China automotive industry scenario 2022 executive summary
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China automotive industry scenario 2022 executive summary Document Transcript

  • 1. © Copyright EBS Business School and China Europe International Business School- 1 -China Automotive Industry: Scenario 2022Focus: The Premium Car SegmentA joint research project ofAutomotive Institute for Management (AIM), EBS Business School,and CEIBS Center for Automotive Research (CCAR),China Europe International Business School (CEIBS).Executive SummaryWhat? A strategic foresight study utilizing expert-based scenario developmentmethodology to analyze the political, economic, socio-cultural and infrastructureenvironment of the automotive industries premium segment in China in 2022 and itsimplications for strategic planning in the automotive sector. The study is part of theIndustry Intelligence Research Program following the approach of ‘LOOKING INTO THEMINDS OF LOCAL EXPERTS’ - integrating the insights of more than 80 local industryexperts from the premium automotive industry in China.The report China Premium Automotive Industry: Scenario 2022 extensivelyelaborates on how China’s premium automotive industry might look like anddemonstrates an analysis process how to evaluate potential (re)actions improvingstrategic flexibility for the future of China’s premium automotive industry in 2022.This executive summary introduces the study’s background and objective, illustratesbasic steps of the specifically developed methodology, depicts selected results andexplains how managers can integrate the report into their firm’s strategic planning forthe Chinese market.Why? Today, China is the largest automotive market in the world. The country hasexperienced impressive growth rates over the past decades. Despite current single-digit growth rates of annual new car sales, the premium segment continues toexperience impressive growth rates and is already the second biggest premium carmarket in the world.1 However, the Chinese automotive market is not only expected togrow further but also to undergo substantial changes which will induce new challengesfor automotive companies operating in China. These challenges include an ongoingmobilization of more than 1bn. people, unstoppable urbanization, changingdemographics as well as consumer requirements, and rising environmentalconsiderations. Inevitably, China’s still growing relevance for the global automotiveindustry requires decision makers to constantly re-think or at least re-evaluate theirstrategies for the Chinese market in order to benefit also in the future from thetremendous growth potentials. As stated by one of our study participants: “it’s no doubtthat the biggest automotive market will become one of the drivers on international level”.For Whom? The “Scenario 2022” report is designed to support senior executives and corporatestrategy managers in the development and/or re-evaluation of their current plans forChina’s premium automotive industry: Be prepared for the future of China, “the centralkingdom” (Chinese: Zhōngguó) of the global automotive industry.1 In this study, the automotive premium segment refers to passenger vehicles with a purchase price > 250k RMB (e.g.Buick Lacrosse, VW Passat, Audi A6, Mercedes-Benz E Class).
  • 2. © Copyright EBS Business School and China Europe International Business School- 2 -How? The Automotive Institute for Management (AIM), EBS Business School, and the CEIBSCenter for Automotive Research (CCAR), China Europe International Business School(CEIBS), have initiated an annual Industry Intelligence Research Program to supportdecision makers and managers of China’s automotive industry and provide a betterunderstanding about how the industry might develop and what it means for theircompanies. The research program integrates a web-based expert panel approachand workshop sessions among automotive experts in China to jointly assess thefuture of China’s premium automotive industry.Process Graph 1: The China Automotive Industry Intelligence Research Focus and ProcessUnderstanding China’sAutomotive IndustrySTEP 1: Online real-time Delphi study with local industryexperts to gather distinct perspectives on ‘hot topics’.STEP 2: Expert Workshop to developscenarios of the future political, socio-cultural, economic and technologicalinfrastructure environment for theautomotive industry in China.STEP 3: Expert Workshopto evaluate the impact of future institutionalchanges on firms’ local operationsof the future automotive industryin China.STEP 2: Expert Workshop to developscenarios of the future political, socio-cultural, economic and technologicalinfrastructure environment for theautomotive industry in China.STEP 3: Expert Workshopto evaluate the impact of future institutionalchanges on firms’ local operationsof the future automotive industryin China.Which changes might occur in theinstitutional environment?How changes might interrelate andwhat does it mean for a firm?Challenge 1:Uncertaintyabout future institutional developmentsChallenge 2:Ambiguity aboutinstitutional interdependencesDelphi StudyScenarioWorkshopStep 1: The participating industry experts access an online real-time Delphi softwareto evaluate a combination of industry environment, macro-perspective and value-chainprojections with respect to their probability of occurrence and impact on the industry.During the online interaction, the participating experts are also requested to explainthe reasons for a high/low assessment of a projection and can review their peers’arguments/ratings anonymously to re-asses their initial estimates for each projection.Step 2: Industry experts develop in the first workshop on CEIBS campus scenariosabout the business environment of China’s automotive industry in 2022. Theworkshop integrates the projections of Step 1 and elaborates scenarios from fourdifferent perspectives (PEST): The political environment examines regulations of the Chinese Government put intoeffect which might support further growth or constrain the industry through theformation of potential hindrances. The economic perspective examines which players (e.g. OEMs/Suppliers) willdominate the value chain and how the major characteristics of their businessrelationships might look like. The socio-cultural environment examines on the one hand purchasing criteria ofcustomers per se and on the other hand trends and expectations of the society atlarge of particular interest for the automotive industry. The technological infrastructure perspective examines “soft” (e.g. knowledge) and“hard” (e.g. infrastructure) factors that are most relevant for the industry.
