Learn from The Chinese and Indian Auto Industry Model

[jpdm]

Auto industry of China (Source: Xinhua)


The history of the industry is simple, Chinese automakers used to manufacture foreign brands under license, then they began developing and producing new models with foreign companies, and now they are building their own research centers, and nurturing homegrown brands.

However, for many years homegrown brands were regarded as low-end, substandard products in China because many of them proved unreliable.



That is now a thing of the past. Homegrown brands such as Red Flag and Roewe are now moving into the more lucrative high-end market currently dominated by foreign automakers.


Homegrown brands are "a beautiful butterfly that is struggling free of its ugly chrysalid", said Chen Guangzu, an expert with the China Automotive Industry Consultative Committee.



For instance, Geely's ambitions know no bounds. The company has said it wants to be a world famous brand by 2015, with an annual output of two million cars, including 1.3 million sold overseas.


Geely just put China's first continuously variable valve timing (CVVT) engine into production in its plant in Ningbo, in east China's Zhejiang Province. Great Wall said it would equip all its SUVs and pick-ups with its newly developed oil-saving diesel engine. Meanwhile, both Brilliance and Chery turned out their own 1.8T turbo engines.

The year 2006 saw Chinese homegrown brands reach a new level of sophistication -- besides improving product quality and exterior design, they are now developing their own engines.

Statistics show that homegrown brands are taking an increasing share in the domestic market for passenger cars, up from 10.5 percent in 2004 to 26 percent in 2005. Tianjin Xiali, Chery and Geely rank among the top 10 best sellers in 2005.


Sales of homegrown brands outperformed those of Chinese-foreign joint ventures in the first two months this year.


China, once known as the kingdom of bicycles, has been transformed over the last two decades into a car culture, with vehicle ownership up 30 times between 1985 and 2004.

[jpdm]

[SIZE=2]Indian Experience
[/SIZE]
[SIZE=2]1970 to 1980 [/SIZE]
[SIZE=2]India's automotive industry begins to grow relatively fast, fuelled by six automotive companies: [/SIZE]

• [SIZE=2]
• Telco (now Tata Motors)
• Ashok Leyland
• Mahindra & Mahindra
• Hindustan Motors
• Premier Automobiles
• Bajaj Auto[/SIZE]

[SIZE=2]However, having a car is still seen as a luxury. [/SIZE]
[SIZE=2]This is at least partly because the sector's growth is held back by requirements for production licences and restrictions on both production within India and on imports. [/SIZE]

[SIZE=2]1980 to 1985[/SIZE]
[SIZE=2]
J[/SIZE][SIZE=2]apanese manufacturers begin to build motorcycle, car and commercial vehicle factories in India, often in partnership with Indian firms. [/SIZE]
[SIZE=2]Component manufacturers also enter into joint-venture agreements, with European and US firms. [/SIZE][SIZE=2]Exports start to grow. [/SIZE]

[SIZE=2]1985 to 1990[/SIZE]
[SIZE=2]The auto component sector, which had been protected by high import tariffs, squares up to competitors as the rules are changed. [/SIZE]
[SIZE=2]Maruti Udyog enters the passenger car segment. [/SIZE]
[SIZE=2]During the following years, Japanese manufacturers started selling motorcycles and light commercial vehicles. [/SIZE]

[SIZE=2]1990 to1995[/SIZE]

[SIZE=2]Economic liberalisation gets underway, allowing passenger car production without licences, though import restrictions remained in place. [/SIZE]

[SIZE=2]Hero Honda emerges as a major operator in the motorcycle market, while Maruti Udyog becomes the leading passenger car maker. [/SIZE]

[SIZE=2]1995 to 2000 [/SIZE]
[SIZE=2]International car makers enter the Indian market, a trend that accelerates. [/SIZE]
[SIZE=2] India's streets are gradually getting fuller

