Howes: Chinese money aims to buy, not build, auto cred
Fiat Chrysler Automobiles NV and its Jeep brand aren’t the only targets for Chinese rivals.
Other pieces of the global auto industry are, too, says Michael Dunne, a native Detroiter and former General Motors Co. executive who runs a consulting firm, Dunne Automotive Ltd., based in Hong Kong. Among his evidence, flashed in an email titled “The Chinese are Coming, No. 1”:
Last year, Chinese companies spent a record $140 billion on global acquisitions, second only to the United States, says a study on “China’s rise in global M&A” by White & Case, a global law firm. And despite a slowing pace of deals earlier this year, Chinese investors could match or exceed the pace this year.
“The record set for Chinese outbound M&A in 2016 is not a one-off event,” the report says. Should China maintain its economic growth and continue its financial liberalization efforts, “the average annual value of Chinese outbound M&A will more than double from 2015 to 2025 compared with the period from 2010 to 2015.”
Meaning the Chinese pursuit of assets in the global automotive industry won’t end with Tencent Holdings Ltd. taking a 5-percent stake in Elon Musk’s Tesla or Pacific Century Motors acquiring Delphi Corp.’s Saginaw-based steering division to create Nexteer Automotive Corp.
They’re just getting warmed up, Detroit. Chinese hunger to become global players, and to do it much more quickly than the methodical approaches pursued by the Japanese and South Koreans, is driving interest in FCA, for example.
And buying is faster than building, which can take decades and prove more costly and fraught. The process also is being turbocharged by Chinese bureaucrats whose bias and rising quotas for electric powertrains are reshaping the global auto industry’s priorities. Why? Because China is the world’s largest market, eclipsing the United States.
Think about that. The vast Chinese market, its rising middle class and a central government controlled by the ruling Communist Party are combining to reorder an industry synonymous with Detroit and Stuttgart, Wolfsburg and Tokyo.
General Motors Co. sells more vehicles in China than it does in the United States, routinely. Chinese autoworkers soon will be assembling Ford Focus compacts and readying them for shipment back to U.S. showrooms. The biggest, fastest growing market for luxury brands isn’t the United States, it’s China.
American consumers and regulators are no longer setting the automotive pace, the Chinese are. Their market demand, their tastes for foreign brands, their automakers’ hunger to win global credibility through acquisition is poised to remake the global auto industry in ways the Japanese and South Koreans did not.
The revival of such storied American brands as Buick, even its staying power during GM’s historic bankruptcy, can be credited to Chinese consumers — a renaissance that could be replicated, Dunne predicts, should a Chinese automaker end up controlling FCA’s Dodge and Chrysler brands.
Add the competitive threat from Silicon Valley in the mobility and autonomy space. The net result is the emergence of mega-forces threatening the traditional hegemony of the world’s leading automakers, including hometown favorites GM and Ford.
Chinese “ambitions have shifted outbound to compete globally,” Dunne said in an interview Wednesday. “Buying is a quicker route to getting points on the board than building it themselves. The Chinese are very comfortable growing through acquisition.
“The Chinese say, ‘If we can crack the U.S. market, we can win anywhere.’ The Chinese are in a hurry” — and they’re showing it.
ChemChina, a unit of state-owned China National Chemical Corp., now owns Pirelli & C. SpA, the Italian tiremaker. Midea Group paid $5 billion for Kuka AG, a leading German robotics maker. And Zhejiang Geely Holdings’ play for Volvo Cars Ltd., now seven years old, breathed new energy into the iconic Swedish brand.
Michigan is part of the game, too. The Rhodium Group’s China Investment Monitor pegs cumulative Chinese investment here at $4.2 billion between 2000 and this year. The leading segment: automotive, at slightly more than $3 billion.
A Chinese bid for FCA would dwarf those numbers, and it would be big news around this town. But it would hardly be unique: the disruption already is underway.