Edited by Asiautos Auto Part
Under the high degree of "involution" of domestic competition, going overseas has become an important strategy for more and more car companies. However, there are many challenges in overseas markets, and in the face of tariff policy adjustments, market demand differences, etc., how can Chinese automakers break the situation?
On August 30, 2024, the 2024 Automotive Pioneer Forum was held in Chengdu at the same time as the Auto Show. Magna and the China Council for the Promotion of International Trade (CCPIT) Automotive Industry Sub-Council have released the Blue Book on China's Automotive Globalization to explore the changing landscape of the global automotive industry.
Magna is the world's leading automotive supplier and also provides one-stop services for car companies to go global. After the meeting, Kurt Bachmaier, Vice President of Global Sales and Marketing of Magna's Vehicle Division, and Peng Junhu, Vice President of Magna's Vehicle Division in China, were interviewed by Tencent Auto and other media.
Kurt Bachmaier said that there are indeed significant differences in consumer expectations and preferences across markets, such as Chinese consumers, who tend to be very interested in new technologies such as speech recognition, while Europe is relatively sluggish. However, the current share of Chinese electric vehicles in the European electric vehicle market has reached 11%, and the first batch of "crab-eating" European consumers have begun to show more and more preferences for Chinese technology, which will also affect the formation of preferences in the European market. "When the consumer preferences and market demand of the Chinese market and the European and American markets gradually converge, we will eventually see that quality and cost performance have become the two core decisive forces."
The following is the full text of the group interview:
Media: I would like to know more about Magna's experience and strategies in helping Chinese automakers with European market certification and local regulations?
Kurt Bachmaier: Magna can provide a full range of services to its customers in China, including engineering development, supply chain management, and vehicle manufacturing. In terms of certification, we have many years of experience in cutting products into major European markets, and can help our existing customer groups and future Chinese OEM customers to better meet the legal and regulatory requirements of specific markets and complete vehicle certification.
Media: I have two questions. First, compared with the previous rise of Japan and Korea automakers, what are the differences in the impact and changes of the global auto landscape from the rise of Chinese automakers? The second question is, will Chinese automakers' going overseas have an impact on or major changes in the global supplier and supply chain structure?
Peng Junhu: First of all, I think that the rise of the automobile industry in Japan and Korea and its integration into the Western market has provided a lot of experience that can be used for reference, and has contributed to the pattern of the international market for fuel vehicles. The difference is that the globalization of Chinese automobiles is accompanied by a general trend of switching from traditional fuel vehicles to new energy sources. In the future, I think that in the field of new energy, Chinese automobiles are expected to lead the world.
Second, I think there are two considerations for the impact of the global supply chain pattern. First, the current Chinese cars going overseas, along with many opportunities, Chinese suppliers go overseas, which is a trend. Second, for Magna, over the past 20 years, we have integrated overseas technology and management into the Chinese market. With the globalization of Chinese automobiles, it may be that we need to transfer the technology and experience of dealing with Chinese automakers to overseas markets. In the future, Magna can carry out more cooperation with Chinese car companies and supply chains in globalization, and jointly help and empower Chinese companies to go global.
Media: In the Chinese market, with the rise of new car-making forces, R&D investment in intelligent cockpits and intelligent driving is very large, and the focus of interest has shifted relatively. Compared with traditional enterprises in Europe and the United States, they pay more attention to mechanical performance and vehicle performance, which is very different, will this affect Chinese car companies to go overseas? Can Chinese vehicles adapt to the needs of overseas users?
Kurt Bachmaier: Let me start with my point of view. For European OEMs, it is true that they have traditionally attached more importance to mechanical performance, and the optimization of the performance of oil vehicles is one of their priorities. Of course, on the road to new energy, European OEMs are also spending a lot of effort to improve the performance of HMI human-machine interfaces.
My observation can be divided into three aspects, one is that after I participated in many auto shows in China, I feel very deeply that China's new energy vehicles and Chinese OEMs have taken the lead, and at the same time, I should also pay attention to the unremitting efforts of European and American OEMs, and they have also made great progress in this regard, which is the first point.
Second, you are also right, there is still a big difference between the expectations of consumers and his consumption preferences in various markets. In China, consumers are generally very interested in new technologies, technologies like speech recognition, and in Europe there may be some slowness in this regard. However, as China's new energy vehicles enter the European market, the first batch of "crab-eating" European consumers will begin to show more and more preferences for Chinese technology, which will also affect the formation of preferences in the European market. I also pointed out in my speech just now that China's share of electric vehicles in the European electric vehicle market has reached 11%, which is a considerable and very important force, so it will also play a role in shaping the preferences of the European market.
