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.

Picking winners in tough times

One of the more curious emergent industries to spring up from the current economic downturn is storage facilities for unsold new cars. As The Age reports, landowners are benefitting from the excess supply of vehicles and the need to park them somewhere in the interim:

“Each car costs a car-maker between $1.20 and $2.50 a day to store. With one source putting the number of vehicles in storage throughout Australia at 100,000, the industry is potentially racking up almost $2 million each week.”

Australia is far from alone in seeing such stockpiling. Nice to see someone making some money out it…