  • 3. © Copyright EBS Business School and China Europe International Business School- 3 -ScenarioMatrixApproachGraph 2: Basic Scenario Matrix for Industry Environment AnalysisScenarioContentEach scenario matrix is framed by two industry environment projections determinedby their respective occurrence and non-occurrence evaluating in detail theconsequences for the industry’s major stakeholders such as customers, suppliers,OEMs, the Government of China and China’s society at large.IndustryDynamicsWorkshopStep 3: Own assessment in a second workshop on individual firm level: How examined projections for China’s automotive industry from the Delphi studymight interrelate with each other to get a better understanding about underlyingdrivers and cause-effect relationships among the institutions of China’s automotiveindustry. How the developed scenarios or particular projections of China’s automotiveindustry affect a firm’s local operations on functional level (e.g. Research andDevelopment, Sourcing and Procurement, Manufacturing and Production, HumanResources, Marketing and Distribution).Graph 3: The Institutions-Resources Matrix to elaborate Functional StrategiesOrganizational(Structures, Processes,Leadership Style etc.)Technological(IP Rights, ProductionTechnologies, TacitKnowledge etc.)HumanResources(Executives, Employeesetc.)Physical Assets(Plants, Machinery etc.)IndustryEnvironmentRelationships(within company,functions, customer orsuppliers etc.)Effects on department’s resources
  • 4. © Copyright EBS Business School and China Europe International Business School- 4 -Selected KeyResults fromDelphi StudyHigh level of uncertainty regarding future developmentIn total, 5 out of the 19 examined projections (26 %) resulted in moderate consensusamong the participating industry experts, while 14 of the projections were stillcontroversially discussed at the closure of the study yielding an average probability ofoccurrence of 51 % across all projections. The future of China’s automotive premiumsegment is difficult to predict - affirming the relevance of the study for both seniorexecutives and further investigations.Selected projections all highly relevant for China’s automotive industryThe average impact of the projections was rated as 3,6 and the minimum reportedimpact was 3,2 (Scale 1-5): All projections are of high interest to managers anddecision-makers of China’s automotive premium segment.The future industry environment: a similar but challenging pictureThe industry environment projections show that the political, economic, socio-culturaland technological infrastructure environment of China’s automotive industry will notchange dramatically until 2022 – but some relevant changes might occur.Graph 4: Quantitative Results of Macro-Perspective & Industry Environment ProjectionsDimension Macro-Perspective Projections Probability Consensus ImpactMacroPerspective“Global Chinese OEMS”: In 2022, Chinese OEMs achieve 25% of their annual carssales in developing countries (e.g. Brazil, Russia, Africa).51%40Very StrongDissent3,5“Mainstream Premium”: In 2022, the premium segment accounts for more than 15%of annual new car registrations in China.59%32,5StrongDissent3,7“Remote Areas”: In 2022, more than 50% of new premium cars in China are sold intier 3-4 cities and rural areas.44%30StrongDissent3,5Dimension Macro-Perspective Projections Probability Consensus ImpactMacroPerspective“Global Chinese OEMS”: In 2022, Chinese OEMs achieve 25% of their annual carssales in developing countries (e.g. Brazil, Russia, Africa).51%40Very StrongDissent3,5“Mainstream Premium”: In 2022, the premium segment accounts for more than 15%of annual new car registrations in China.59%32,5StrongDissent3,7“Remote Areas”: In 2022, more than 50% of new premium cars in China are sold intier 3-4 cities and rural