China’s car market represents a huge opportunity for global car manufacturers, thanks to unrivalled growth in the car-owning population and a strong consumer appetite for new technologies.
China’s car market represents a huge opportunity for global car manufacturers, thanks to unrivalled growth in the car-owning population and a strong consumer appetite for new technologies. However, in order to succeed, I think foreign companies will have to take a ‘when in Rome’ – or indeed Beijing approach and form partnerships with Chinese IT companies to develop country-specific technologies.
Many of the biggest Western technology companies have a limited presence in China. Baidu and Haosou are the search engines of choice, not Google which has only a 1.7% share of the local market. The home-grown technology players and internet services companies’ unique knowledge of China’s many distinct provinces has already led to working relationships with foreign car makers.
Volkswagen, General Motors, Hyundai and Audi are now all selling vehicles with Baidu’s in-car infotainment systems. The Chinese search engine’s superior map coverage will be an important asset, especially as inbuilt satellite navigation with apps and voice or gesture-led controls become more common.
The Chinese are typically early adopters of new technologies as proved by phenomenal penetration rates in mobile internet and smartphone usage over the past few years. Tech-savvy consumers expect the integration of their connected world into the car connectivity. This will open up huge potential for platform providers as well as innovative IT start-ups to provide disruptive solutions that can enrich consumers’ connected life.
The more open attitude towards data sharing in China – unlike the west - will allow manufacturers to create new revenue streams, such as in-car software packages, pay-by-demand infotainment services and other customer insights that might be valuable for other service providers. Being the master over this data will be especially important, as it will keep consumers locked in to the car brand and future product offerings.
These revenue streams will become increasingly important. Better connectivity provides an enhanced ability to co-ordinate established trends such as car-sharing and pooling schemes, which make better use of space in densely populated areas. As urbanisation grows and the Chinese economy and car sales experience slower growth, I believe that customer data could become more lucrative than selling vehicles.
Foreign carmakers must recognise these trends in order to continue to succeed in the Chinese market. After all, local car brands have enjoyed $700 million of government subsidies and will find it easier to collaborate with other Chinese software firms. Manufacturers will need to continually reassess their IT strategy and build up their capability to manage new technologies. They will also need to strengthen R&D collaboration with their Tier 1 and 2 suppliers and focus more on using data and analytics to anticipate trends and disruptive developments. If they can adopt a “when in Beijing” philosophy for the Chinese market, carmakers can build on their strong brand credibility to succeed as the future of the car is revealed.
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