Auto Manufacturing in China for the Chinese Market
- Do you see a place for Canadian automobile manufacturers in China?
- Do you see a potential for Chinese automakers to export to Canada?
1. Assembling the cars in the destination country, China, can be better / easier / more profitable for Canadian automobile manufacturers for various reasons:
- China has cheap labour, getting assembly done in China lowers overall labour costs.
- Delivering cars in parts rather than single pieces may lower the delivery costs.
- Car sales in China have been soaring up last years which makes China a great target market for car manufacturers.
- Canadian companies can form a joint venture with Chinese companies to utilize Chinese’s local knowledge and experience, they can together manufacture high-end automobiles for the Chinese market.
- China has a massive population, if the Canadians achieves to have a good marketing strategy and build a brand awareness in China, then they can leverage the size of the population and have huge sales.
However, there are some challenges that Canadians should expect too:
- China has so many automobile brands that offer cheap, reasonable quality cars. As well as Canadian manufacturers should adopt a strong marketing strategy to attract Chinese customers, they should also have a reasonable pricing strategy to compete with them.
- When Chinese brands learn that Canadians are trying to penetrate the Chinese market, they may decide to strengthen their focus on the domestic market and create competition to prevent Canadian from succeeding.
- Cultural differences will be in place in every stage of the business as Chinese and Canadian cultures are completely different.
- Language barrier is likely to be in place too since not all Chinese speak or understand English very well.
- Canadian companies do not have any knowledge or experience in Chinese markets. There is too much uncertainty for them if they don’t achieve to collaborate / form a joint venture with a Chinese company.
So overall, I definitely see a place for Canadian manufacturers in China, but they have to well prepare for the local culture and analyse the Chinese market well to form the best marketing strategy. Besides, they have to be prepared for serious competition too.
2. Chinese automakers can consider exporting cars to Canada for various reasons:
- Chinese has low-cost, affordable cars of reasonable quality. Low-income and even a part of middle-income families in Canada might be interested in Chinese brands just because of the price point.
- Since Canadians have more purchasing power than Chinese, Chinese brands can sell their cars for higher prices in Canada. This brings higher profit to Chinese companies.
- If Chinese brands conduct a good marketing strategy and build awareness in Canada, they can use Canada as a stepping point to expand to United States which is a larger market.
However, there are some challenges that Chinese should expect too:
- Chinese auto brands are not known or familiarized outside of China. Therefore, they need to run a massive marketing strategy to build awareness in Canadian market. That kind of marketing costs tons of capital.
- In case any service or maintenance problem occurs in Canada for a Chinese car, in order to address and fix those problems, Chinese must open up many service stores in Canada. This again requires again massive capital investment.
- Chinese companies do not have any knowledge or experience in North America. There is too much uncertainty for them as well as cultural barriers, language barriers.. They may need to conduct a massive market research and analyze the market well to have a proactive penetration strategy.
- When Canadian brands learn that Chinese are trying to penetrate the Canadian market, they may decide to strengthen their focus on the domestic market and lower their prices, make promotions, offer new features to create competition for Chinese.
So overall, I definitely think that there is a potential for Chinese automakers to expand to Canada, but they have to well prepare for the local culture and analyze the Canadian market well to form the best penetration strategy. Besides, they have to be prepared for serious competition too.