[/SIZE]
[SIZE=2]Advanced technology is introduced to meet competitive pressures, and environmental and safety imperatives. [/SIZE]
[SIZE=2]
As India's car market grows, the country is also emerging as a global automotive production hub.[/SIZE][SIZE=2]Cars developed and produced entirely in India for both the domestic and exports markets emerge. [/SIZE]

[SIZE=2]Efficiency, capacity and environmental issues are identified, along with initiatives aimed at encouraging research and development to address such issues. [/SIZE]
[SIZE=2]
Source: India's Ministry of Heavy industries & Public Enterprises Draft Automotive Mission Plan 2006-2016. [/SIZE]

[jpdm]

The Malaysian Experience (TED Case Studies, June 2001)

The automotive sector in Malaysia is assumed to be an engine of industrial development, provider of technological capability, and generator of inter-industry linkages (plastics, still, electronics, glass, metal, rubber, textile industry).

The history of Malaysian automotive industry goes back to early 1960s, where Malaysian government developed a policy to promote an integrated automobile industry to strengthen Malaysia's industrial base.



The main objectives of the government in promoting an automobile assembly industry were to reduce imports, save foreign exchange, create employment, develop strong forward and backward linkages with the rest of the economy, and transfer industrial technology.



The government's efforts were fully reimbursed - industry managed to move into the manufacture of motor vehicles and component parts in the 1980s and 1990s from just being fragmented and inefficient assembly base in 1960s and 1970s and fulfilled the abovementioned goals, that is significantly contributed to the national economy in terms of manufacturing output and employment.



The automotive industry was led by the two national car projects (Proton and Perodua).

The success story of Proton can be directly attributed to the government policy, which is said to be the most interventionist regime among the ASEAN countries. The national car manufacturers enjoy a certain amount of protection against foreign competition in the form of tariff and other non-tariff barriers.

[architect]

*jpdm -

Dr. Czarina Saloma-Akpedonu the Chair of the Dept. of Sociology and Anthropology of Ateneo de Manila University wrote a case study on Proton. You may want to invite her as a resource speaker although I have to admit I don't know if that will be okay as she is with Ateneo. I am not privy to the inter-school relationships and policies when it comes to these things as I am only a graduate of the the public school near Ateneo.

BTW, Dr. Saloma-Akpedonu, or Bopeep, is part of our design group, although AFAIK she has yet to register with tsikot.

[webmiester]

In the Philippines, the government has also been instrumental in the development/destruction of the philippine automotive industry...

Unlike in Malaysia where foreign components are subjected to high tariffs, the Philippine government was one of the first among ASEAN nations to bring down tariffs in major industrial products! Today, Philippine tariffs in automotive products are one of the lowest in the region.

The GATT and WTO were cornerstone trade policies enforced by newer administrations ensuring the public access to a wide range of high quality, imported car products...

Can you guess who signed the GATT? She was a senator back then and now holds a much higher position in office. Rest assured, as long as we keep voting politicians based on their star struck complexion, the Philippines' automotive and other manufacturing industries will continue to take the less taken road of trade liberalization.

Even our agriculture is taking the same road by the way...

Im so glad we learn...I just dont know if we apply.

[architect]

*jp,

In studying the various industry models employed by the different countries as a prelude to delineating our own we need to consider several factors and considerations –

1. Technology - established, emerging, and future - has always been an enabler insofar as redefining industry models is concerned, be it from a manufacturing standpoint or from a business perspective. And technology, by its own very nature, begets more technology, so much so that the resultant progress and development is increasingly exponential. Or in other words, the vast majority of technological inventions would have occurred within the last hour if we were to compress world history into a 24-hour clock. This means whatever industry model, even if implemented successfully just five years ago, may not necessarily be the optimal solution in the present day.

What we need to appreciate is that technology is also a leveraging enabler, of which the Internet is a prime example. It not only levels the playing field but very often lowers entry barriers, especially for small players in an established industry.