areas.44%30StrongDissent3,5Dimension Industry Environment Projections Probability Consensus ImpactPolitical“Vehicle Fleets”: In 2022, the Government of China and State-Owned-Enterpriseshave to use exclusively Chinese OEMs’ brands in their vehicle fleets.52%43,8Very StrongDissent3,5“Access Restrictions”: In 2022, registration of new passenger cars and entry in tier1-3 cities in China is only eligible to passenger cars with displacement volume lower than2.0 liters.41%38,8StrongDissent3,8Economic“Profit Margins“: In 2022, OEMs’ profit margins in China’s premium segment havedecreased by more than 50% compared to the profit margins in 2011.60%30StrongDissent3,7“Dealership Consolidation”: In 2022, the top 25 dealership groups in China have acombined market share of more than 60% of annual new car sales.63%25ModerateDissent3,6Socio-Cultural“National Pride”: In 2022, China’s young generation is strongly driven by nationalpride considerations in their lifestyle and consumption behavior including premium carpurchases.43%33,8StrongDissent3,6“Interior Design”: In 2022, the brand perception of premium cars is significantly moredriven by a car’s interior design and features (e.g. cockpit ambience, rear space, centerconsole) than a car’s exterior design (e.g. front/rear lights, radiator grill).50%20ModerateConsensus3,2(Hard/Soft)Infra-structure“Corporate Universities”: In 2022, each OEM runs own corporate universities andtraining centers (vocational, service, and design) to attract, develop and retain sufficientnumbers of well-qualified employees in China.58%35StrongDissent3,5“Public Transport”: In 2022, public transportation is perceived as a convenientalternative mode of transportation by more than 90% of premium car owners in tier1-3cities in China.49%40Very StrongDissent3,7Dimension Industry Environment Projections Probability Consensus ImpactPolitical“Vehicle Fleets”: In 2022, the Government of China and State-Owned-Enterpriseshave to use exclusively Chinese OEMs’ brands in their vehicle fleets.52%43,8Very StrongDissent3,5“Access Restrictions”: In 2022, registration of new passenger cars and entry in tier1-3 cities in China is only eligible to passenger cars with displacement volume lower than2.0 liters.41%38,8StrongDissent3,8Economic“Profit Margins“: In 2022, OEMs’ profit margins in China’s premium segment havedecreased by more than 50% compared to the profit margins in 2011.60%30StrongDissent3,7“Dealership Consolidation”: In 2022, the top 25 dealership groups in China have acombined market share of more than 60% of annual new car sales.63%25ModerateDissent3,6Socio-Cultural“National Pride”: In 2022, China’s young generation is strongly driven by nationalpride considerations in their lifestyle and consumption behavior including premium carpurchases.43%33,8StrongDissent3,6“Interior Design”: In 2022, the brand perception of premium cars is significantly moredriven by a car’s interior design and features (e.g. cockpit ambience, rear space, centerconsole) than a car’s exterior design (e.g. front/rear lights, radiator grill).50%20ModerateConsensus3,2(Hard/Soft)Infra-structure“Corporate Universities”: In 2022, each OEM runs own corporate universities andtraining centers (vocational, service, and design) to attract, develop and retain sufficientnumbers of well-qualified employees in China.58%35StrongDissent3,5“Public Transport”: In 2022, public transportation is perceived as a convenientalternative mode of transportation by more than 90% of premium car owners in tier1-3cities in China.49%40Very StrongDissent3,7Remarks:Each projection is formulated as an extreme statement to generate detailed comments from the participating experts.Probability (0-100%); Impact on Chinese automotive industry (low (1) –(5) high).Consensus (Level of agreement between 50 Delphi study participants measured as Interquartile Distance).
