Executive summaryHolden is one of the fastest growing vehicle producers in Australia. Their output sales have grown to compete with other producers in Germany, Korea and France. Australian auto industry has grown extensively due to new models of cars manufactured by the company. As a matter of fact, Klier and Rubenstein (2010) indicate that Holden dominates major markets across Europe and Asia. However, by contrast, the company wants to introduce its product in China where auto companies are already flooded and these companies now attempt to make inroads in other countries.
With this in picture, this paper will critically carryout analyses of key risk factors Holden is likely to encounter in its attempt to introduce some of its car models in China. The paper will also provide recommendations on every risk factor as well as how such factors will impact on the product(s). These will be done through feasibility study including statistical data from key ministerial reports and auto companies in China. Table of contents Executive summary Key risk factors in the Chinese market2.0.1. Current market trends2.0.2. The government objectives for 2006-20102.0.3.
China is currently on the verge of replacing gasoline cars with Compressed Natural Gas (CNG) cars2.0.4. China Compulsory Certification2.0.5. Conclusion2.0.6. References Key risk factors in the Chinese market2.0.1. Current market trendsOne of the key risk factors the company ought to give consideration to is the current market trends of other cars supplied by other companies. Statistical analyses suggest that China is critically vital point and offers good market for other auto companies to invest in. Report by China Association of Automobile Manufacturers (2007), indicates that there currently exist five large players who supply the already insufficient cars to the country.
These players are: VW, Honda, Toyota, Hyundai and Nissan. According to the same statistics, in 2004 alone, the market share of the country based on VW, Honda and Hyundai was stated to be above their global market share. The figure below explicitly demonstrates the growth in sales among leading auto companies in the country. However, Holden need to ignore the above statistics as there are more risks to this market than opportunities available for investments. In other words, Chinese market share is not prudent for this company.
To begin with, there has been enormous investment of new model of cars over the past 5 years beginning from 2005. Giving the statistics, (James, 2006, p. 50) explains that arrival of new models by Chinese based companies has led to intense price cutting and thus affecting net profits previously enjoyed by foreign companies. In a separate research, figures presented shows that there was increase in total net earnings by leading auto producers (Fourin Auto China Weekly, 2010, p. 1). This stands at 45.3% between 2007 and 2009 however, profits dropped by 7% by the end of 2010.
To make it more visible to this Holden, European based companies have been the one adversely affected. The article explains that European based companies such as Citroen, Volkswagen and Fiat saw their annual sales dropping by 6.6, 24.5 and 34.5% respectively. Knowing that such trend did not take place many years ago, it will be correct to argue that market in china is still very volatile for Holden to introduce their products. We can also consider a very interesting statistics related to market trends in China.
First, whatever risk factor(s) is going to be discussed here, it is important for Holden to appreciate the fact that China is already a powerhouse in car manufacturing. Secondly, recently introduced regulations requiring that import duties be paid when foreign Companies have their vehicles in the port rather than when they are delivered to the buyers will make it harder for Holden to enjoy continuous supply unless they have firm orders.