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Old 21st July 2013, 16:57   #1
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Default How to win in the Asian Market - Talk given by Michael Dunne

As part of the Renault Nissan Discovery Tour that Team-BHP was recently invited to, we were treated to an insight about the what the asia car buyer wants and how India is well placed to play an important part in this. This insight was provided by an independent analyst - Michael Dunne


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For those who Asian car trend watchers, it is impossible not to know about Michael Dunne. Michael was the vice president for Asia Pacific for J.D. Power and Associates till 2010. J.D Power acquired his original company Automotive Resources Asia which he had founded in 1993. ARA assisted automakers and suppliers entering and competing in car markets across Asia.

Michael writes monthly columns for the Wall Street Journal and Automotive News. He has given various keynote talks at investor conferences in London, New York , Milan, Singapore and Tokyo since 2003. He has spent considerable time in China, Thailand and is currently based in Jakarta.

The topic of discussion was about the car buyer in the emerging market. This is the next wave of growth for the automotive industry.

It all began with an anecdote about how he started his automotive life in the US with an old Honda Accord for $1600 and he got a culture shock in Thailand where the same car cost new $30000 coupled with a 3 month wait and cash down upfront. The way people are willing to pay big money for cars in Asia show there is so much demand and aspiration. His neighbor in Jakarta spent $140000 on an ML Merc and yet uses it for the weekend,

The question is what does the consumer, in emerging markets want and also with so many competing brands, how do you satisfy them and keep them loyal?

At present, manufacturers have only tapped the aspirational demands, not the real demand.

Some basic statistics, Asia has a potential market of 3.1 billion motorists. 95%of these people are on two wheelers. Once would think that the Nano is the obvious follow-on choice.

Michael was of the opinion that the Nano is stranded in No Mans Land and mistakenly positioned as a glorified motorbike or a downgraded car. The marketing and positioning required never supported anything else. Looking at the Asian market as a percentage of global car sales, from what was 15% during the year 2000, the Asian market accounts for 50%. It is projected to touch 67% by 2020.


This poses the question on how? If not the Nano, how are other countries approaching this.


China has no middle class, either you are wealthy or you are not.

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The main profitable market are the wealthy elite in city who want expensive quality cars. Even the Chinese have not fully accepted Chinese brand cars.

Thailand's best selling car is a pick-up truck

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Thailands economy is primarily agriculture based hence for pick truck. Hence this has evolved as cars disguised as trucks, which cost upto $30000. This means again, the only the elite are the car buyers.


Indonesia love mini MPV's

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The minivan comprises of half the market at an average cost of $15000. This not the cheap car market

When he came to India. He put up the best selling car in India

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India is a place where the average person prefer to invest elsewhere. The Indian government has done the right thing to direct demand towards small cars. India is far ahead on this and is being smart to avoid dependence on imported oil.

Once average incomes take off beyond $4000 per annum, this is the inflection point to drive car ownership.

India has done the right things by focusing on frugal engineering, becoming the centre of excellence for small car design. Rather than continuously impose existing models, it is importance to design new products for existing markets as opposed to impose old functional designs.

The example of the Wuling Sunshine – global 4th best selling car. It is not the best but technically meets the need for large space in a smaller footprint.

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So, what is required to win in emerging markets which will account for 80% of global market in 2020?

The basic criteria is that cars will need to be affordable and cost <$10000 and have a fuel economy greater than 20 km/l

However to win in such a market, cars need the following:
  • Cool features
  • A brand that consumer trust
  • Feature space and connectivity as cars are the second living room
  • Small SUV or crossover

Nissan are using Datsun as a brand revival to open up a new segment by promoting affordability. Datsun is Nissan's question of survival. Manufacturers need to take these risks to survive and take a risk in designing for the market.


