Jaguar Land Rover and The Chinese Premium Auto Market | In Practise

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Jaguar Land Rover and The Chinese Premium Auto Market

Current General Manager, Procurement and Supply Chain, SAIC General Motors Corporation

Why is this interview interesting?

  • Chinese premium auto market structure
  • Positioning of JLR versus leading German players
  • Why quality issues are a key cause of JLR underperformance in China
  • Brand identity and demographic of JLR consumer in China
  • How JLR can turn the performance around in China

Executive Bio

Liang Zhou

Current General Manager, Procurement and Supply Chain, SAIC General Motors Corporation

Liang has been working on the ground in the Chinese automotive market for the last 20 years at various different Chinese Joint Ventures with Western automotive companies. He began his career as a Purchasing Manager at Changan Ford Automobile, the JV between Changan and Ford. In 2012, Liang joined General Motors China as a Global Procurement and Supply Chain Manager. He is well connected with OEM's, Tier 1 suppliers and also larger dealer groups in China which proves invaulable given how opaque the market is to Westerners.Read more

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Interview Transcript

I think it would be a good if you could run us through your experience in the Chinese automotive market.

I'm the procurement manager for General Motors in China. I've been working in the automotive industry for more than 15 years now. I'm mainly responsible for the chassis, the body in white as well as the body exterior and interiors. Similarly, I work in parts purchasing. I'm responsible for different projects. I'm very glad to share my experience with the automotive industry in China.

How is the premium automotive market in China structured today in terms of number of cars sold per year and market share of the major players?

Actually, the premium automotive industry in China makes up about 10% of the total sales volume, which is approximately 3 million units per year. We are still expecting up to a 10% increase in sales year on year, due to the high demand in luxury cars, as well as premium autos, in China compared to the past. In the past, it was mainly volume increase competition, but now the industry has changed to holding volume competition, which means there is much more upgrading on the current structure of the automotive industry in China.

What are the main drivers of this growth?

Actually, there are several factors or incentives for it. The consumer is upgrading. In the past, every family had one type of car, but this car was a lower brand, a lower sector, but now, each family wants to upgrade their current car to a higher brand, to a luxury or premium car. So that's the first factor, the consumer upgrading.

The second factor is that the percentage of the premium market relative to the total volume in China for vehicles is relatively low, at around 9.8% to 12.3%. So we can see the average is around 10 or 11% for the premium autos as a percentage of the total volume. But, in developed countries, such as the US and Europe, the penetration rates of premium autos is around 15%. So that's around a 5% increase for the Chinese market for the premium autos.

The third factor is the price. Due to the fierce competition in the premium auto market, each brand is trying to get a larger market share, so they continuously decrease price. This means that BBA, Benz, BMW and Audi, all of them have decreased their prices this year, which also makes the consumers more willing to purchase premium autos in China.

The fourth factor is that there are more and more rich young people. Due to the auto limit, whereby the government limited the number of cars people can purchase in bigger cities, the first car that young people buy is typically a premium car. They want to have a premium car as their first car, which has also increased the sales of premium cars in China. So these are the main factors that mean that the premium auto industry in China is still increasing, despite the overall environment for the automotive industry, which may start to decrease year on year starting in 2018.

Is there a major difference between the sedan and SUV market growth in China?

In the past 5 to 10 years, the rate at which the SUV market has increased is bigger than the sedan market. The sedan was introduced to the Chinese market maybe 20 years ago, which was the starting point of the Chinese automotive industry. But, after about 10 years of development, people who purchased cars in China became more likely to buy SUVs because they had more utility. Families could use them to go out travelling or for holidays. So after 5 or 10 years, SUVs have had an increase in sales. But, in recent years, both sedans and SUVs have had around the same rate of increase because currently the market is more or less stable. That's why both sedans and SUVs have had the same rate of increase or we could say decrease because the Chinese automotive market is somewhat decreasing year on year and this is similar for sedans and SUVs. So that's the current situation.

So you would say the competition for SUVs has increased over the last couple of years?


What's the mix in the premium market, of those 3 million cars, between SUVs and Sedans roughly?

Of those 3 million cars, around 1 million are SUVs and around 1.5 million are sedans, and the rest would be other types of car.

And you'd expect the SUVs to increase to 1.5 million over the next few years?

Yes, each year we are seeing that tendency, but the increase rate is not so high now.

What are the major differences between the Chinese automotive market structure and the Western more developed markets?

From our understanding, the major difference between the Chinese automotive market and the Western automotive market is that the Western industry is already developed, which means it is stable. We can see that in the US and in Europe the penetration rate for premium autos is around 15% and currently stable. In China, the penetration rate for premium autos is around 10-11%, which means there is still some room to increase. As I said, we expect around a 4-5% increase maybe in the coming 5 years. I think that is the major difference.

Currently in Europe and the US, the competition between the OEMs is a holding volume competition, which means each year, the sales volume is stable. It consists of a lot of consumption upgrading, which means people who are changing their current cars, who will buy some new brand, maybe upgrading their current vehicle. In China, the volume is still increasing, which will cause a volume increase competition in the OEMs in China. So I think this is a major difference between the Chinese automotive industry and the Western one.

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Jaguar Land Rover and The Chinese Premium Auto Market

November 26, 2019

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