A contrarian on China's local branding strategy

Posted by: Dexter Roberts on June 21, 2006

With all the news coming out lately about China’s plans to build an indigenous brand vehicle (see BusinessWeek.com, 5/30/06, “China’s Drive for Local Car Brands”), to compete with the likes of General Motors, Toyota, and Hyundai, I decided it was time to meet with one of the more contrarian voices in the Chinese auto industry. Jia Xinguang, chief analyst at the China National Automotive Industry Consulting and Development Corp., has been doing policy research on the car biz since China’s reform and opening in 1978.

But unlike the boosterish voices you usually hear when talking to local auto analysts, Jia has plenty of doubts about China’s ability to build a domestic brand. He also isn’t sure how easy it will be to successfully tap overseas talent (see BusinessWeek.com, 6/19/06, “China Carmakers’ Global Talent Hunt”), to build those brands. We met him on June 16 at the historic Laoshe Teahouse in south Beijing, a soothing environment sure to help one forget about the mad rush of vehicles outside in the capital’s streets. Over Longjing green tea, he made the following comments, condensed and edited here for clarity:

The rush by local Chinese companies to tap overseas talent:

“Traditionally the Chinese automobile industry didn’t pay any attention to self product development. Now they are paying attention to this because of growing competition. But talent is not a readily available resource in China. So many companies are searching for talent.

“So they are absorbing talents with overseas training. But the problem is that many talents that have had outstanding successes overseas may not duplicate that in China—China may not provide them the same good environment. So a majority of talents will not produce the same outstanding results here in China as those they earlier produced overseas.

“I’ve been to General Motor’s r&d center in California. I asked them why they chose to set up a center in California. They answered that it was because California has such good weather but also because of the good environment. I found that the center has a very open structure. Everyone’s ideas can be discussed and tried out. But in China you don’t have such habits and there is not such a laidback organization environment. And so it is difficult for one’s ideas to be tried out.

The challenge of attracting the best talent:

“To attract good talent you must face the problem of luring them to difficult, unattractive environments. For example First Auto Works is based in Changchun, Jilin province [which is located in China’s northeast and is one of China’s largest auto makers joint venturing with Volkswagen and Audi] and Dongfeng is based in Shiyan, Hubei [one of China top three auto makers that partners with Nissan, PSA Citroen, and others, and is located in a remote mountain region.] It is almost impossible to convince returnee Chinese to go to these remote places.

“Another issue is this: people working in technology are able to reach very high levels in management at a Ford or at a GM. But in a Chinese company, one has to not only be good at technology but one also must be very good at politics or at being an official. In Chinese auto companies the highest technical position is chief engineer, but one also must be an official from the government to be able to hold that position.

“And there are new problems emerging in this trend of attracting overseas Chinese. People used to think that those who had worked and studied overseas of course, would be real talented people. But recently some people have returned who have faked their achievements. Some of these returnees’ capabilities are just not that good.

“Chinese companies have this illusion that they can cure all their problems by simply importing talent with foreign experience. But there are huge differences in the markets and the levels of development between China and America.

**

As Chinese companies shift into high gear in their pursuit of overseas talents and competitive brands, they would do well to consider these sobering words from Beijing.

Post a comment

 

About

Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

BW Mall - Sponsored Links

Buy a link now!