Top 10 locations of manufacturing clusters in China include Guangdong, Shanghai, Jilin, Hubei, Guangxi, Chongqing, Beijing, Jiangsu, Hebei, and Zhejiang.
To tap into China’s auto market, UK companies can make use of local events as market entry opportunities in the country as the first step. They may attend auto-related exhibitions, trade shows or forums to showcase their products and pitch to potential Chinese clients. For example, China EV100 Forum 2021, recently held on 15th January 2021, is a major online forum in the NEV sector. More than 200 VIP guests joined the next generation vehicle event, including those from governments, associations, research institutes and companies. As a sub-forum, the 5th China-UK EV Innovation Forum invited EV experts from both countries to explore mutual opportunities. Due to COVID-19, the event had various live streamed sessions continuing the likely trend of upcoming events to be conducted virtually. As the automakers and supplier chain aspire to produce better quality vehicles and components, Testing Expo China 2021 in September 2021 is another event to be considered. Automechanika Shanghai will also take place in November 2021.
In 2018, China issued the plan to cancel its mandatory policy requiring that the Chinese shareholding must be higher than international one in all automotive joint ventures set up in the country. NEV companies are the first type to have the share restriction lifted, while others will also be free of it by 2023. As a result, BMW was the first foreign automaker to take controlling stake at 75% purchased from its JV partner Brilliance Automotive. Tesla set up its 100% wholly owned entity in China in 2018 and has completed the work to build the mega manufacturing base in Shanghai, aiming to produce 300,000 Model 3 and 250,000 Model Y cars in 2021, manufactured from the facility. Chinese government has been striving for market liberalization and reform on technology transfer and IP protection to create a more competitive domestic market. Automotive sector sets a new direction of the overall liberalization trend.
China has targeted developments in specific parts of the automotive sector as a key part of their industrial strategy (Made in China 2025). This includes NEVs and intelligent and connected vehicles. As already stated, China is the biggest market in the world for NEVs for both manufacturing and sales.
The UK has a long history of automotive excellence and is home to many renowned automotive and engineering companies (70% of the F1 teams have bases in the UK) that are part of the global supply chain. This history and heritage of excellence is highly sought after by the Chinese automakers and supply chain players. As China continues to develop its NEVs, intelligent and connected vehicles (ICT), it needs expertise in advanced lightweight materials, autonomous technologies, batteries, motors, energy management technology, body control management system, information, communication, and entertainment systems. These will be the areas where UK companies can find opportunities and collaborate. For example, a UK supplier in electronically controlled air suspension (ECAS) collaborated with a Hangzhou-based Chinese supplier to position their air suspension systems for the growing ECAS market particularly in the premium NEV segment11. Overall market is worth $8.8bn USD (CAGR 8.3% between ’16 – ’25).12
In terms of these opportunities, Chinese companies are looking for solutions in all forms, covering products, design and consultation services. A step beyond the opportunities is to potentially form a joint-venture or establishing a wholly foreign owned enterprise (WFOE) especially considering the market liberalization mentioned above.
Route to Market
Around 40% of UK companies trading with China say bureaucracy remains a major challenge, according to Santander’s latest 2021 Spring Edition Trade Barometer, while 36% cite regulatory barriers as an issue. As a fast-growing economy, China faces bureaucratic challenges like other emerging markets. However, eagerness and successes in recent reforms propelled China’s Ease of Doing Business Index from 46 (’19) to 31 (’20). Finding the right local partner, IP protections and the correct entity setup are areas Santander and CBBC can support to navigate the challenges. We have successfully opened the doors for many UK SMEs and large corporates to trade and invest in China.
Santander has a strong local presence and partners in China and understands the breadth of practical help that is needed to connect companies to the right opportunities. This covers a variety of support from knowledge of the local culture, language, and regulatory environment to operational support such as legal or HR resources. Above all it means helping companies move with confidence by putting them in touch with people they know they can trust.
Speak to us to have a bespoke solution tailored to your business’ own unique sets of challenges. Dennis Lin is Santander UK’s China Trade & Investment Corridor Director and Paul Brooks is UK Head of Manufacturing & Automotive.
China Gateway is the China–Britain Business Council’s premier market advisory service – designed to meet client’s individual and bespoke business objectives. You may be seeking to export to China for the first time and in need of market intelligence, competitive analysis, verified contacts or a costed, market-entry strategy. Or you may be a company with existing trade in China looking to develop and grow your business through leveraging new sales and marketing channels, platforms or establishing a permanent in-market presence. Whatever stage you are at in your China journey as a business, China Gateway can enable you to achieve your goals both efficiently and cost effectively.
If you would like to discuss how CBBC can support your business in China then please contact David Gregory, China Market Business Adviser.
12Infiniti analysis, industry interviews