Automotive News Europe - August 2019 - 13

AUTOMOTIVE NEWS EUROPE

AUTOMAKERS

Local knowledge
Chinese use Europe-based r&d centers as springboard to bigger things
CHRISTIAAN HETZNER
chetzner@autonews.com

n an attempt 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.
Chinese companies have been trying to
establish a foothold in Europe for years,
with Geely first debuting at the Frankfurt
auto show in September 2005. To date,
however, they have failed spectacularly,
due in part to a reputation for woeful
quality following crash-test scandals involving the infamous Jiangling Landwind
SUV and Brilliance BS4 sedan.
New engineering bases such as that of
Great Wall Motors in Germany could address some of these shortcomings. Local r&d operations help manufacturers
better understand market requirements,
learn the complicated ins and outs of
foreign homologation procedures and
establish ties with new suppliers.

Technological advances
"These development centers could certainly contribute to driving technological
advances in China," said 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," said Bratzel, who
tracks innovation in the industry with the
consultancy PwC. Granted, an r&d center
or design studio is not necessarily a precursor to a market launch, nor a requirement.
Some brands have quietly been here for
years without mounting a serious offensive.
Volkswagen Group's largest joint venture
partner, SAIC Motor, established a small
engineering operation in Europe in 2005,
as did VW's newest JV partner, JAC Motors.

be judicious in choosing the right moment
to expand beyond domestic borders. "It's
very easy to enter a market," Li said, "but
very hard to survive and win."

Troubles at home

Chery Automobile picked a Frankfurt suburb for the site of its r&d center, which
opened late last year. The center is supposed to help Chery prepare for its European launch. Stressing the company's
desire to sustainably grow, Chery Europe
Director Jochen Tüting said the carmaker
was still finalizing its plans for Europe. In
the meantime, most of the team is concentrating on design and design feasibility work for the parent in Wuhu.

Yet the slowdown in China's auto market
over the past few years, culminating in the
recent slump, has underlined the need for
carmakers there to expand their reach to
survive. Domestic brands have been hurt
the most, with Geely dropping to fifth from
second-largest by sales in one year. The
early imposition of stricter "C6" emission
standards in many parts of China, as well
as trade tensions with the Trump administration, prompted forecaster LMC Automotive to revise its 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 thereafter.
While sales abroad can potentially help
offset difficulties at home, analysts warn
that the prestige that comes with succeeding in Europe requires mastering its
brutal market conditions. Many global
carmakers have been forced to scale
down their presence in the region, shedding brands and shutting plants - with
General Motors giving up entirely.

Photo: Bloomberg

As recently as last year, financially beleaguered Qoros had looked to set up an
engineering center in Germany. Yet plans
for a European launch appear further off
than ever, despite it being the first Chinese carmaker to earn EuroNCAP's top
rating of five stars in a crash test.

The Geely CD debuted at the 2005
Frankfurt show. Today Geely has an
r&d center near Frankfurt.

AUGUST 2019

While Chinese premium electric-vehicle
brand Nio has a development center
in Munich with almost 200 employees,
founder William Li told Automotive News
Europe in April that the company would

That said, industry experts agree that a
small-scale r&d center can help attract
new design and engineering talent while
limiting financial risks. Frankfurt in particular has proved to be a popular location, situated in the heart of Europe's
automotive cluster with immediate proximity to one of the Continent's largest
international airports.

"Chery Europe's approach does not entail
the aim of being the first Chinese carmaker to operate here with as broad a
product portfolio as possible, but rather
examine various possible business scenarios on the basis of profitability," Tüting
said in an email answer to questions.
In May, Geely opened a development
center virtually next door to Chery's.
Geely's facility is expected to employ
about 300 engineers within the next
few years and help accelerate the company's efforts in electrification and ultralow-emissions vehicles.
The choice echoes a similar move by
Hyundai Europe, which founded its
technical center near Frankfurt in 2003
and shortly thereafter established a
joint design studio with sister brand
Kia. "These Chinese brands are learning from those who did it best," said
Bratzel. "Hyundai and Kia were able
to establish themselves in Europe in a
far shorter time frame than Toyota, for
example, in part because early on they
built up local research and development operations." ANE

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