Some other snippets from the session: :
  • India - potential to be export base, growth is transparent and more realistic.
  • China - 50, 50 joint venture poses risks since no control on funds, IP and lack of transparency. A lot of invesntment went in as a result of herd mentality. $40 billion was sunk in wiouth any accountability.
  • Indonesia - shaky due to political issues, might be a potential market in 5-10 years.
  • Thailand is a very good manufacturing base but Indonesia is a better market
  • Car sharing is only suitable from affluent cities. There is also the trust and aspiration factors.
  • Tata heading right way in reviving the Nano by making it aspirational
  • Colours make a big impact
  • Connected car is huge growth area
  • Development of engine and transmission will not be as radical compared to the connected environment in the car.
  • Cars could be getting duller. People used to connect through cars but now people connect out of the car than with the car

Last edited by ajmat : 27th July 2013 at 22:45.
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Old 27th July 2013, 22:44   #2
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Default Re: How to win in the Asian Market - Talk given by Michael Dunne

Moving over to main forum!
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Old 27th July 2013, 23:27   #3
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Quote:
Originally Posted by ajmat View Post
As part of the Renault Nissan Discovery Tour that Team-BHP was recently invited to, we were treated to an insight about the what the asia car buyer wants and how India is well placed to play an important part in this. This insight was provided by an independent analyst - Michael Dunne

[*]Car sharing is only suitable from affluent cities. There is also the trust and aspiration factors.
[*]Tata heading right way in reviving the Nano by making it aspirational
[*]Colours make a big impact
[*]Connected car is huge growth area
[*]Development of engine and transmission will not be as radical compared to the connected environment in the car.
[*]Cars could be getting duller. People used to connect through cars but now people connect out of the car than with the car
The best example of aspirational value driving sales rather than actual demand can be seen with maruti's cars. Swift/dzire combo has been selling on par with the alto, even overtaking it in a couple of months.

The NANO not being able to sell despite the pathbreaking design is also justified by this. Hope the new positioning brings the success it truly deserves.

I could not completely understand the last point - cars becoming duller - from what I could get, it could mean becoming duller in terms of driving experience as there is not as much focus on engines and transmissions but rather on infotainment systems.

I am not really surprised though, people consider a bluetooth/usb enabled music system as an important feature when deciding on a car. Hyundai's strategy of providing these toys to the brim in their cars at the cost of performance factors such as vehicle dynamics seems to be paying off.

Interesting observations-
* china has no middle class
* small SUV - here to stay
* India has done the right thing by focusing on small cars to reduce oil dependency - are affordable hybrids the next big growth wave?

Last edited by DReddy : 27th July 2013 at 23:36.
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Old 28th July 2013, 07:51   #4
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Default Re: How to win in the Asian Market - Talk given by Michael Dunne

I think slowly the market will become mature . Definitely , indian market will be very different from any other market including other Asian markets.
In india cars of different segment rut from low end to luxury car market has a demand . I think we have a potential for pick up truck, SUVs and small cars . We need a car which gives a great mileage even with the traffic, low in maintenance and should have all the features like reverse camera etc . Hmmm also we are brand conscious , more than car being practical we still pay little more for the image . Small cars , minivans and SUVs have a grt future .
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Old 28th July 2013, 08:08   #5
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Default Re: How to win in the Asian Market - Talk given by Michael Dunne

Buying a car is still very much an aspirational need for most. Hence when a car is being bought there is so much joy and celebration in the family. People want the car reflect their tastes and more important feel that is is a recognition that they have reached a significant milestone. Hence what is perceived to be cheap looking is rejected. Look at the case of Etios where there were so many positives in Brand, size, engine, mileage, space etc but failed because it was perceived to be cheap looking.

On the other side the Govt. really needs to get it act together. Imagine the maximum fine GM will have on its Tavera's is Rs. 1000 per car as per the MV Act. Government needs to ensure that not only emission but safety standards need to be met. Why is Maruti still selling the OMNI? Why is ABS not standard for vehicles over a certain CC, for example the Swift should have ABS as standard? Why are car without ABS not having speed governors? What formal policy is there for scrapping and recycling of cars? The List still goes on ........

It is also high time that the traffic violations start getting linked to License and Insurance cost. Police fines are just too low. For example in the UK fine for speeding is 300 pounds plus 3 points on your license. Your insurance cost goes up. We need significant deterrents to bring more traffic discipline in the cites.

Guess the government in the major cities, needs to have camera's all over the place and start issuing challans for traffic violations with a minimum fine of Rs. 1000. This was they will reduce corruption, increase collections and I sure that they will recover their costs very fast. This will eventually lead to better traffic discipline.

The culture need to change to that one will aspire to own a car and drive with discipline and make to overall ownership experience enjoyable to the owner and fellow users of the road.

Cheers

KPS
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Old 28th July 2013, 22:22   #6
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Default Re: How to win in the Asian Market - Talk given by Michael Dunne

Well said KPS, Enforcement is key. You just need to look at Mumbai whether the cops have been given powers and they do not mess around
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