Impressions from the Auto China 2014

Before this years Auto China there was stronger than usual trend to point out the accelerating decline of local carmakers. And indeed， if we look at the numbers there are serious reasons for concern. In the first quarter of 2014 the sales of local carmakers declined by 1% to a total of 1.2 Million vehicles. Sales of passenger cars in January and February showed an even steeper decline between 25% and 50 %， which translates into a loss of market share for domestic carmakers which now only account for 22.5 % of all passenger cars sold in China - a historically low number and a shocking drop from the relatively constant 30% domestic brands held just one year ago.Many of the new models which were announced at last months Auto China give reason to hope that this trend can be if not reversed at least slowed down.

Among the many new product introductions in Beijing we could identify a few underlying trends：First， the growing influence of Chinese tastes into product design. This year Nissan joined the group of major OEMs who not only "produce in China" but also "Design in China". With its"Lannia" Nissan stressed the work of its local design center in developing the next generation of its cars and even goes on record stating the clear intention of exporting the Lannia to other markets. But Nissan is far from being the only major OEM this year to highlight its Chinese design work. During its keynote Volkswagens head of Design， Mr. Klaus Bischoff， repeatedly stated his collaboration with the local design centers in conceiving the next generation of Volkswagen vehicles， the standout vehicle being the NMC， the "New Midsize Coupé" study.

Second， by looking at the most recent cars from local carmakers such as GAC， BYD and Changan it becomes clear that the time of catching up is coming to an end - both in terms of styling and technology. While in past Auto shows local carmakers were belittled by the foreign media and competition for merely copying foreign designs while neglecting essential product characteristics such as safety and technology， judging from this years media reception the tone is shifting in favor of local carmakers. Changan received praise not only for its sleek design of its new SUV range， but especially for its technology advances in powertrain such as aluminum clutch housing and TDI engines， which put it on equal footing with western OEMs. Cherys new design direction under James Hope， the former head of design at GM， also give credit to its often touted"new way of developing vehicles".endprint

Third， the rising ambitions of Japanese carmakers in China， with Toyota being its most aggressive proponent. During its keynote Toyota trumpeted its goal of selling 2 million cars per year in the near future， almost double its sales figures in 2013 which stood at 1.1 Million vehicles. Nissan， the largest Japanese OEM in China， aims for a 15% sales increase this year， whereas Honda aims even higher with an estimated growth of 19%. While many foreigners wonder about these sales targets ， especially given the political noise in recent years， the revival of Japanese ambitions comes as no surprise： Last November a large Keidanran delegation，Japans most influential industrial lobbying group， visited China with the aim of smoothing out business relations. Auto China 2014 serves as a good indicator that this trip played out very well.

Fourth， the battle for market leadership will push Volkswagen， the newly crowned number of the the Chinese auto market as of 2013， and GM even further to introduce cars at lower price points. The Baojun 730 which was premiered at the show and priced at only RMB 70.000 is guaranteed to be hit among customers and very well has the potential to lift GMs sales， together with the refreshed Wuling Hongguang， to the top spot again. Volkswagen on the other hand no longer makes a secret of its ambitions to introduce a low-cost brand especially for the Chinese market. Mr.Demant， the project leader， stated that the first vehicles can be expected for fall 2016 and aim for a price point of EUR 7.000. However it remains to be seen if the targeted 8-10% profit margin can be achieved.

Fifth， similar to every single car show since 2009 the abundance of EV and （P）HEV vehicles. Sadly most carmakers still leave the impression that they treat electric vehicles as something forced upon them from the government or top management and not as an unique opportunity to push their brand further. This years most interesting model was the Denza of Shenzhenbased BDNT （BYD Daimler New Technology）. While the car itself looks very appealing its price point of RMB 369.000 will make it very difficult to grab any significant market share， especially as it is marketed under the new brand name and thus cannot benefit from Daimlers brand cachet. Further dampening the enthusiasm for the Denza is the announcement that sales will be restricted to China. This leaves the impression that we are here witnessing not a ambitious breakthrough product such as Tesla， but merely another project aimed to please local legislation.endprint

The Auto China 2014 proved again that China will remain the most competitive automotive market for the near future. While it is encouraging to see that local carmakers are rising up to the challenge on product side， we cannot ignore the branding situation of most OEMs. Initiatives such the one launched by Chery look very promising， but given the targeted launch window of 2016 one cannot shake the feeling that it might be too little to late for many brands.

As for the show itself， surprisingly for an innovative and bristling market such as China， most presentations still followed the same old script： a moderator leading through 30 to 45 minutes of presentations， short speeches of foreign executives， very brief introductions of new products as well as an art program which feels more often out of place than a real differentiator.

Given the enormous size of the China Auto I wonder how long this old-fashioned way of introducing products will be maintained. While it makes perfect sense for big carmakers such as Volkswagen and GM to use the Auto show as an international platform to both address the Chinese and foreign press， smaller carmakers have a very hard time to make any impact.

I would not be surprised if in the future some automakers abandon this concept and rather focus on their own media events. As the IT and electronics industry has shown this is a very viable way for companies with an attractive product portfolio.endprint