This document provides an overview of the automobile industry in China and several major automakers operating in the Chinese market, including Volkswagen, Toyota, Ford, Nissan, and General Motors. It discusses the growth of the Chinese economy and automotive sector, market drivers and restraints, strategies and operations of key companies in China, and SWOT analyses of some firms.

1. Automobile Industry in China
German, U.S., and Japanese
Group Project
International Business
M. Bruss
T. Hobson
T. Zercher
M. Christensen
L. Heaps

2. Agenda
 Chinas Economy & Automotive Industry
 Volkswagen
 Toyota
 Ford Motor Company SWOT Analysis
 Nissan Motor Company SWOT Analysis
 General Motors in China
 Bayerische Motoren Werke (BMW) in China

3. China‘s Economy
Source: National Bureau of Statistics of China, Frost & Sullivan

4. China‘s Economy cont.

5. FDI‘s in China
 Entrance to World Trade Organization
 2003: largest amounts of FDI‘s
 2014: China received $120 billion FDI inflows
 Foreign companies entered the market
 Boosted employment
 New technologies
 Increased productivity and exports
 Decentralization and modernization

6. Consequences for Domestic Car
Manufacturers
 Competition with joint ventures

7. Benefits for Global Producers
 “Global auto producers in China could employ
up to 40 percent less capital, which promises
a 60 percent increase in their return on capital”
(Gao, 2002, p. 149)

8. Market Drivers & Restraints

9. China‘s Share of the
Global Car Market
19.1 % 20.7 %
30 %
2010 20302015

10. Leading Vehicle Sales

11. Consumer
 Expected private consumption in China by 2020:
$2 trillion
 Urban middle class  high quality products
 Large young population  international brands

12. Politics & Legal System
 From command to market based economy
 Allocation of amount of
 Capital
 Land
 Human capital
 Introduction of higher standards

13. VW AG History in China
 30 Years / 20 Million Vehicles
 Volkswagen Group China Headquartered in Beijing
 Majority of Sales in North and East

14. Branding Strategy of VW
 VW uses an individual branding strategy where each brand
is marketed separately.
 This should help mitigate the damage of the VW emissions
scandal in comparison to an automaker, such as Honda that
pursues an umbrella branding strategy.

15. VW’s Chinese Joint Venture Partners
 FAW-Volkswagen
 Joint Venture between FAW and VWAG
 VWAG = 40% stake
 Produces Volkswagen and Audi
 Shanghai Volkswagen
 Joint Venture between SAIC Motor and VWAG
 VWAG = 50% stake
 Produces Volkswagen and Skoda

16. Breakdown of VW’s Sales
by Brand in China
 Audi sold 513,000 vehicles in 2014.
 Skoda sold 281,412 vehicles in 2014. China was Skoda’s largest market in
the world.
 Bentley sold 2,560 vehicles in 2014. China was Bentley’s second largest
market only behind the US.
 Porsche sold 46,931 vehicles in 2014. China was Porsche’s second
largest market only behind the US.
 China was VW brand’s largest market in the world.
 VW AG sold 3.675 million vehicles in China in 2014. China was VW AG’s
largest market in the world in 2014.
 VW Finance China increased it’s market penetration rate in China from
10.23% to 11% in 2014.
 VW had a 15.3% share of the Chinese auto market in 2014. Largest
market share of any automakers in China.

17. Impact of VW Emissions
Scandal on Sales in China
Minimal
Diesel = Unpopular
Only 1,950 cars
have been recalled

18. VW Car Sharing Business
 Ren Wei Ben
 Combat lack of parking spaces
 Beijing = 5m vehicles / 2.5m parking spots
 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)
 Benefits
 Provides flexibility that taxi doesn’t
 Reduced weekend rates
 Hourly rate billed monthly

19. VW Production in China
 19 production facilities
 There are also plans to build two more new plants on China’s
coast.
 Goal: 5 million vehicles annually by 2019
 VW’s joint venture companies are expected to invest 22 billion
euros into new production facilities, and product development from
2015 to 2019. All financed by the companies’ cash flows. To meet
their WACC these investments must generate at least 1.388 billion
euros of FCF per year over 30 years.
 In 2014 VW produced 3.528 million vehicles in China

20. VW Strategy Going Forward
 “In future, the plan is also to significantly expand the existing R&D
activities in China and to open up new business areas, primarily in
alternate drive technologies.” (2014 10K)
 VW and it’s JV partners will continue to partner with the Chinese
Education Ministry to enhance vocational training in China.

