In less than two weeks, German leader Gerhard Schroeder will be with Chinese leader Zhu Rongji, on-board the maiden voyage of the new Shanghai magnalev. People’s Daily is reporting that Chinese business is propping up the German economy right now. From what I saw while visiting Beijing in September, this is probably true.
Havingbeen raised in thehome of”the big three“, I pay attention to automobiles. Beijing has a lot of cars; the traffic situation (and I was in the traffic constantly) makes Boston or Manhattanlook like a child’s game. The first thing you notice about the cars is that Chinese brands dominate all others. Names like Songhuajiang, Changhe, Jiefang, Dongfeng, Xiali, and Santana. I asked around, and found that Xiali was a joint venture with Toyota but is now based in Tianjing and majority controlled by China. Santana is the only “Chinese” brand not controlled by China, and is a joint venture with Volkswagen. I would estimate that the brands listed above make up for at least 85% of the vehicles on the road at any time.
Even more surprising, most of the remaining cars are not Japanese or Korean. Based on geographical proximity and expertise,one would expect the Japanese and Korean auto makers to be swamping the market. Instead, the clear leader by far for foreign-brand cars in Beijing is Volkswagen, with other German automakers like Volvo and Audi also selling some cars. American, Japanese, and Korean brands combined sell practically nothing.
It became a mission of mine to discover why only Germans seemed to be able to crack the Chinese auto market, but I only found more mysteries. I saw only a few auto showrooms in the city; huge, glitzy, multi-story showrooms with shiny cars positioned at strategic intersections. They were all American brands. Why is it that the best chance of seeing an American car in Beijing is to visit a showroom? If these other brands don’t even have a dealership, where the heck are people buying all of these cars?
So I started asking Beijing residentswho owned cars (mostly German cars)to describe their car-buying experiences. I found that car-buying, like everything else in China, involves knowing the right people and a lot of hustle. And car-buying definitely does not involve a visit to the glitzy showroom. I found that the Chinese brands sell their cars from huge lots on the outside of the city. And I found that you can even estimate how much someone paid for their car by looking at where the plates were issued (Guangzhou is a good place to buy cars). But most of all I found that Volkswagen has a ton of credibility for being willing to play by Chinese rules.
This was the story I heard often (in relation to software as often as automotive). Chinese people, I was told, are sick of foreign companies coming in, exploiting the Chinese people, and then leaving with the loot. Other companies just try to siphon off as much as possible while leaving Chinese industry hollow, but Volkswagen is willing to work as equal peers with the local manufacturing outfits. Volkswagen was willing to recycle old models for the Chinese market and sell at Chinese prices, Volkswagen was willing to play the same hustle that Chinese manufacturers play, and so on. In contrast, the people I talked to seemed to think of the Japanese automakersas arrogant and exploitative. Since Beijing seems to love Japanese department stores, and Japanese restaurants were really popular, I doubt that the perception of Japanese auto makers was indicative of any sort of anti-Japan sentiment.
The way I see it, the Germans are just doing a much better job of doing business with China, because they have taken the time to understand the market. (Not that I understand the market very well, mind you, but all of the locals tell me that Germans do, and even I amsmart enough to see that the big glitzy American showrooms aren’t working.)