Third, I think that when the consumer preferences and market demand of the Chinese market and the European and American markets gradually converge, we will eventually see that quality and cost performance will become the two core decisive forces.
Peng Junhu: In the current market environment, consumers in different countries have some differences in their needs for intelligence. In the process of Chinese car companies going overseas, Magna can communicate with Chinese customers early when they introduce products in the early stage, and inform them which configurations may be redundant in the European market, so as to avoid some unnecessary costs. In addition, the road of Chinese car companies going overseas has just begun, and they also need to consider that there is a stage of influencing consumers and training consumers on the marketing side.
Media: Recently, China's new energy vehicles have encountered some policy obstacles in Europe, I would like to ask the two of you, what are the suggestions for cars to go overseas under the current situation?
Kurt Bachmaier: It should be said that it is difficult for us to change the external environment, which means that it is difficult for us to change this uncertainty and change in policy, but what car companies can do is to take the initiative and respond more flexibly. At present, the EU policy has not been officially implemented, and there may be some changes, but for Magna and our future Chinese OEM partners, we can respond to all changes. We need to have a flexible response plan, from SKD, CKD to CBU OEM, and flexibly consider which mode to plan, and plan as soon as possible.
Finally, I would like to emphasize that Chinese OEMs must pursue long-termism in the process of going overseas, and once you have a long-term perspective, no matter how the policy changes, it is within our control.
With so much uncertainty about policy risk starting to emerge, Magna is able to bring unique value to Chinese OEMs. If you build a new factory in Europe, the investment is very large, the risks involved are very high, and the market share that may be won is still unknown, so Magna hopes to help Chinese OEMs avoid pitfalls. We can help Chinese OEMs quickly enter the market with small investment through short-term cooperation, and when there are some positive changes in the EU's policies, we can actively seize the opportunities of the policy window.
Media: Now the pressure on Chinese car companies to export to Europe or export United States is relatively large, we see that many Chinese car companies have exported to the "Belt and Road" countries or ASEAN countries, so in the third world countries to lay out this piece, Magna has any advanced successful experience to share with us, or do you have any suggestions for Chinese car companies to lay out these markets?
Peng Junhu: For third world countries, China's automobiles are still mainly exported. Different countries have different regulatory requirements, from Magna's point of view, we can have a good communication with these OEMs in China, on the level of export market laws and regulations, from the perspective of parts, so that the vehicle can better meet the requirements of the local market.
Media: Looking ahead, what role do you think Chinese automakers will play in the global market in the future, and how will Magna continue to support Chinese automakers in achieving this aspiration?
Kurt Bachmaier: I'm going to answer your question in a few ways. First of all, let's talk about the European market, I also emphasized at the conference just now that the current share of Chinese OEMs in the European electric vehicle market is 11%, and it is currently mainly concentrated in four OEMs, including SAIC and BYD. For other China's leading new energy OEMs, there are also opportunities for brand improvement. Therefore, I think there is still a significant window of opportunity to enter the European market, and Chinese OEMs have every opportunity to expand their share in the European market.
In the process of globalization of Chinese OEMs, Magna can help Chinese OEMs achieve success. Magna is a full-service provider, and we can meet the needs of Chinese OEMs in terms of vehicle certification and adaptive development. At the same time, in terms of supply chain management, we can provide flexible solutions, for example, Chinese OEMs need to deploy their own parts and components systems in Europe, which is a demand that we can fully meet. At the same time, it is entirely feasible for us to find the right supply chain partner for Chinese OEMs in Europe. Magna already has more than 100 parts factories in Europe, which can quickly help Chinese OEMs to achieve matching, so these flexible ways can help Chinese OEMs open up the situation in a short period of time.
Media: In your speech, you showed you some of the model projects that we have served other companies, can you give an example? Just now you mentioned that we can do engineering or manufacturing for some small batches of projects or models, what is the minimum batch of our cooperation? What does this kind of cooperation mean for companies?
Kurt Bachmaier: The smallest batch size can be a car (laughs). For the smallest batch size, even if there is only one vehicle, we can provide support. Usually, we can cooperate with the flexible range of 1 unit to about 150,000 units per year. This range also depends on the target price, cost structure and localization strategy, which is one of our main considerations. At present, according to the demand of Chinese OEMs to enter the European market, it is estimated that the main volume will be between 15,000 and 30,000 per year.
