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Sunday, May 11, 2008

The Global Aspirations Of Emerging Giants

The explosion of the growth of the automobile industry is indeed mind boggling. In a recent visit to Asia, I noticed a phenomenol explosion of automobiles on the road. Besides several well known brands, a new wave of asian headquartered automobile players are moving aggressively into the market. Hyundai for example is rolling out far more sophisticated models in the Korean market than those available in the US markets. The Tata's are making huge leaps in the automobile world stradlling from the Nano to buying premium auto brands like the Jaguar & Land Rover. The chinese are working hard to expand their global footprint in the automobile world, though they suffer from a serious image problem.

One chinese manufacturer named Cherry tied up with Chrysler to make cars for western markets. Its interesting to see how this relationship pans out. Ten year old Cherry wants to expand globally on its own. Its CEO explains in this conversation the challenges that lay ahead for it :

Chery has four major challenges :

" -First, we are facing a shortage of qualified people. To deal with our rapid growth in both domestic and overseas markets, Chery’s management and technical specialists all have to take multiple positions, some of which they may not be good at, and that is not sustainable.
- Second, there’s an issue with brands. Chery brands already enjoy good awareness in China for inexpensive, low-end cars. We want to move gradually toward the higher end of the market but still ensure customer loyalty and sustained growth.
- Related to that point is product quality. Chery must improve its product quality along the whole value chain instead of just focusing on the production line. This requires fundamental improvements in important processes such as product development, supplier management, logistics management, production management, and sales and after-sales services.
- Finally, Chery needs to raise huge amounts of money to maintain its growth. The cash flow generated from day-to-day operations would not be sufficient to support our global ambitions, so Chery needs better access to the capital markets, perhaps by being listed on domestic or overseas stock markets or both".

The only thing that has been downplayed here is the supply ecosystem for the automobile industry - in china an ecosystem gets created owing to cheap capital - one will have to see how Cherry could scale up on that on a global basis . Nonetheless, these points are very well said and I liked the sequence in which would think Yin Tangyao, Cherry's CEO has listed the issues : people, brand, quality and capital - in that order would make a huge difference towards global business.


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