Britain's lessons

Experience of British carmakers offers some lessons for Chinese counterparts

Think of a country which halfway through the 20th century was the raging tiger of the world's motor industry, with its vehicles exported to just about every country in the world and with brands which were renowned for their advanced technology and customer appeal. Think of a country which - for a developed nation - today has one of the smallest domestically owned automotive sectors yet which is still at the forefront of vehicle design. You would be thinking of the same country - Britain.

Britain gave the world many of its iconic motor brands but is now viewed by some observers as being like an aircraft carrier moored off the coast of continental Europe, serving as an assembly source for Japanese, American and now Indian carmakers.

So could the rise and dramatic fall of the British-owned motor industry have lessons for the burgeoning and apparently invincible motor industry of today's China?

In 1950 Britain dominated the global automotive market, providing 52 percent of the world's exported vehicles. That was a remarkable achievement yet one which was sadly short lived - the 1960s and 1970s saw the decimation of output, jobs and companies.

The symbol of Britain's transient strength and eventual weakness was the conglomerate known as British Leyland (BL), a company which became a metaphor for the ills of the industrial sector in Britain in the post war years. So what went wrong?

The key factors behind the decline are fairly clear. They span: A failure to recognize the pace of improvement among competitors; weak management; overly powerful trades unions; too high costs coupled with poor product quality; and a singular failure to care for brand values. Oh, yes, and one other ingredient - the dead hand, toward the end, of government intervention.

In the 1950s, Britain's motor manufacturers could still sell second-rate and poorly produced and supported vehicles in countries which lacked indigenous competitors and had undemanding consumers.

The Chinese parallel here is obvious. Most of China's vehicle exports today are going to undemanding markets such as Chile, Ukraine and Africa. These are countries which do not demand the latest technological developments or impose the latest legislative standards, particularly in respect of emissions and safety.

Chinese managers need to very carefully track what overseas rivals are doing, driven in many cases by the legislative standards which China is only slowly embracing both at home and in export markets, and they also need to be concerned about labor costs and employee commitment.

At its peak, BL controlled some of the best and most iconic car brands in the global motor industry lexicon including Austin, Morris, MG, Riley, Wolseley, Triumph, Jaguar, Daimler and many more. Yet this enormous heritage was largely squandered by an uncaring management that failed to understand the power of these assets.

Chinese makers have some lessons to learn in this area. Attitudes to Chinese motor brands seem surprisingly lax: Little effort is being made to educate audiences outside China about those brands, all of which have strong export sales ambitions. Global brand building takes years and costs millions - it is a process which should be well under way right now.

Finally, BL's end came after an unhappy period of government control. In China, of course, many automakers are completely controlled by the State and all are heavily influenced by its strategic direction. Of course, that is the way in China and few could argue that that result has been anything but positive - up to now. But politicians do not understand issues such as branding, specifications and the ingredients which make one model more desirable than another.

Professional, world-class managers are required for that and, if there is one thing Chinese leaders could usefully do now to consolidate the power of the Chinese motor industry, it is to grow and attract more such people and then let them get on with the job of growing their businesses without undue central control.

On the face of it, China is becoming the dominant power in global automotive production. But Chinese products will not be taken seriously until they compete successfully in the world's most demanding car markets - in North America, Europe and Japan. Chinese brands are conspicuously absent there.

And there is a real lack of perception about what brand building really entails. It involves high investment, consistent application and a real understanding of the values of the brand and a sure-fire means of communicating those values to a mass audience. In successful Western companies - from Coca-Cola to Mercedes - there is a single-minded commitment to the brand and a dedication to protecting, nurturing and growing the brand in every market. Do we see that among indigenous Chinese auto brands? We do not.

That is the way to succeed and it is a long drawn out process to fashion and launch a new brand in these highly competitive and critical markets. But progress is slow at present and that will, before very long, be a real dampener on overseas sales growth for Chinese makers.

So there are lots to praise about the modern Chinese motor industry - but there are some concerns too.

Martin Hayes is executive chairman of public relations firm Automotive PR and a former senior executive at vehicle group British Leyland.