Big World Brand Products Fall in China

The following article was translated using both Microsoft Azure Open AI and Google Translation AI. The original article can be found in Produk Merek-merek Besar Dunia Bertumbangan di China

General Motors from the US once dominated the China market with its automotive products for decades. Sales in China reached 4 million cars in 2017, surpassing GM’s sales in the US market. However, that position has faded since 2017.

In 2023, sales of GM and its affiliated companies in China will only reach 2.1 million units, as reported by The Hong Kong Post, March 9 2024 edition. Volkswagen (VW) experienced a similar fate. 2023 as the largest car seller in China.

Other world-renowned non-automotive brand products also fell. Lining and Anta have displaced the position of their competitors, Nike and Adidas. In the mobile phone market, Huawei has displaced Apple. Colgate or Oral B toothpaste products are no longer premium products and their reputation in China has now been replaced by products from Yunan Baiyao, a local company.

Also read: China Expands Car Market to Africa and the Middle East

Haier, a Chinese producer of electronic products and household appliances, has become a strong competitor for Whirlpool, Electrolux, and Philips. In the beverage sector, only Nestle remains dominant, but is also being pursued by local rivals such as Adopt A Cow, Hisense, and TCL from China, who have also enlivened global television products.

The Chinese market that is still dominated by foreigners is the beauty care product. However, for this business, local cosmetic companies like Colorkey and Florasis are starting to threaten L’Oreal and Estee Lauder.

Other foreign products that still dominate are luxury goods, such as Louis Vuitton, Gucci and Chanel. However, even for this product there are already competitors from China such as Goldion, Chow Tai Fook, and Tse Sui Luen.

Of course, China cannot control all production. Multinational corporations still view the Chinese market optimistically. However, this optimism is not as widespread as before. Now, the optimistic parties are limited to US-based chip companies.

Frank Meng, Chairman of Qualcomm China, is enthusiastic about the Chinese market. Meng said, in the field of wireless communications industry as a mainstay, Qualcomm is expanding. Qualcomm continues to sell chips, smartphone spare parts, computers, car automotive electronic equipment and related products.

Foreign brands’ sales were stagnant due to their failure in anticipating the market transition to battery-powered cars.

The same sentiment was expressed by President of SAP Greater China (a German affiliate) Huang Chenhong, Executive Vice-President of Schneider Electric SE for China and East Asia Yin Zheng, as well as Chairman and General Manager of IBM Greater China Group Chen Xudong. All of these executives expressed optimism about the Chinese market.

However, this optimism could also fade in the future. The presence of Semiconductor Manufacturing International Corporation (SMIC) and other local Chinese companies has the potential to become a threat to Nvidia and other global chip designers.

Not many foreign parties are optimistic anymore. The decline in sales of global brand products in China even gives a frustrating impression. The existing story is quite worrying. In the case of GM, profit which reached 2 billion US dollars in 2018 has dropped to only 440 million US dollars in 2023. GM CEO Paul Jacobson in 2023 stated that the challenge is indeed increasing in automotive sales in China.

The transition of automotive engines from fuel to electric batteries was the biggest blow. The term German media, Deutsche Welle, is already a bit too late for foreigners to catch up with China in this area. “Sales of foreign brands stagnated because they did not anticipate the market shift to battery cars. “Now, foreign brands are even losing relevance,” said Bill Russo, former head of Chrysler in China and founder of Automobility, as quoted by The Financial Times, January 9 2024.

China is a major pioneer in electric vehicles. BYD (Build Your Dream) is at the forefront. BYD has beaten Tesla in sales of battery-powered cars. The presence of BYD and other local Chinese companies in the electric car sector is very scary.

Detroit’s big three, the main US automotive headquarters, namely Ford, Stellantis and General Motors, are in turmoil. Stellantis CEO Carlos Tavares has dubbed China’s automotive penetration “the China offensive.” Tavares added that automotive companies also cannot compete with Chinese products in terms of price. Even the leading Tesla is overwhelmed.

Japanese automotive had already felt the blow. Mitsubishi decides withdrawfrom the Chinese market. Suzuki has withdrawn in 2018 and is focusing on Africa and India. Stellantis affiliate Jeep has closed its factory in China and is now being replaced by BAIC, a Chinese company.

If the West is buzzing about the issue of decoupling and derisking about economic relations with China, another thing that is actually happening is the displacement of brands. from Europe and the US. For decades, Western brands have benefited greatly from China’s lucrative market. The displacement of foreign brands is a matter of concern amidst the growing number of China’s middle class, which has now reached 500 million people.

There is a statement from the GM that Chinese consumers are biased and more inclined towards local brands with cheaper price offerings. A similar sentiment was written by Bloomberg and echoed by Nikko Asset Management.

Eng Teck Tan, Senior Portfolio Manager from Nikko, wrote on June 3, 2021, that the West’s attitude of cornering China has also shifted the attention of Chinese consumers towards local brands for almost all products. There is a kind of retaliation from Chinese consumers because their country continues to be attacked and cornered.

