Attempting to gain prestige, improve competitiveness and open new sales channels abroad, Chinese automakers are investing in new design and engineering operations in Europe that could bolster their long-term prospects in the region and at home. Local R&D operations help manufacturers better understand market requirements, learn the vagaries of foreign regulations and compliance procedures, and establish ties with new suppliers.
| Stefan Bratzel |
“These development centres could certainly contribute to driving technological advances in China,” says Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany. “They are, however, much more likely making ground preparations to launch in the European market, since they realize their products wouldn’t stand a chance if they cannot be developed to meet European needs”.
An R&D centre or design studio is not necessarily a precursor to a market launch, nor a requirement; some brands have quietly operated in Europe for years without trying to introduce a model in the region. Volkswagen Group’s largest JV partner, SAIC Motor, established a small engineering operation in Europe in 2005, as did VW’s newest JV partner, JAC Motors.
But the slowdown in China’s auto market over the past few years, culminating in the recent slump, has underscored the need for automakers there to expand their reach to survive. China’s domestic brands have been hurt the most, with Geely dropping from second to fifth place in sales in one year. The early adoption of stricter “C6” emissions standards in many parts of China, as well as trade tensions with the United States, prompted forecaster LMC Automotive to revise their estimates for China’s light-vehicle market through 2025; the analyst firm now expects a second straight year of contraction with only a gradual recovery.