  • 5. © Copyright EBS Business School and China Europe International Business School- 5 - The most likely projections (>50%) draft the picture in which the ‘golden ages’ areover, premium-cars are substantially higher in demand and dealerships go throughconsolidation. A substantially risen demand for premium cars and car-registration/urban-accessrestrictions are expected to have the highest impact on the segment. When combining probability and consensus, it can be concluded that the chancesof interior design driving brand-differentiation are “50-50”, while governmentalfleet policies, the global positioning of Chinese OEMs and public transportation arevery controversially discussed.Graph 5: Probability Consensus Impact Analysis for Macro-Perspective & Industry Environment3,1 3,3 3,5 3,7 3,9 4,115202530354045Low HighLow HighConsensus ImpactProbability30%40%50%60%70%VehicleFleetsVehicle FleetsPublicTransportPublic TransportGlobal Chinese OEMsGlobalChineseOEMsAccessRestrictionsAccessRestrictionsCorporateUniversitiesMainstream Premium Mainstream PremiumProfitMarginsProfitMarginsRemote AreasRemote AreasNational PrideNational PrideInteriorDesignInteriorDesignGold-Rush isover?Carefully monitor, given thehigh impact and probability.Mobility ≠ Cars? China’s Vastness…DealershipConsolidationDealership ConsolidationCorporateUniversities3,1 3,3 3,5 3,7 3,9 4,115202530354045Low HighLow HighConsensus ImpactProbabilityLow HighLow HighConsensus ImpactProbability30%40%50%60%70%30%40%50%60%70%VehicleFleetsVehicle FleetsPublicTransportPublic TransportGlobal Chinese OEMsGlobalChineseOEMsAccessRestrictionsAccessRestrictionsCorporateUniversitiesMainstream Premium Mainstream PremiumProfitMarginsProfitMarginsRemote AreasRemote AreasNational PrideNational PrideInteriorDesignInteriorDesignGold-Rush isover?Carefully monitor, given thehigh impact and probability.Mobility ≠ Cars? China’s Vastness…DealershipConsolidationDealership ConsolidationCorporateUniversitiesSelectedScenarioWorkshopResultsThe most likely PEST scenarios: merging the ‘old’ with the ‘new’The most likely* PEST scenarios confirm a similar picture of China’s automotiveindustry in 2022 compared to 2012, but with quite some substantial changes which aremostly expected to even ‘change the rules of the game’ in China’s automotive industry.From a political perspective, the industry expertsexpect the scenario “GERMAN STIGMATA” to be themost likely* for 2022 (Probability 40-60 %). Thisscenario renders that… …the Government of China (GOC) and stateowned enterprises NEITHER use exclusivelyChinese cars in their vehicle fleets therefore lessemphasizing support for developing domesticOEMs’ brands, …nor that the GOC restricts car registrations orurban access to passenger vehicles with adisplacement volume <2.0 liters in tier 1-3 citiestherefore leaving the fuel efficiency issue to theindustry.In short, political SCENARIO 3 renders currentcustomers’ preferences and market shares in thepremium segment to largely remain comparable in2022.Political Environment Projections for 2022“Vehicle Fleets”: The Government of China and State-Owned-Enterprises haveto use exclusively Chinese OEMs’ brands in their vehicle fleets.“Access Restrictions”: Registration of new passenger cars and entry in tier1-3cities in China is only eligible to passenger cars with displacement volume lowerthan 2.0 liters.*Assessed during workshop discussions with local industry experts in China“AccessRestrictions”HighSCENARIO 120-35% Probability“GREEN PREMIUM”SCENARIO 20-15% Probability“CERTIFIED CHINESECARS”ProbabilityofoccurrenceSCENARIO 340-60% Probability“GERMAN STIGMATA”SCENARIO 410-20% Probability“CHINESE PREMIUM”LowLow Probability of occurrence High“Vehicle Fleets”
  • 6. © Copyright EBS Business School and China Europe International Business School- 6 -From an economic perspective, the industry expertsexpect the scenario “WALL STREET” to be the mostlikely* for 2022 (Probability 45-55 %). This scenariorenders that… …neither OEMs’ profit margins in the premiumsegment decrease substantially, …nor dealerships consolidate substantiallyyielding a few remaining large players whichjointly account for the major share of annual newcar.In short, economic SCENARIO 3 renders theattractiveness of China’s premium segment toremain high and bargaining power to largely remainwith OEMs in 2022.From a socio-cultural perspective, the industryexperts expect the scenario “SHANGHAI” to be themost likely* for 2022 (Probability 40-50 %). Thisscenario renders that… …China’s younger generation neitheremphasizes national pride considerations inlifestyle and consumption behaviour, …nor the brand perception of premium cars tobe more driven by a car’s interior design.In short, socio-cultural SCENARIO 3 renderscustomers’ preferences to not differ substantiallyfrom the TRIADs and a strong preference for foreignbrands to drive purchasing decisions in the premiumsegments in2022From a technological perspective, the industryexperts expect the scenario “OUTPUT but no IMPACT”to be the most likely* for 2022 (Probability 50-60 %).This scenario renders that… …OEMs in China substantially invest intocorporate universities and training centres to‘breed’ local talents, …but the public transportation is not perceivedas a convenient alternative mode by premium carowners in China’s tier 1-3 cities.In short, technological SCENARIO 4 rendersdomestic automotive players to particularly benefitfrom widely available talents in China and domesticcars to be at least a choice for the mainstreamsegment“DealershipConsolidation“HighSCENARIO 120-30% Probability“SLUMDOGMILLIONAIRE”SCENARIO 20-10% Probability“STAR TRECK”ProbabilityofoccurrenceSCENARIO 345-55% Probability“WALL STREET”SCENARIO 415-25% Probability”TRANSFORMERS”LowLow Probability of occurrence High“Profit Margins”Economic Environment Projections for 2022“Profit Margins“: OEMs’ profit margins in China’s premium segment havedecreased by more than 50% compared to the profit margins in 2011.“Dealership Consolidation”: The top 25 dealership groups in China have acombined market share of more than 60% of annual new car sales.*Assessed during workshop discussions with local industry experts in China“InteriorDesign“HighSCENARIO 110-25% Probability“SANTIAGO DE CHILE”SCENARIO 210-15% Probability”SEOUL”ProbabilityofoccurrenceSCENARIO 340-50% Probability“SHANGHAI”SCENARIO 420-30% Probability“FORBIDDEN CITY”LowLow Probability of occurrence High“National Pride”Social Environment Projections for 2022“National Pride”: China’s young generation is strongly driven by national prideconsiderations in their lifestyle and consumption behavior including premium carpurchases.“Interior Design”: The brand perception of premium cars is significantly moredriven by a car’s interior design and features (e.g. cockpit ambience, rear space,center console) than a car’s exterior design (e.g. front/rear lights, radiator grill).*Assessed during workshop discussions with local industry experts in China“PublicTransport“HighSCENARIO 10-10% Probability“IMPACT withoutOUTPUT”SCENARIO 210-20% Probability“OUTPUT with IMPACT”ProbabilityofoccurrenceSCENARIO 320-30% Probability“Neither IMPACT norOUTPUT”SCENARIO 450-60% Probability“OUTPUT but noIMPACT”LowLow Probability of occurrence High“Corporate Universities”Technological Environment Projections for 2022“Corporate Universities”: Each OEM runs own corporate universities andtraining centers (vocational, service, and design) to attract, develop and retainsufficient numbers of well-qualified employees in China.“Public Transport”: Public transportation is perceived as a convenient alternativemode of transportation by more than 90% of premium car owners in tier1-3 citiesin China.*Assessed during workshop discussions with local industry experts in China
  • 7. © Copyright EBS Business School and China Europe International Business School- 7 -The results from the stakeholder projection analysis question many of established expectationson the future of China’s automotive value chain in 2022.Eight value chain projections evaluate the potential future of China’s automotive value-chain withrespect to Research and Development, Sourcing and Procurement, Manufacturing and Production,Distribution and After-Sales. According to the participating experts, China’s automotive value chain willundergo substantial changes until 2022 and will share some characteristics with nowadays’ automotivevalue-chains in the TRIAD markets.Graph 6: Quantitative Results of Industry Value Chain ProjectionsDimension Economic Value Chain Projections Probability Consensus ImpactR&DEngineering Service Providers: In 2022, foreign engineering service providers inChina strongly integrating ‘Chinese’ design elements with foreign engineeringstandards/technological know-how completely drive the development of new cars inChina’s automotive premium segment.60%40Very StrongDissent3,7Chinese Global Trends: In 2022, China’s automotive