21. Toyota in China
 Toyota sold 1.03 million vehicles in China in 2014.
 Toyota had a 4.29% share of the Chinese auto market in 2014.
 Toyota entered China in 1936, but set up major operations in
1995.

22. Toyota JV Partners
 Toyota has two current JV partners
 FAW Toyota Motor Sales- 50% stake
 GAC Toyota- 50% stake

23. Toyota Problems in China
• Toyota has the most auto sales worldwide, but only holds a 4.29%
slice of the Chinese market
• Toyota has not opened a new plant in China since 2012.
• Out of 523 Toyota distributors as many as 95% are losing money
• When Yaris was introduced to the Chinese market in 2008 it failed
to meet customer’s expectations of having road presence or daqi.

24. Toyota Problems in China (Cont)
 Toyota being a Japanese company is a magnet for anti Japanese
sentiment still remaining in China from WW2
 Especially among consumers 80+, or in areas where the
Japanese had sustained occupation.
 Also various disputes more recently over islands off the Chinese
coast with Japan have exacerbated relations.

25. Toyota’s Strategies to Turn
Things Around
 Toyota plans to invest $440 million in existing plants.
 This will increase production capacity by 100,000 vehicles
 Must come up with some new marketing campaign maybe try and
create cognitive dissonance in Chinese consumers minds about
Toyota being Japanese

26. Ford SWOT Analysis - Strengths
• Global platform consolidation and affordable mobility
blueprint delivers sustainable growth
• Strong market share in several regions could enhance brand
value
• Robust portfolio of automotive products provides competitive
advantage
• Significant research and development capabilities help launch
new vehicles

27. Ford SWOT Analysis – Weaknesses
• Frequent product recalls could affect brand image
• Decline in unit sales could impact market share

28. Ford SWOT Analysis - Opportunities
• Growing global automotive industry could provide immense
opportunities to boost financial performance
• Focus on hybrid electric and fuel cell vehicle market
• Establishment of new plants to expand business prospects

29. Ford SWOT Analysis - Threats
• Intense competition and pricing pressure could impact market
share
• Stringent environmental regulations affect business
performance
• Fluctuations in foreign currency could impact profitability

30. Ford’s Global Electrification Strategy
• Advanced technologies used in different products
• The Different Options:
• Hybrid Electric Vehicle
• Plug-in Hybrid Electric Vehicle
• Battery Electric Vehicle
• Fuel Efficiency & Reducing Greenhouse Gases
• Non-Hybrid Vehicles fuel efficient as well
• EcoBoost Technology

31. Ford’s Mobility Focus
• Solution for transporting people without just putting more
cars on the road
• Interested in other modes of transportation
• To address this issue Ford has released:
• MoDe:Flex
• “Get Around”

32. Ford’s Other Strategies
• One Ford Plan
• Aggressive Growth Strategy
• Branding Strategy
• Cost Leadership Strategy

33. Ford in China
• Estimated 60-70% of Ford’s growth with be in Asia Pacific
• Currently 1/5 vehicles sold globally is in Asia Pacific
• By 2020, that number will be 1/3
• 4 New Plants under construction in China
• Expansion of Research and Development facility in China
• Where Regional Headquarters is located

34. Ford JV Partners
• Changan Ford Automobile Company
• Ford owns 50%
• Jiangling Motors Company
• Ford owns 32%
• Changan Ford Mazada Engine Company
• Ford owns 25%

35. Ford’s Metrics in China
• 1.116 vehicles sold in China in 2014
• Total number of Ford dealers in China is 600
• Contributed $1.3 billion to Ford’s EBT in 2014
• Accounted for 30% of Ford’s Total EBT in 2014
• 4.65% market share of Chinese market in 2014
• Market share was only 2.64% in 2010. Only sold 483,000
vehicles in China in 2010.
• 1.439 million Ford vehicles produced in Asia/Pacific region in
2014
• China is a market in which Ford sells debt instruments to raise
capital.

