Report: China Recommended As Major Focus For Automakers

January 22, 2010

Boston Consulting Group has released a study that should be particularly interesting to automakers. BCG has determined that Brazil, Russia, India, and China (aka the BRIC countries) will account for nearly 31% of the growth in the auto market over the next four years. Of the four, China is best positioned for stable, long-term investment.

The news isn't entirely surprising.  Last year, China officially passed the U.S. to become the world's largest auto market. New car sales in China were up a whopping 42% in 2009, and although that rate is expected to fall sharply to around 5% in the future, BCG says China's forward motion should be steady and reliable. Russia is also expected to see strong improvement -- around 15% growth per year through 2014 -- but compared to highly regulated, highly insular China, Russia's oil-based economy is a roller coaster of surprises. Brazil and India are seen as somewhat riskier, with slower growth potential.

We've given a good bit of coverage to the various automakers operating in China -- not only companies like Ford and GM who are working toward strong market penetration, but also partnerships like that between Volkswagen and Suzuki, as well as China's indigenous companies like Warren Buffet fave BYD. Which is to say: there's a lot of competition in China's auto market right now. In fact, according to BCG, there are over 100 automakers operating in the country, and the report organizers warn that "there is a risk that capacity could outstrip demand some day". (To us, it sounds like a huge bubble in the making.)

BCG also pointed out that there is no "silver bullet" vehicle that can address the needs of all four BRIC countries: "Brazilians favor sporty hatchbacks. Russians prefer western sedans and SUVs. Indians seek ultra low-cost minicars and the Chinese enjoy affordable luxury-style sedans". The automakers who survive in BRIC markets -- or any market, for that matter -- will be those who build brand awareness and meet the culturally specific desires of buyers.

[BCG via Freep]

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