These 2 high-profile failures teach valuable lessons on entering China

Photo credit: lculig / 123RF Stock Photo.

In a previous article, I wrote about how both Carlsberg and Danone encountered setbacks in China and how the former came back and succeeded.

In this article, I have two more examples that give insight to the question “What to do when things go wrong in China?” This time, my examples come from the automotive industry.

Nanjing Fiat

Struggle to launch

Italian automaker Fiat entered China in 1996 through a 50-50 joint venture (JV) with Nanjing Auto. As foreign auto companies could only operate with a local partner at the time, there was a lot of jockeying for partners in the 1980s and 1990s. GM partnered with SAIC, Volkswagen partnered with both SAIC and FAW, and Fiat partnered with Nanjing Auto.

The JV was a fairly standard deal based on combining foreign capital and technology with local operations and government expertise.

Over the next six years, the JV produced only four models (the Perla, Siena, Palio compact, and Palio Weekend station wagon), a very low number in the fast-moving market. Sales averaged 25,000 to 35,000 cars annually from 2002 to 2006. In comparison, SAIC-GM sold 413,000 cars in 2006 alone.

Fiat basically never really launched in the country because they chose the wrong partner. Nanjing Auto primarily made trucks and the Nanjing city government could only offer limited support. In contrast, Shanghai-supplied GM and Volkswagen had extensive support, including an entire auto supply chain and large government car and taxi fleet purchases.

The JV ended in 2007 and Fiat exited. Nanjing Auto later became part of SAIC.

Fiat’s return

In 2010, Fiat found a new partner, Guangzhou Automobile Group Co. (GAC), and sales began in September 2012. Fiat had also become Fiat Chrysler along the way. In 2013, they reportedly sold approximately 130,000 cars in China.

Changan Ford

Late to the Chinese market

Through a similar JV, Ford entered China with Changan Auto in 2001, albeit as a latecomer into the Chinese market.

In 2005, Mazda also entered the picture, buying 15 percent of the Changan-Ford JV. The entity was renamed the Changan Ford Mazda Automobile Co., and production became focused in Chongqing and Nanjing.

Lesson 1: You don’t need to get to China early to win

Lesson #2: You don’t need to start off in first-tier cities

Lesson 3: Market share can shift fairly quickly in China

Lesson 4: It’s mostly about getting to local operating scale