2. Global Market – Given that physical, territorial boundaries are less restrictive and play a lesser role in the world market today, we can not ignore developmental trends in other countries even if we are developing (initially) for the local market. Unlike in other cases, we can’t depend on our government protecting our market for us. With our limited resources, this obviously means we can’t afford to compete head-on with established market players, be they local or foreign. Yet, the harsh reality is that in a free market, our products will have to have a distinguishing appeal that will make potential buyers select them.

If we can achieve this balance then we will have a fighting chance of succeeding.

3. In today’s highly automated, standardized production lines, the product is incidental. If you think about it, most manufacturing approaches are fundamentally applicable for several industries. The underlying principles are almost always the same. Hence, we should not limit ourselves to studying auto industry models. We need to look beyond and see what we can learn from the models of other industries – computers, constructions, etc. The key is standardization. The irony though is that since automation makes customization possible, automation, to some extent, becomes non-essential, especially if evaluated in the context of a different sense of economics (see below) and within the framework of our own deconstructed manufacturing process.

4. Economics – In evaluating our approach, we often consult ourselves as well as learn from the feedback of those reading the threads in the sub-forum. While a lot of the input has been very useful, in doing so, we often forget that our primary market target is not ourselves. Nor is it those providing the feedback, be they positive or negative. Because our target market most likely would not have Internet access nor the inclination, if their family happen to have access, to spend the time browsing this forum.

In fact, our project’s stakeholders will have an entirely different sense of ROI and other economic terms whose definitions we often take for granted. When they invest in their mom-and-pop operations, they are not concerned about ROI. What they are concerned about is whether they will have enough daily cash to buy food, and perhaps a little. When they purchase items on installment, their concern is not how high the interest is or how long the payment terms will last but whether they can afford to make the monthly payments.

When you consider all the above and put them in perspective vis-à-vis with what we are attempting, then you will realize why a conventional auto industry model will never work for our project.

[uls]

there won't be a Proton, Chery, or Tata equivalent in the Philippines anytime soon.

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The pinoy car will come from a local car enthusiast's workshop.

A guy who loves cars so much he is crazy enough to spend his own money to build a car from scratch.

He will build just one car.

He will have it registered at the LTO.

He will drive it around and people will notice and ask what the hell it is.

People will ask him if it is for sale.

He will tell people he can build one for X amount of money.

Someone will actually put money down.

That's how the pinoy car will begin.

[dprox]

there won't be a Proton, Chery, or Tata equivalent in the Philippines anytime soon.

-----------------------


The pinoy car will come from a local car enthusiast's workshop.

A guy who loves cars so much he is crazy enough to spend his own money to build a car from scratch.

He will build just one car.

He will have it registered at the LTO.

He will drive it around and people will notice and ask what the hell it is.

People will ask him if it is for sale.

He will tell people he can build one for X amount of money.

[ 2 MISSING STEPS ]

Someone will actually put money down.

That's how the pinoy car will begin.

You're catching on, man, and almost on the ball!
There's just one step you missed out.
He's crazy enough to trademark-register and industrial-patent the thing,
even just for the fun of it, and see what happens.

A second missing step is he will need to find kindred spirits in forums like Tsikot.com,
and contend with an endless chain of naysayers while the ball gets rolling, until ... (next step) ...

[uls]

it's the only way...

The other way is for a group of locals to come up with a few billion pesos, build a factory, buy machinery and robotics, establish credit lines with raw materials and parts suppliers here and abroad, employ people for administration, R&D, assembly etc...

WHICH ISN'T LIKELY TO HAPPEN...

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You can trademark the brand.

But what is there to patent? the design? the shape?

If there will be other businessmen who see profit potential in building cars from scratch, they would be designing and building their own cars.

And besides, i think the enthusiast who builds a car people will actually buy should focus on his business rather than spend his time and money suing copycats.

[mbeige]

Uls, that's probably what's going to happen and I couldn't agree more than what you and Dprox said.