry has begun the search for a true competitive edge, notwithstanding the current slowdown
Not long ago, Chinese car companies were characterised by their blatant copycat designs of Western brands. This is now changing. They have learnt from their peers, benefited from government support and developed highly efficient technologies to design and produce cars.
China's top car companies are narrowing the gap with international brands, and today they aspire to lead the direction of the global auto industry, rather than just being followers.
After years of growth, however, we have seen a major slowdown of new car sales in China. The China Association of Automobile Manufacturers recently cut its growth forecast for 2015 vehicle sales from 7 to 3 per cent.
This slowdown is partly due to reduced confidence in the economy and the stock market fluctuations. Restrictions on car purchase and usage in major cities have also been major factors.
Will this slowdown help separate the wheat from the chaff in terms of local car brands that can offer true innovation? Certainly brands are being forced to find new ways to get noticed.
Innovation in technology, quality, design and communication will be key to domestic manufacturers gaining a competitive advantage. By technology, I'm not just referring to the arrival of mainstream models by Haval with features to match those of premium brands like Mercedes-Benz or Audi. This is a much wider opportunity, as seen by Changan's research and development centres in China, Japan and Italy, which are working round the clock to integrate new sources of inspiration. It's about finding energy vehicles of the future, exploring technologies such as hybrid, plug in, all-electric or hydrogen, for example.
The gap in quality and reliability between Chinese domestic brands and international ones is also narrowing - another sign of China's auto market maturing.
Progress has also been made in terms of design and styling consistency across the portfolio. The latest models from Haval, Geely, Changan and BYD have shown that these brands are capable of designing highly attractive body styles.
Finally, we are seeing brands promoting their innovation. BYD is introducing a new currency to replace the traditional engine size car badges. Instead of using litres, the BYD Tang displays the number of seconds needed to go from 0 to 100km/h. This gives a clear and powerful explanation about the car's performance.
If domestic players really want to claim a leadership role, they have to innovate. In today's price-sensitive market, they should also focus not on cutting prices, but on adding value.
Guillaume Saint is managing director of automotive (Asia Pacific) at research consultancy TNS