36. Ford’s Strategy going
forward
 “Our strategy in Asia Pacific is to invest in growth
through both new and expanded plants, new
products, and the introduction of Lincoln in China”
(2014 10K)

37. Nissan’s Global Strategy
• Implemented aggressive strategy
• Encompasses strategy for emerging countries
• Strategy for lower-priced/compact vehicles
• Promoted leadership strategy
• Based on zero-emission & smart community concepts
• Supported Partnership Strategy
• Renault-Nissan Alliance

38. Nissan in China
• Nissan has three different brands Infiniti, Nissan, and Renault
• Attended 13th Beijing International Automotive Exhibition
2014
• Premier of New Sedan
• Cutting edge vehicles: BladeGlider & Autonomous Drive
Car
• Nissan’s flagship sedan Teana

39. Nissan’s JV Partners
• Dongfeng Motor Corporation
• Consists of 2 Subsidiaries:
• Dongfeng Motor Group
• Dongfeng Automobile Corporation
• Zhengzhou Nissan Automobile Co, Ltd

40. Nissan Metrics in China
• 142,925 employees in China through Chinese Joint Ventures in
2014.
• Sold 1.22 million vehicles in China in 2014.
• China contributed $1.21 billion to Nissan’s EBT, and accounted
for 25.59% of Nissan’s total EBT in 2014.
• Sales in China came to $8.97 billion in 2014.
• 5.09% Market Share of Chinese market in 2014.
• 6.22% Market Share of Chinese market in 2012.

41. GM Generic Strategy
 GM pursues multiple generic strategies based on brand.
 Cadillac and Buick employ a differentiation strategy.
 Chevrolet and GMC employ a cost leadership strategy.
 Baojun - the China specific GM brand - employs a cost
leadership strategy.

42. GM Branding Strategy
 To complement its existing brands, GM has several additional
China specific brands:
 Baojun -Means “treasured horse” in Chinese
 Makes low cost vehicles that compete primarily with similar
Chinese automakers.
 Jiefang produces commercial vehicles and exports commercial
vehicle kits for export.
 Wuling produces light trucks and vans. It also produces vehicle
component parts.

43. GM’s Joint Venture Partners
 GM has many joint ventures, this demonstrates their strong
presence in the market.

44. GM China Metrics
 GM sold 3.54 million vehicles in China in 2014. It was GM’s 2nd
largest market in 2014 only behind the US.
 Sold 900,000 Buick’s in China accounting for 75% of all Buick’s
sales worldwide.
 GM has the second most sales in China based on vehicles sold
of any automaker in the world.
 Chinese earnings accounted for 48.66% of all GM EBT
 Their total market share is 14.60% and has been growing (though
not smoothly) at an average of .47% annually.

45. GM China Goals
 Plans to invest $14 billion in Chinese Joint Ventures from 2015
through 2018.
 Increase vehicle sales volume in China by 40% by 2018

46. GM Strategy going forward
 GM China is working to reduce vehicle related child injuries and
raise public awareness of child safety in and around vehicles with
the recent launch of Safe Kids China.
 Accelerate integration of OnStar into GM vehicles and grow
number of customers using the service in China.
 Expand product line breadth in China

47. BMW Generic Strategy
BMW is made of three different brands and pursues separate generic
strategies for all three.
 BMW pursues a differentiation strategy
 Rolls Royce pursues a focused strategy on the extremely high
end luxury car market. So, we believe it employs a focused
differentiated strategy.
 Mini pursues a focused strategy in the subcompact car market

48. BMW in China
 China accounted for 21.6% of BMW’s sales by volume in 2014.
China was also BMW’s largest market in the world by volume in
2014.
 There are six BMW models specifically built for the Chinese
market.
 In 2014 BMW opened more than 40 new BMW dealerships and 30
new Mini dealerships in China.

49. BMW Metrics in China
 BMW had 19.95 billion dollars in sales in 2014 in China.
 China contributed $598.5 million to BMW’s EBT, and accounted for
5.18% of BMW’s overall EBT.
 BMW has had sustained growth in market share, increasing at an
average of .24% annually.

50. BMW’s Joint Venture
Partners in China
 BMW Brilliance Automotive Ltd. 50% stake.
 Produces BMW vehicles for the Chinese market.
 This joint venture began in 2003 and marked the moment when
BMW went from an imported car to a truly market-present
automaker in China
 BMW does still import some resources and vehicles (started this
practice in 1994)

51. BMW China Goals
 Though they expect growth rates to trend lower they still expect
market growth to remain above the global premium segment
 BMW is cautious of what it calls “Normalization” of auto sales in
China in the coming years
 Considering all of this, BMW expects growth rates between 5-8%
in the coming years
 Greatly expand their product offers to continue to benefit from the
changing Chinese market

52. BMW Strategy going forward
 2020 vision includes unit sales of 2,745,000 from Mainland China
 BMW expects further growth in the luxury car market as well as
household income continues to grow

53. Thank you for your
attention!
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