Fast road to success

Chinese automakers need to keep their ears on the ground for success in Africa

Chinese and other international automakers are fast turning their attention to the booming automobile market in Africa, to prop up sales in what has otherwise been a tough global market.

Flat growth in the developed markets like Europe and the US has put most of the global companies in a quandary as they have to not only keep production costs at reasonable levels, but also spend more on research and development to stay ahead of the game.

But for Chinese automakers, Africa is more than just a market to sell vehicles. It is also a buoyant, vibrant market for automobile parts exports. Motor vehicles and parts account for a fair share of China's total exports to Africa.

However, some of these Chinese auto parts exporters have not tasted the success they should in Africa due to a variety of reasons. Prominent among them are a lack of in-depth pre-market research, and a failure to sustain sales and after-sales networks. In most cases, these companies did not have a systematic and scientific plan for the African market.

Failure to have a proper African strategy will lead to long-term profit slumps in the after-sales market and an overall erosion of market confidence in Africa for Chinese auto brands.

Branding involves several factors including market positioning, product quality, performance, technology, equipment and services. Consumer recognition is vital to brand an image. If Chinese companies do not establish a proper communication channel with African consumers and obtain their trust, their brand value is equal to zero.

Automobiles are different from other commodities, as they feature high prices and usually involve follow-up investment. User satisfaction is dependent on quality and diversification of services, such as supply of spare parts, repair and maintenance, financing, second-hand car transactions and information feedback.

Chinese car branding lags behind the US and Europe, although China is gradually shifting from a major automobile importer to an exporter. Chinese car dealers are now beginning to show up at international auto expos, which is an effective and practical way to expand in overseas markets.

To establish a good brand image, Chinese companies should take heed of the following.

Chinese automakers must improve their product quality and develop long-term strategies and plans. Besides price advantage, Chinese auto companies should also focus more on after-sales services and increase publicity through local media.

Some companies lack a deep understanding of brand marketing, and their business should combine brand image, product quality, services and dealer system. Their products are similar, which may also lead to vicious price rivalry.

Currently most Chinese cars that are sold in Africa carry a price tag that is 35 percent lower on average than similar products from South Korea and Japan. Since the automobile market in South Africa is rather well developed, the main focus of Chinese auto companies has been East Africa, North Africa and West Africa. Since the local automotive industry in these regions is underdeveloped, and the level of consumption limited, low-priced Chinese cars have an edge over others.

However, Chinese enterprises need to follow local market policies, laws and regulations, and be in line with the needs of African consumers. Before entering the local market, they need to set up a proper after-sales service system, and establish good communication with the local government.

They should also have different strategies for different markets. Chinese export enterprises are often fraught with problems caused by cultural differences. Focusing on social responsibility and exporting Chinese-style corporate culture are two effective tools to strengthen integration. This is also about using Chinese soft power to reshape brand image.

Chinese enterprises also need to accelerate their independent R&D and innovation capacities. One effective way is to increase technology exchanges with Western counterparts, so that their staff will be equipped with sophisticated knowledge, skills, vision and auto culture.

It is also important to train a large number of local professionals and expand the sales and services network in Africa by entrusting construction work to local dealers. This is extremely important to multi-brand exporters, because they bear a greater risk compared with single brand exporters.

Most car companies have formulated their own development strategy in Africa, some with a three-year plan, some with five-year plans. These programs have clear objectives and specific measures, so that investment capital is available to ensure the implementation of corporate strategies in Africa.

This shows that Chinese brands are transforming from the temporary, short-term plan to a step-by-step layout strategy. From what I have heard, it is clear that companies have put a lot of effort, especially in the marketing layout and the dealer system.

Many Chinese companies have established their own branches or offices, while some have set up a comprehensive overseas branch system, such as Chery Automobile Co Ltd and Zhengzhou Yutong Bus Co Ltd.

Great Wall Automobile Group had 15 sales and service outlets as of last year, while Lifan Group and Geely have 287 and 220 outlets. Yutong Bus has 68 overseas service centers, 52 dealers and investments in six parts warehouses and 26 accessories consignment warehouses. Some enterprises have also developed their own dealer management software system, such as Chery and Yutong.

The author is a researcher at the Institute of Industrial Economics of the Chinese Academy of Social Sciences in Beijing. The views do not necessarily reflect those of China Daily.

(China Daily 04/19/2013 page7)