x Abu Dhabi, UAETuesday 25 July 2017

China's car makers must innovate or stay in back seat

Chery, Geely, Great Wall, BYD and JAC - all fine brands, beautifully displayed at Auto China 2010 in Beijing last week, but hardly household names outside of China.

BEIJING // Chery, Geely, Great Wall, BYD and JAC - all fine brands, beautifully displayed at Auto China 2010 in Beijing last week, but hardly household names outside of China. They are also evidence that while China is making and buying cars in record numbers and is destined to dominate the world's car market, it is still a long way off becoming the saviour of the industry.

China overtook the US last year as the world's biggest car maker and companies sold 13.6 million vehicles last year in the country as increasingly well-off domestic consumers continued on a shopping spree that has run for years, underpinned by government incentives such as lower taxes. But no one yet wants to be seen on the Corso in Milan behind the wheel of a Xiali. And the Champs d'Elysees is untroubled by the presence of a Chery.

It would be churlish to doubt China's ambitions and its skill at fulfilling them but there is a serious gap. The big reason for this is that China is still struggling to innovate, especially in the car market. Chinese consumers do not really like domestically produced cars. They will buy their QQs and their Xialis because they are cheaper, but given the option they would always go for an imported car. This is why Volkswagen has done so well there, by perfectly positioning its Passat to a hungry market.

One eye-catching model looked exactly like a smart new Mini, until you read the sign that says it's a Lifan 320. Who? The car maker BYD, which counts Warren Buffett among its investors, is one of China's most progressive companies with inventive and exciting products. But its hybrid cars are very similar to Toyota's and are not going to set the world on fire. Chery, China's biggest domestic brand, displayed its global ambitions when it announced at Auto China that it had signed the Argentine football wizard Lionel Messi as an international ambassador to promote its brands.

But you could sign the entire Argentine World Cup squad and it wouldn't hide the fact that for many Chinese domestic brands the quality is not yet there. Very few Chinese cars meet say, strict European standards on safety, although this is changing fast. But there is still a way to go and China needs to acquire manufacturing expertise to build the kind of cars that will sell abroad. The western companies are also proving fleet of foot in meeting the specific demands of the Chinese market.

If you are able to buy a Cadillac in China, for example, there is no way you will drive it yourself - such a loss of face. You sit in the back. So the Cadillac CTS since 2008 has featured a bigger back seat. This has gone on to become the norm for that model around the world, showing that what's good for China is also good for everyone else. The Mercedes-Benz E-class has been a huge hit in China and the German car maker has introduced an extended E-class sedan for China. Audi and Ford have also made bigger back seats in their high-end models for Chinese buyers.

Rolls-Royce has also introduced a long vehicle for the chauffeur classes of Beijing, Guangzhou and Shanghai, and expects sales to more than triple this year to between 300 and 400 cars. China has been busy transferring technology from a number of creaky western makers such as MG Rover, but it is running out of western companies it can acquire. Visitors to the China Auto Show were definitely more interested in Volvo now that Geely has bought the Swedish car maker from Ford. And Beijing Automotive will also experience a burst of interest now that it has access to Saab technology it bought from General Motors.

This kind of expertise needs to sink in; to be what one Chinese engineer once described as "absorbed". Then we can start hailing the new giant of the world car industry. @Email:business@thenational.ae