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?

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.

Network externalities & electric cars

Further to my post of last week about US electric companies potentially boosting the sales of electric cars through bulk orders, the state of Hawaii’s has endorsed a proposal to develop the network of recharging stations necessary for large-scale adoption of the technology.

Hawaii joins a list of countries and locations reportedly jumping on board, including Israel, Denmark, San Francisco, Renault-Nissan, and Australia (through yet another Macquaire consortium).

The driver of all this is Shai Agassi and his Better Place startup. The firm clearly has a very strong grasp on the need to build partnerships when dealing with products so reliant on network externalities. Put simply, unless consumers can be convinced that shifting to electric vehicles is not a hastle, then most won’t bother. Likewise, until they can be sure there will be enough consumers, most providers of the necessary infrastructure, like “filling stations”, won’t bother either. Better Place is trying to break this impasse. Now let’s just hope they are backing the right technology, and also, are not just building monopoly via technology lock-in.