Why Buy? The Chinese sequel

Yesterday’s post profiled (mainly) Indian firms on the prowl for strategic assets in the international arena. The overnight news brings a further example from the other BIG emerging market – China.

Beating fellow vehicle manufacturer Chery to the punch (in terms of picking up some of the wreckage from the collapse of the US auto giants), privately owned Sichuan Tengzhong Heavy Industrial Machinery has scooped up that symbol of US extravagance – Hummer – from GM.

The world’s ugliest faux military SUVs will continue to be produced on US soil for now, but presumably this play is about accessing the underlying technology and production standards (and a recognised, if somewhat tarnished, brand) to fuel Chinese production in the future.

This certainly wont be the last acquisition by cashed up Chinese auto aspirants (Holden, anyone?). This is a buyer’s market for strategic assets.

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Agassi talks up a Better Place

You may remember my earlier posts on the Better Place electric car scheme (1, 2, & 3). Well, now that WordPress allow us bloggers to insert videos from TED easily, I thought I’d share an 18 min vid presentation from Better Place founder Shai Agassi:

He does a great job of outlining the economics of his model, and addresses some of the typical objections to this idea. He continues to highlight the linkages needed (between his firm, auto manufacturers, techologists, governments etc.). Let’s hope (for his sake, and perhaps ours) these cooperative endeavours continue.

And he mentions Australia…

Is advertising enough?

The power of marketing is a hotly debated topic among strategic management scholars (and, of course, out there in the real world). It remains highly contentious whether efforts to persuade consumers of the newness and uniqueness of your offerings can overpower the reality of the underlying offering.

An interesting case in point is the current US campaign by Nissan for their Cube vehicle. As the New York Times article explores, the firm is going out on a limb and trying to present the car as a “mobile device”. They have built a campaign around a range of familiar jargon from the online world – “search engine, storage capacity” etc – in the hope that this will appeal to a different audience and differentiate this product in what might well be the harshest buying climate for cars in a century.

Here’s some of the promo material.

It strikes me that in the end this is just a slightly quirky and boxy car with no particularly innovative features. Surely consumers want more than an oh-so-cool tagline?

Volvo to head East?

A fascinating prospect has emerged from the drawn-out demise of Ford’s international network of operations (and perhaps the firm itself). It seems they may sell their Volvo business to a Chinese suitor.

In an auto world where consolidation is the buzz word for all, a major international play from the overpopulated Chinese manufacturing sector was only a matter of time. This would give Geely a huge boost in size. They will more than double in size immediately.

Picking up Volvo for a pittance is surely attractive, especially given the Swedish firm’s competencies in safety and design. It will allow Geely to learn very quickly about exporting vehicles into developed markets (something which is still pretty rare for Chinese auto manufacturers).

The huge challenge will be extracting the Volvo manaufacturing out of Sweden, untangling labour relations and trying to transplant what is surely a very advanced production facility into an unfamiliar environment.

This takeover is being compared with Tata’s acquisition of Rover. The big difference is that Geely is unlikely to be paying substantially over the money for the assets. This is yet more evidence of businesses going cheapin the current crisis.

Quirky fact – Shift in auto powers continues

Here’s a quirky international business fact from past week: the identity of the world’s largest car market has shifted. No longer is it the US. It is now China.

January vehicle sales were reportedly: China – 790,000 vs US – 657,000.

Of course, this is mainly driven by the plummet in US auto sales (down around 40% year on year and still falling), but nevertheless it demonstrates the ongoing rise of China as a consumer market (as well as the world’s factory).

At the same time, there appears to also be a shakeout within the Chinese market itself, with expectations of considerable consolidation. The Top 10 brands only account for 66% of sales in China, which is probably unsustainable (especially as export markets possibly shrink).

As the WSJ piece argues, this could be just what is needed to spur on the emergence of a clear Chinese car giant in the coming decade.