industry drives global trends inthe premium segment due to the most dominant group of creative automotivedesigners and marketing professionals worldwide working in China.46%30StrongDissent3,5SourcingSuppliers’ M&A: In 2022, Chinese automotive suppliers have the majority control(majority stakes) of more than 30 out of the current global top 100 suppliers (e.g. fromEurope, Japan, USA).52%20ModerateConsensus3,7Secondary Component Market: In 2022, more than 55% of annual revenues inChina’s automotive supplier industry are generated in the secondary componentmarket (e.g. maintenance, repair and replacement parts).55%13,8StrongConsensus3,4ProductionAutomation and Standardization: In 2022, more than 90% of domestic automotivefirms have successfully automated and standardized their production processes andoutperform foreign competitors’ productivity levels in China.47%37,5StrongDissent3,6DistributionAfter-SalesAfter-Sales Service: In 2022, dealerships in China generate more than 50% of theirannual revenues through service-offerings (e.g. repair and maintenance, finance,insurance).62%23,8ModerateConsensus3,7Used Car Market: In 2022, the Government of China strongly regulates the used-carmarket which is dominated (>50% sales) by less than 5 dealership groups.39%20ModerateConsensus3,3Customers2nd Hand Premium: In 2022, more than 90% of China’s current and potential carbuyers prefer buying a used premium car instead of buying a lower-priced new carfrom the mass market segment.44%28,8ModerateDissent3,7Dimension Economic Value Chain Projections Probability Consensus ImpactR&DEngineering Service Providers: In 2022, foreign engineering service providers inChina strongly integrating ‘Chinese’ design elements with foreign engineeringstandards/technological know-how completely drive the development of new cars inChina’s automotive premium segment.60%40Very StrongDissent3,7Chinese Global Trends: In 2022, China’s automotive industry drives global trends inthe premium segment due to the most dominant group of creative automotivedesigners and marketing professionals worldwide working in China.46%30StrongDissent3,5SourcingSuppliers’ M&A: In 2022, Chinese automotive suppliers have the majority control(majority stakes) of more than 30 out of the current global top 100 suppliers (e.g. fromEurope, Japan, USA).52%20ModerateConsensus3,7Secondary Component Market: In 2022, more than 55% of annual revenues inChina’s automotive supplier industry are generated in the secondary componentmarket (e.g. maintenance, repair and replacement parts).55%13,8StrongConsensus3,4ProductionAutomation and Standardization: In 2022, more than 90% of domestic automotivefirms have successfully automated and standardized their production processes andoutperform foreign competitors’ productivity levels in China.47%37,5StrongDissent3,6DistributionAfter-SalesAfter-Sales Service: In 2022, dealerships in China generate more than 50% of theirannual revenues through service-offerings (e.g. repair and maintenance, finance,insurance).62%23,8ModerateConsensus3,7Used Car Market: In 2022, the Government of China strongly regulates the used-carmarket which is dominated (>50% sales) by less than 5 dealership groups.39%20ModerateConsensus3,3Customers2nd Hand Premium: In 2022, more than 90% of China’s current and potential carbuyers prefer buying a used premium car instead of buying a lower-priced new carfrom the mass market segment.44%28,8ModerateDissent3,7Remarks:Each projection is formulated as an extreme statement to generate detailed comments from the participating experts.Probability (0-100%); Impact on Chinese automotive industry (low (1) –(5) high).Consensus (Level of agreement between 50 Delphi study participants measured as Interquartile Distance). The most likely projections (>50%) draft the picture in which foreign EngineeringService Providers (ESPs) drive OEMs’ new-car developments and dealerships directtheir primary attention towards after-sales services - indicating a large secondarycomponent market. OEMs’ sole reliance on foreign ESPs, a shift towards after-sales services and thedemand for 2nd hand premium cars are expected to have the highest impact onthe industry. When combining probability and consensus, it can be concluded that supplierswill increasingly focus on the secondary component market while the role offoreign ESPs for the industry and the technological process competencies ofdomestic firms are very controversially discussed.
