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Honda In China

Honda In China. By: Peter Kennedy, Mary Liu, Rohit Mayadam and Vinayak Kayal. China joined WTO in 2001 T ariff reductions and eliminating local content requirements benefits growth 2006 tariff for imported auto parts lowered to 10 %

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Honda In China

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  1. Honda In China By: Peter Kennedy, Mary Liu, Rohit Mayadamand Vinayak Kayal.

  2. China joined WTO in 2001 • Tariff reductions and eliminating local content requirements benefits growth • 2006 tariff for imported auto parts lowered to 10% • Attracts a great number of foreign direct investment in China • The VW-FAW joint ventures brought some major car manufacturers to China • Opening the market to domestic car manufactures China is an attractive market

  3. Production costs decreased due to growing local production • Chinese suppliers opened up to foreign companies • They are engaged in multiple joint ventures • Wages are as low as US $0.50/hour • Compared to $31.67 US in the United States • Or $5.04 US in Mexico China is an attractive market

  4. Major costs component is raw materials China is an attractive market

  5. Market Potential

  6. Guangzhou Honda has capacity of 240,000 units • Company produced 202,312 and sold 202,066 units • Contributed 99% of sales • Overall production increase of 38.8% in 2002 • 36.7% in 2003, making China the fourth largest auto producer • Third largest auto market worldwide Market Potential

  7. Market Potential

  8. In Beijing 100 people out of 1000 own private cars • With 1.4 billion population, the graph indicates the huge potential of the market Growth Rate

  9. Growth rate is increasing dramatically from 2001-2003 • From 500,000 units to 2,000,000 within 2 years • In the comparison to South America region, Korea, India and South Africa Growth Rate

  10. Growth Rate

  11. Market Entry Strategy

  12. Honda entered china with joint venture with Guangzhou Automobile Group • Forming Guangqi Honda Automobile Co • Established July 1998 • Capital US$ 283.29 million Market Entry Strategy

  13. Capitalization ratio:50% Guangzhou Auto Group • 40% Honda Motor Co. • 10% Honda Motor (China) • Location: Guangzhou City, Guangdong Province, China • Employment: Approximately 6,800 associates Market Entry Strategy

  14. Sales results for July 2011, 30,646 cars • July, up 28.57% month on month • In the first quarter of 2005 Honda was No. 2 car seller in China • Behind the number one company Hyundai • Honda sold 117,130 vehicles in 2003, making it the fifth largest automaker in China, • Sales grew by 31 percent in 2007. Effectiveness of Strategy

  15. Established: July 2003 • Capital Investment: US$250 million • Capitalization Ratio: 50% Dongfeng Motor Group 40% Honda Motor Co. • 10% Honda Motor (China) Investment Co. • Location: Wuhan, Hubei Province Strategic Alliances

  16. Representative: Yasuhide Mizuno, President • Employment: 4,180 associates • Products: CR-V, Civic, Spirior • Sales Network: 285 dealer locations (as of the end of October 2010 • Dongfeng Honda Automobile Co., another Honda joint venture in China with Dongfeng Motor GroupCo Strategic Alliance

  17. Cain Wang, VP of AdChina said: "Since the internet has become a powerful medium for consumers to decide which brands they like or dislike, it has become an integral part of the car purchase decision process.  The role of the car marketer and dealer as the initial point of reference for information is on the decrease.  More often these days, consumers decide which car to buy before reaching the dealer's showroom." Chinese Customer’s Want

  18. They want to makes comparison of price, product and features • Across brands and models quick and efficiently • Consumers can reject car brands and models even before they walk into a car dealership. • Consumers in China want access to information from one source. Chinese Customer’s Want

  19. Fashion Chaser (10%) • Fashion Chasers love to try new things and have a keen interest in fashion and technology trends.   • To a bigger or lesser extent, they are narcissistic. • They want to be the focus of attention.   • They like personalization in both products and services. •  They want to change the colour, interior decoration and even the logo. Different Segments

  20.  When they purchase a car, they pay special attention: • to the exterior design and technological innovation.   • They pay less attention to gasoline consumption and maneuverability. • The key channels from which they obtain information are TV, and mobile phones Different Segments

  21. Hedonistic Life Lover (20%) • Hedonistic Life Lovers have modern values.   • They care about enjoyment and being happy. •  For them, life should be full of fun and happiness make the most of life.   • They like western things • When they buy cars, they are willing to borrow money from banks.  . Different Segments