For a new market, there is still a lot of uncertainty about the expectations of Chinese OEMs in the European market, and it is not clear how the market will react in the short term. So for Magna, we want to provide a very high degree of flexibility to help Chinese OEMs quickly seize opportunities when the market changes, and at the same time use Magna's existing facilities to produce with minimal capital investment.
Media: I would like to ask, did you visit the Chengdu Auto Show today, what are the points you pay more attention to, and what direction will you pay more attention to Chinese car companies this year?
Kurt Bachmaier: Whether it's the Beijing Auto Show, the Shanghai Auto Show, or the Chengdu Auto Show, I've been there many times. I think the growth of Chinese OEMs, especially after the pandemic, really surprised me. Divided into two aspects, one is in intelligent technology, Chinese OEMs have indeed made a very big leap and achieved a great breakthrough. Second, in terms of the speed of the model to market, it is indeed amazing, and it is usually difficult for Europe and the United States to have such a dense number of new products on the market in a relatively short period of time. Generally speaking, the standard for European and American OEMs is 24 to 36 months to launch a new product, but in China, the speed can even be cut in half.
Every time I go to the exhibition, I have a unique perspective, and I will see if this product can also be sold in Europe. So I will score Chinese cars from several angles, including first, its appearance size; the second is its appearance; The third is whether its performance and other related characteristics can meet the needs of consumers in other markets. Now I am more and more convinced, I feel that Chinese cars, especially in the past year and a half, including appearance, exterior design, and related development, have become more and more global perspectives, and can fully enter the European market and even the United States market.
Media: The automotive industry is undergoing a transformation, in the process of intelligence, Magna, as a parts supplier, in the process of cooperation with Chinese OEMs, has there been any change in the way of cooperation, including the pace and speed?
Junhu Peng: Magna has been in China for more than 20 years, and Magna has a particularly important localization strategy of how to cultivate more local talent. Over the past 20 years, we have made great strides in localization, and from the perspective of talent, we have been able to fully and effectively communicate with Chinese OEMs, and in the face of the gradually expanding market share of our own brands, Magna has been able to meet the requirements of local OEMs in terms of cost and quality.
Media: The electrification trend in the European market has slowed down, so does Magna have any suggestions for Chinese car companies to go overseas in Europe, and should the pace of new energy going overseas be slowed down? In addition, from Magna's point of view, do you have any good suggestions for the layout of Chinese car companies in the European market?
Kurt Bachmaier: Europe is the second largest market for new energy vehicles after China, and it's true that, as you said, the process of electrification is slowing down in Europe at the moment, probably for a number of reasons. But we're also seeing that the speed of electrification isn't quite consistent in different countries in Europe, which is a phenomenon we've observed. Perhaps it will take time for the penetration rate of electrification to increase significantly in Europe.
Therefore, the suggestion for Chinese OEMs is to not only adhere to the advantages of pure electric vehicles, but also pay attention to hybrid technologies such as plug-in hybrids. Such a two-in-one or inclusive strategy can better help Chinese OEMs go overseas and win the European market.
The reason why I have a lot of confidence in the EU for the BEVs from Chinese OEMs is because the range is a strong point for Chinese OEMs. European consumers are actually very concerned about the range of batteries, and China's new energy vehicles have solved the problem of range anxiety in terms of range, so I think Chinese OEMs still have a very good chance of winning in this regard.
In addition, even if we just talked about the possible slowdown in the momentum of electric vehicles in Europe, I think this is only a temporary phenomenon. The leading edge of Chinese OEMs in new energy and intelligence may bring new breakthroughs to the European electric vehicle market.
Media: Chinese automakers will have a demand to build factories overseas, can Magna assist automakers in building factories overseas? In addition to the European and American markets, does Magna have advantages in other markets, such as Southeast Asia and Africa? How much of a role can we play if Chinese automakers target these countries?
Kurt Bachmaier: It's okay to help OEMs build their own factories, and Magna has a lot of experience in this area. However, our current suggestion is that Chinese OEMs should make good use of the existing production capacity in Europe under the current situation of going overseas in small batches. When sales in Europe gradually begin to expand, we will consider building a new factory of our own. Either way, Magna has the support to come along.
Peng Junhu: On your second question, I would like to share my own thoughts. Judging from the current situation, Europe is very important in the globalization process of Chinese car companies. If you can gain a firm foothold in Europe and have good sales and brands, it can play a very important role in expanding other markets and brand development. Therefore, when we communicate with domestic OEMs, we will also have such a consensus. The core is that the European market can allow Chinese car companies to prove their strength on the brand side and the technology side. Magna can empower Chinese automakers as they enter Europe.
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