  • 8. © Copyright EBS Business School and China Europe International Business School- 8 -Graph 7: Probability Consensus Impact Analysis for Industry Value Chain Projections3,1 3,3 3,5 3,7 3,9 4,110152025303540Low HighLow HighConsensus ImpactProbability30%40%50%60%70%Low HighLow HighConsensus ImpactProbability30%40%50%60%70%30%40%50%60%70%Engineering ServiceProvidersEngineering ServiceProvidersAfter-SalesServiceAfter-SalesServiceSecondaryComponentMarketSecondaryComponentMarketSuppliers’ M&A Suppliers’ M&AAutomation andStandardizationAutomation andStandardizationChinese Global Trends Chinese GlobalTrends2nd HandPremium2nd HandPremiumUsed CarMarketUsed CarMarketWhat are thepros & cons?Carefully monitor, given thehigh impact and probability.Who wins therace: China orWest?Used = Premium?Take forgranted?According to the experts, the 8 industry value chain projections imply for China’sautomotive industry in 2022: ‘ESP’ driven Research and Development: Foreign engineering service providers(ESPs) will play a crucial role in China’s automotive industry: ESPs are expected tosuccessfully integrate ‘Chinese’ design elements with foreign engineering know-how and to drive development of new cars in China’s premium segment.Nonetheless, China’s automotive industry will not be in the position of a globaltrendsetter due to a shortage of designers and marketing professionals. Maturating Chinese Suppliers: Domestic suppliers will continue to acquire majorstakes of large foreign suppliers in order to integrate those suppliers’ technologicalknow-how as well as management practices and to expand into new geographicalmarkets. In the domestic market, the enormous secondary component market willshift Chinese suppliers’ focus towards after-sales. Learning Process Competence: Chinese automotive firms will not successfullyautomate and standardize their production processes - foreign competitors willremain their competitive edge and can still outperform domestic firms’productivity levels. Potential in the Used-Car Market: Chinese customers’ preference for new cars willprevail - despite ‘value-for-money’ offerings such as 2nd hand premium cars - andthe overall used car market will be fragmented without a concise regulatoryframework – inducing little consumer confidence in this market.What doesthe reportoffer?How to integrate the “Scenario 2022” insights in your strategyThe report is specifically designed to account for a strategist’s individual interests:There is no ‘one size fits all’ solution for strategy. The report is structured to easily fitwith your particular interests or your firm’s current and upcoming plans in/for China.“China Automotive Industry: Scenario 2022 Report” integrates the assessmentsof >80 local industry experts on: …16 scenarios (4 scenario matrices) to better understand how China’s futureautomotive industry might look like and how to prepare individual functionalstrategies today assessing physical assets, human resources, organizationalstructures, technologies and relationships. …assessments of the probability and impact for 8 industry environment, 3 macro-perspective and 8 industry value chain projections supporting senior executives tounderstand how the future of China’s automotive industry and its value chainmight look like in 2022.
  • 9. © Copyright EBS Business School and China Europe International Business School- 9 -The report also includes a specifically developed framework (Institutions-ResourcesMatrix) which allows corporate strategist and functional heads to systematicallytransfer our industry experts’ insights into strategic planning implications andconsequences on a functional strategy level in order to better plan future budgets andincrease strategic flexibility: Identification and evaluation of the department’s or function’s strategic plans aswell as those topics and unresolved or potential issues considered to be the mostrelevant ones; Identification of the associated PEST scenarios (or projections) in terms ofrelatedness; Assessment of the identified scenarios’/projections’ potential effects on thedepartment’s/function’s resources along five categories; Identification of re-occurring or conflicting patterns with respect to the elaboratedeffects along the distinct PEST scenarios (or projections), followed by developmentand evaluation of potential countermeasures to account for the most necessaryadaptations of a department’s resources at an early stage - based upon individualprioritization.Responsible?Dr. Roger MoserManaging DirectorASIA CONNECT CENTER,University of St. Gallen;Automotive Institute forManagement,EBS Business School;roger.moser@unisg.chProf. Thomas E. CallarmanDirectorCEIBS Center for AutomotiveResearch,Professor of OperationsManagement,China Europe InternationalBusiness School (CEIBS)tecallarman@ceibs.eduProf. Dr. Franz-Rudolf EschDirectorChair of Automotive Marketingand Brand ManagementProfessor of BrandManagement and AutomotiveMarketing,EBS Business Schoolfranz-rudolf.esch@ebs.eduQuestions? Christian KuklinskiResearcher/Doctoral CandidateAutomotive Institute for Management,CEIBS Center for Automotive Research,christian.kuklinski@ebs.edu /kchristian@ceibs.eduPhone: +49 611 7102 2062CEIBS Center for Automotive Research (CCAR)China Europe International Business School699 Hong Feng Road, 201206 Shanghaiwww.ceibs.edu/ccar/index.shtmlAutomotive Institute for Management (AIM)EBS University of Business and LawGustav-Stresemannring 3, 65189 Wiesbadenwww.aim-ebs.de