  22. When they choose cars, they have high requirements: • Horsepower, functions, maneuverability, interior space and decoration.   • Conversely, they do not care as much about the brand.   • When they look for information they go to car exhibitions, test drive and listen to radio. • Hedonistic Life Lovers are more likely to consider buying: • Buick, Ford, Mazda and Great Wall Motors Different Segments

  23. Status Seeker (20%) • Status Seekers care a great deal about how other people look at them • Want to win respect from others through their wealthy lives and successful careers.   • To them, chasing a higher social status is a means to success.   • When they buy cars, they like to buy new models, so that they can show off in front of others.   • Out of the five consumer segments, Status Seekers like SUVs the most.   Different Segments

  24. Brand, craftsmanship, interior decoration are important • They care less about gasoline consumption and horsepower.   • Means of touch-points, they can be reached via magazines, and WOM. • Status Seekers have highest income level of five segments.    • 49% of Status Seekers intend to buy a car within the next 12 months.   • Audi and BMW are brands they consider in their next purchases. Different Segments

  25. Progressive Achiever (24%) • Progressive Achievers believe that a person's values come out best through work.   • To them, life is a constant progress to bigger achievements.   • Therefore, they are willing to work overtime to earn more money. • In this segment, 81% are men.   • When they buy cars, they pay more attention to comfort and brand.   Different Segments

  26. Their requirements on exterior design are relatively less.   • The Internet and WOM from relatives and friends are channels where they get most of their information on cars. • 27% of current car owners have a Volkswagen. •  For those who intend to buy in the near future, Volkswagen and Chevrolet are brands that progressive Different Segments

  27. Family-oriented Traditionalists (26%) • Are driven by traditional Chinese values. •  What they care most about is the harmony of the family. •  In terms of car purchase, they put emphasis on fuel consumption and low carbon emission. •  In addition, safety, price-value ratio and second hand resale value are all important considerations. •  Exterior design and technology, on the other hand, are relatively less important. • . Different Segments

  28.  Compared to other segments, Family-oriented Traditionalists tend to turn to newspapers for car purchase information more. • Family-oriented Traditionalists are older and more skewed towards female. • 19% of this segment wants to buy a new car within the next 6 months and many of them prefer Volkswagen.   • Currents owners tend to drive Toyota, Buick and Chevrolet more than other segments Different Segments

  29. Honda strives to make car buying a joy • They are aware of their customers needs • Honda has great online resources available • Understands who their customers are and build to suit • This is shown by their rapid growth and units produced • They are the second largest automotive company in China Comments on Strategy

  30. Honda’s main mission in the Chinese’s auto industry is to become the “automaker closest to customers” in China. • Honda Motor Co., 646,631 units in China in 2010, which is a 12.2% growth. • Build stronger collaborations with their local partners Guangzhou Automobile and Dongfeng Motors. • Honda aims to increase its dealerships in China to about 890 from about 810 in the future. Success Achieved

  31. Honda surpassed Nissan in 2001 to become the second-largest Japanese automobile manufacturer, as of August 2008 • Hondas initiative to spread awareness and go eco friendly environmentally by introducing more hybrid models Success Achieved

  32. Honda has set high sales goals for the year 2011 as much as 700,000 units which is 12% more than 2010. • Introducing three hybrid models into the Chinese automobile industry. The Insight, Fit Hybrid and CR-Z by the end of 2012. • Honda also aims at exhibiting a concept model of the LI NIAN, at the Guangzhou Motor Show. Future Positioning

  33. Future Positioning

  34. Hondas has been successful in China because of its new products and technologies, which exceed the expectations of the Chinese clientele. • Honda aims to maximize all its manufacturing and assembling in China in the future. • Honda will introducing Acura’s hybrid version within the next three years. • Honda will exhibit U3-X, one of the product applications of Honda Robotics, a compact one-wheel drive personal mobility device. • Honda plans to launch the Elysion concept model in the Chinese Market by the year 2012. Future Positioning

  35. Our suggestions/recommendations to Honda is that • They focus on product development, research and development. • Try and create innovative products to exceed all expectations of the automobile industry in China • Do justice to their tag line "The Power of Dreams”. • Remember their mission statement of “Maintaining a global viewpoint, we are dedicated to supplying products of the highest quality, yet at a reasonable price for worldwide customer satisfaction” Recommendations

  36. Thank-you

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