CHINESE AUTOMAKERS IN JAPAN'S BACKYARD
Page 1: Chinese Automakers In Japan's Backyard
Page 2: Electrics • Autonomous • Ride-Sharing • New Deals
Chinese automakers appear to be cracking the powerful Japanese oligopoly in Southeast Asia -something western automakers have tried - and failed at - for more than 30 years.
Southeast Asia, aka "ASEAN", is the loose association of 10 countries - including Indonesia, Thailand, Vietnam, Malaysia and the Philippines - located in the South Pacific. As a group, the nations are home to nearly 500 million people, an expanding middle-class and 3.4 million new car purchases a year. In Indonesia alone, annual car sales will reach around 1.1 million in 2018.
Newest Chinese entrant to the Indonesian market is the Glory 580, built in Indonesia by Dongfeng Sokon Motors - DFSK
Since the 1980s, Toyota, Honda, Nissan, Mitsubishi and Suzuki have combined to lock in Japanese market share above 90% across ASEAN and even as high as 96% in Indonesia. Japanese automakers have secured this significant market share through brand recognition, low-cost manufacturing, affordable spare parts and reliable used-car values. And of course, Japanese quality. They've proven especially nimble and responsive to Indonesian government mandates, especially with regard to green vehicles and low-emission requirements. All of these advantages are so significant that local auto industry officials refer to their own market as "Japan's Backyard."
But now Chinese automakers are mounting a challenge. Last week I attended the 2018 Jakarta Motor Show. Indonesian auto dealers and industry leaders shared with me some of the surprising advances the Chinese have already made. Wuling Motors, which opened a factory 60 miles from Jakarta in 2017, and Dongfeng Koson ("DFSK") are winning a record number of Indonesian customers.
Their secret sauce: Irresistibly low prices. Wuling and Dongfeng Sokon offer small 7-seater vans and SUVs for as little as $11,000 in Indonesia. Perennial market leader, Toyota, has lost 6 points of market share in the past 12 months, an almost unthinkable change of fortunes. Demand for MPV's ("multi-person vehicles") remains exceptionally high in Indonesia, thanks to a tax system that makes people-movers more affordable than sedans.
Elsewhere in ASEAN, Chinese automakers are also gaining traction.
In Thailand this week, BYD won a contract to supply 1,000 electric vehicles to the Airports Authority of Thailand. And Shanghai Automotive continue to increase production of its MG brand vehicles at a plant on the country's Eastern Seaboard.
In Malaysia, Geely is advancing into the market via equity investments. Prime Minister Dr Mahathir (shaking hands with Geely Chairman Li Shufu below) visited Geely this week to confirm terms of a joint venture. Geely, which already owns Volvo, Lotus, and The London Electric Vehicle Company, acquired a 49% share of Proton in 2017.
Japanese brands still dominate the markets, of course. And they will not cede further ground without a battle. But there are fresh and unexpected cracks in the Japanese fortress that the Chinese will work hard to pry open wider.
- PAGE 2 -
ELECTRICS • AUTONOMOUS • RIDE-SHARING• NEW DEALS
>> Faraday Future. The high-end automaker will start mass production of its concept FF91 in early 2019. 0-to-60 in an unthinkable 2.39 seconds, the electric vehicle (with autonomous features) is currently being assembled at Faraday's factory in Hanford, California. The company also broke ground recently on its factory in Guangzhou, China.
Takeaway: Not so long ago, Faraday Future was on the ropes. The company is a battler, but with an $800 million cash infusion (of a promised $2 billion) this is their last chance to get it right. Having production set in both China and the U.S. is the right start and should help sales.
>> BYD. China's leading EV bus maker has won contracts to supply electric buses to both the City of Atlanta and the State of Georgia. BYD municipal buses range in price from $500,000 to more than $1 million.
Takeaway: From its production base in Lancaster, California, BYD has now delivered to 40 different US customers, including the Facebook campus, UCLA and Stanford. Globally, BYD buses can be found on the streets of London, Amsterdam, Santiago and Budapest.
>> Baidu & Competition. China's leading autonomous technology company has an increasing number of homegrown competitors. There are now 12 Chinese start-ups chasing the leader. Among them, Roadstar, Pony.ai, Jingchi, Horizon Robotics and TuSimple have particularly high-calibre teams with global education and experience.
Takeaway: In China's tech industry, government officials like to see the emergence of 2-3 "Champions". The smaller number allows players to scale while keeping some level of competition. Witness Ofo, Mobike and Hello bike in bike-sharing. So, we should look for the emergence of a No. 2 and No. 3 to Baidu in autonomy and new challengers (like Meituan) to Didi in ride-hailing.
>> Testing CA vs. Testing China. It is no secret that real-world testing in crucial to collecting data that is central to enhancements in autonomous vehicle performance. California has now issued autonomous testing permits to 55 companies, including 13 Chinese companies.
Takeaway: The Chinese cities of Beijing, Shanghai and Guangzhou are now issuing autonomous driving testing permits. So far Daimler is the only foreign firm to win a testing permit in China. Is there a serious market access issue here? Or are the other foreign companies just not applying for permits? Where is Waymo, Cruise, Nuro or Zoox?
>> Grab. Southeast Asia's number one ride-hailing firm is teaming up with China PingAn's Good Doctor to deliver medical services in Southeast Asia, where access is uneven. Grab's Indonesian competitor, Go-jek, already offers a wide range of services under the GoLife App, including: Go-Massage, Go-Clean (housekeeper), Go-Glam (salon), Go-Daily (groceries), Go-Ride (document delivery) and Go-Laundry,
Takeaway: If Southeast Asia's 10-country markets were anywhere in the world other than ensconced between China and India, they would command a lot more attention. Southeast Asia's largest market, Indonesia, has a population fast-approaching 300 million, making it number four globally after China, India and the United States. By 2030, the Southeast Asian population will climb to 640 million, almost the size of two Americas.
>> CaoCao and EVCard. Two leading electric vehicle car-sharing platforms are in the hunt for fresh capital to fund their expansions. Geely backs CaoCao. And EVCard is a subsidiary of Shanghai Auto.
Takeaway: Chinese car companies are launching car-sharing services to push sales of EVs and also to punch back at ride-hailing giants like Didi. Earlier this summer, First Auto, Changan Automobile and Dongfeng Motors announced plans to cooperate in a unified car-sharing platform.
>> NIO. China's most advanced premium electric car maker has filed for an IPO on the NYSE. The aim is to raise up to $2 billion. NIO backers include Tencent, Baidu and Sequoia Capital.
Takeaway: NIO has been so very impressive since its formation four short years ago. With top talent driving operations based in San Jose, Munich and Shanghai, the first product (the "ES8") is as good as any since Tesla demonstrated that electric vehicles can be fast and good-looking. The key hurdle now is sales: Will NIO be able to generate the Tesla-like aura and prestige necessary to attract and keep fastidious-about-image Chinese consumers?