Chery got sued by GM Daewoo

 alleging that Chery QQ and Daewoo Matiz models shared identicial body structure,
design and key components

Global automotive industry

1st paradigm:
Ford – mass production
 increased effectiveness and reduced costs

2nd paradigm:
GM – product-based divisional structure
 greater product diversity

3rd paradigm:
Toyota – lean manufacturing
 responsive to the need for adjustments
 significantly reducing production waste

4th paradigm
Chinese manufacturers – reduced development process + innovated processes to product
cheap sub-sub compact cars
 low-cost cars

FAW – first automotive workshop in first domestic automotive manufacturer in PRC

German Volkswagen + Shanghai Automotive Industry Corporation (SAIC)

Copying  prevalent after WWII

North America, Europe and Japan evolved from the bottom up

China evolved from the top – developing top-level markets  then entry-level markets

Breaking into North America market  centred initially on a joint venture with Malcolm
Bricklin’s Visionary Vehicles

Chery business architecture

1. Reducing cost structure e.g. imitating
 process, materials
2. Evolve to include foreign partnerships on engines, powertrains, production and
design
 shifting cost structure more towards a mature manufacturers
Chery Porters 5 Forces
Threat of new entrants
- Skills knowledge
- Regulation / license
- Subsidiaries
- Capitals
- Tariffs
- Safety

Bargaining power of buyers

- Switching cost
o Relatively low income  sensitive to price
o High end  not sensitive to price

Bargaining of suppliers
- No big blocked suppliers
- Unfavorable to Low end
- Favorable to High end

Substitute
- Public transport  reducing threat of substitute
- Motorcycle, bikes

Rivalry
- High in both high-end and low-end
 more players
 low margin
 difficult to exit
High-end and low-end do not really compete with each other

How Chery overcome the 5 forces

 20% SAIC
 Capital from the local government, bank

Job
 Invitation
 Component maker
 Low labor cost
 Outsource engineers

Low cost
 Cheap materials
 Lean manufacturing
 No features
 Export
  Low-labor cost

Differentiated from rivalries

 Over production  lower cost [low-cost strategies]
 Innovative  styling
 Joint venture
 After sales service