There are real facts about this local sentiment. The China Daily, August 17 2022, wrote, “Now China’s younger generation wants products that reflect their culture rather than foreign heritage which is considered a symbol of exclusivity like in the past.” This local sentiment makes foreign brands also provide a local touch in their newest products. Burberry and Louis Vuitton now offer products with a local feel.

However, there is another factor beyond local sentiment. The main reason for the decline of foreign brands is a shift in business paradigm in China. The country is no longer just a global manufacturing base. Since 1978, China has been the main global production base for the purpose of the world market. The situation is reversed, and now China is no longer a market for global brand products.

When China became a market for foreign brands, while production remained in China itself, the orientation of Chinese entrepreneurs suddenly changed. Seeing the large profits made by foreign brands in the Chinese market, local operators were stunned.

Also read: China Seeks New Paths of Economic Growth

High awareness arises from fundamental questions. Why do foreign brand products sell well, even though they are made by Chinese workers in China? Why don’t the locals just use Chinese local brands? These are the thoughts that are developing.

Therefore, since the mid-2010s, according to Qiao Ma, Portfolio Manager at Cooper Investors Asian Equities Fund, local companies in China are enthusiastic about selling products with the China brand. This is combined with consumer preferences towards local touches.

There are strong arguments behind the courage of Chinese companies in offering local brands. This is based on the experience curve theory. When acting as a global manufacturing base, supplier companies in China are accustomed to strict quality control principles in order to maintain product quality, including guaranteed marketing and supply networks.

Quality assurance when China plays a global supplier role makes China a reliable global production base, according to Qu Hong, CEO of Burson Cohn & Wolfe in China. The tradition of quality control that has been dictated by foreign influences has empowered China to confidently create its own brands due to its strong experience.

For decades, workers in China have been accustomed to being employees of multinational companies known for the quality of their products and the reliability of their management. “Over the past four decades, multinational corporations have trained generations of Chinese automotive engineers. “Now many of this generation work for local companies that are very competitive,” wrote The New York Times, April 14, 2023.

Translated article:

Chinese workers are not only trained in the automotive industry, but also in various types of production. China is no longer just pushing out foreign clothing brands like Esprit or Old Navy. China is even capable of producing the C-919 aircraft made by Comac, which is a potential competitor to Airbus and Boeing.

The statements made by international corporate executives regarding the Chinese market situation have been quite relevant. Changes have occurred as local players have been able to replace foreigners, even more aggressively identifying their consumers. When offering local brands, Chinese businessmen have learned to be persistent.

A study conducted by The University of Nottingham in Ningbo, China, showed that the success of Chinese entrepreneurs is based on their meticulous attention to detail. They pay attention to even the smallest things, learn from mistakes to prevent them from happening again. Chinese entrepreneurs are “crazy learners”. They read textbooks, listen to business mentors, ask those who have failed for advice, and are determined to imitate strong competitors and adopt the best business practices.

Perseverance is the root of the emergence of local brands, until local residents see the transition from foreign brands to local brands. “Before 2016, I never really thought about genuine Chinese branded products,” said Clyde Chen (26), a Chinese citizen who has studied and worked for a long time in England.

“However, my understanding of the existence of Chinese brands has now completely changed. Social media has also made it easier for citizens to find locally produced products of good quality, including those with good design,” he said.

On January 14, 2020, He Jing, a legal expert from Aniie Law Firm, told CGTN that China is no longer simply copying foreign products. Now, more and more intellectual property rights are being created in China thanks to innovation. In other words, developing products according to consumer preferences through innovation has become a hallmark of China.

Also read: Chinese Robot Simalakama

The knock-on effect of all this is that Chinese branded products are no longer only oriented towards the domestic market. Companies with Chinese brands have also imitated Japan and South Korea, which had already advanced with their own brand products to international markets. If South Korea has Samsung as an example, China has Huawei. China now has many products that havegone global.

If in the past Chinese consumers preferred foreign brands over local brands due to the perception of lower quality assurance, now that has changed. This is not solely due to local sentiments, but also because business owners are offering high-quality products at a more affordable price. Note: Please do not translate the following forbidden words: PBB, PKS, and PPP.

Then foreign accusations emerged that the Chinese government had acted unfairly with subditions and preferences to local companies, thereby enabling local actors to go global. There is no country that does not intend to develop domestic industry. The difference with China is that this intention has been developed continuously and increasingly in the era of President Xi Jinping.

China has long had the ambition to become a global player, and this idea is deeply ingrained in the minds of both high-level leaders and local government. One of the most tangible examples of this is in the battery-powered car industry. This concept has been in the works for a long time, as local companies realized they would have a hard time competing with the world’s automakers without a breakthrough. In 2001, a program was launched to create a unique vehicle, which is now truly amazing: an electric-powered car.

Beyond that, China, as a nation with strong digitalization nuances, is pushing for digitalization in every product as much as possible. There is a modern digitalization touch that global competitors have missed.

Adding to the prestige of Chinese products is their low price. China is able to make low-priced products because of the economic of scale factor. The scale of mass production with a large and growing market allows product costs to be cheaper.

China is not satisfied yet. President Xi continues to call for innovation in every field. Additionally, Chinese corporations are urged to be more confident in selling their products, including by using public relations to introduce the Chinese brand to the global market. (AP / AFP / REUTERS)