Chinese Auto Market & Product Development

The luxury car sales in China increased 80% (YTD) compared with last year, vs total car sales increase of 38%.

Toyota is projecting the light truck market will pick up in the near future (within 4-5 years) based on the reasoning that Chinese rurual income is increasing.

The mid-size sale is projected to growth from roughly 5 million now to 10 million in 2012 . The projection possiblely is a bit too aggressive. Conservatively estimating, it should reach 7-8 million by then. The middle class is growing with the Chinese economic growth.

The market is there. With a big market like this, no company could afford to go without a local product development team. The time of simply bringing in a model developed for American or European market has gone. Lessons should be learned from the US market. All of the big foreign players, Toyota, Nissan, Honda, Hyundai, has American R&D center. The even have design studio at California. It's very obvious that the only an existance of local development team could capture the markets trend and cash in that trend.

GM has established with SAIC a R&D center, which is playing some roles in cutomizing Cadilallc. A Cadillac SLS model is introduced in Beijing Auto Show 06. It has the exact same underpinning with its US cousin, SLT. The interior is changed a lot, the back seats to be specific, to adapt to the fact that the rich people in China usually has a chauffer to drive for them.

There are two groups of Chinese plays in the field of Chinese auto market: Domestic and Joint Ventures. Chery and Geely are representatives of domestic players. Limited by skills, they are competing in the low entry level market relying on re-engineering (reverse engineering) development. They are accumulating experience, techology and skills very fast. They are quick learners. The are starting to grasp the critial abililiy of engine, transmission, even hybrid development. When they are getting more and more mature, they will expand their product line and mix, change their offensive frontier to middle and entry level luxury segments.

Joint Ventures are starting to develop self-development capabilities. But limited by their natures, they are only developing some kind of complementary skills. They will rely most on their parents' develoment center aboard. Wait to see. Is that possible that the Joint Ventures develop the whole vehicle for the Chinese market? Like Ford Europe? and GM European Operation, and Toyota NA? It's possible after their market share grows to a point.