Chinese Consumers Seek Specialty Products

SEMA News—December 2011

Chinese Consumers Seek Specialty Products

U.S. Manufacturers Travel to China to Meet Growing Demand

By Linda Spencer

 
The SEMA delegation was invited to take part in the opening ceremonies of the China International Auto Parts Expo (CIAPE). Posing with the group were Daniel Green, director of market access and compliance office, U.S. Embassy, Beijing (front row, second from right) and William Brekke, principal commercial officer, American Consulate General, Shanghai (front row, third from right). This is the fifth edition of this trade-only show, which was sponsored by the Chinese Ministry of Commerce (MOFCOM).
   

A group of SEMA-member manufacturers recently descended on the Chinese capitol of Beijing, for the second annual SEMA China International Auto Parts Expo (CIAPE) China Business Development Program—an intensive three days of networking and one-on-one meetings with Chinese buyers from 24 cities throughout China. The 2011 delegation of U.S. companies represented a broad range of products, including engine performance, interior and exterior appearance products, suspension and handling upgrades and mobile electronics. The goals of the participants included meeting potential customers, getting a better understanding of consumer brand awareness, evaluating distribution channels for their products and identifying vehicles on Chinese roads for which they should develop new product applications.

In addition to the daylong networking and one-on-one meetings, the 30 members of the SEMA delegation had the opportunity to meet with top U.S. Embassy officials, meet for an informal breakfast with Chinese enthusiast press and tour the Chinese Ministry of Commerce-sponsored CIAPE. This year was the fifth for this trade-only event, which featured primarily repair and replacement products but included a new specialty-equipment hall, with the largest exhibitors being distributors of overseas specialty products.

SEMA places a high priority on assisting SEMA-member companies in diversifying their customer bases and facilitating access to the 95% of the world’s customers located outside the United States. For SEMA members, new geographic markets offer opportunities to create new revenue streams and reach new customers. SEMA Vice President of Communications and Events Peter MacGillivray noted that the association actively searches for additional markets where passion, market conditions and vehicle mix indicate good potential for members’ products and increasingly point to emerging markets.

“One of the most promising of these markets is China,” said MacGillivray. “There is no doubt for those who travel to China that the demand is growing among Chinese consumers to customize their vehicles. The SEMA Global Business Development Conference helps to meet the demands of these buyers in emerging markets, such as China’s. Our program facilitates one-on-one meetings between SEMA manufacturers and pre-vetted Chinese distributors and retailers in a hotel-based setting.”

The program allows for quality meetings between serious buyers and member manufactures in a low-cost, turnkey situation. The program is based on the premise that, until a market has a more fully developed distribution system and has achieved a certain level of development, U.S. companies are advised to avoid the typical high costs of exhibiting in a traditional trade show, including but not limited to shipping material, booth costs and the need for significant staff resources.

China offers a population of more than 1.3 billion and growing market sophistication, and participants in the 2011 program were impressed with the speed at which the Chinese market is expanding.

“The market in China is developing at a much quicker rate than we experienced in the United States,” said SEMA Chairman Scooter Brothers, who also serves as the chief operating officer of Tennessee-based COMP Performance Group. “Chinese consumers crave Western style and trends, which are increasingly being reflected in their cars.”

“Trips, such as the SEMA China Business Development Program, are a critical component in our company’s activities to develop a growing range of products to fit vehicles found on Chinese roads,” said Brothers. “This task will soon become easier as the world platform for the OEs is becoming standard. With that, U.S. and Chinese vehicles will become quite similar, making the development of parts much easier, quicker and less expensive.”

 

SEMA Member Companies Who Exhibited at the 2011 SEMA China Business Development Conference

  • American Expedition Vehicles
  • Anzo U.S.A.
  • BDS Suspension
  • BrynDana International
  • Bushwacker Inc.
  • COMP Performance Group
  • eBay Motors
  • Evosport
  • Girard Systems and Girard
    Products LLC
  • Injen Technology
  • K&N Engineering Inc.
    and AEM Induction Systems
  • Keystone Automotive Operations
  • SCT Performance
  • Sheen Coatings Co./
    Paasch Products Inc.
  • Stillwater Designs and
    Audio Inc. (Kicker)
  • StopTech/Power Slot
  • T-Rex Grilles
   

Other companies are finding immediate sales.

“I would attribute our success to the fact that China is experiencing an economic boom in its middle- to upper-class markets,” said Ed Rossi, vice president of sales for Injen Technology. “The average young man aspires to own his own car as a means for making his life easy and as a status symbol. As they travel abroad or experience global news, they start to crave Western ways of life and means.”

“I am convinced that the market for Western products will grow exponentially over the next few years,” Brothers said. “The plans are for the Chinese to manufacture 35 million vehicles by 2025. That’s twice what the U.S. built in its best year. Only a very few of the owners of all those cars need to be ‘car guys’ for us to have a tremendous market.”

Brothers noted that COMP Cams finds the SEMA trip a good way to keep an eye on the market so that it can be well positioned to move quickly when the market explodes.

“I believe it is going to happen all at once,” he said, “and those of us who have done our homework will do well. Those who follow might not be successful.”

The participating companies and SEMA executives had the opportunity to discuss with Chinese and U.S. government officials based in China a variety of issues and problems that must be addressed in order for the market to achieve its full development, including cracking down with strict enforcement over counterfeiting and other intellectual-property infringements and the need for greater clarity and progress regarding the legalization of specialty-equipment products. There was consensus that only when issues such as these are addressed will distributors and retailers in China be willing to invest in the development of a distribution system supported by firms of sufficient size to grow the market and provide consumers with needed access to leading global brands.

SEMA Vice President of Marketing and Member Services Tom Myroniak traveled to China with the group and noted that there is a large and growing need for education and training among Chinese trade businesses and consumers to assist in the development of the market and increase familiarity with leading U.S. brands and their correct installation.

“It’s clear that the marketplace for specialty products in China is building momentum and that the passion for automobiles is alive and well with a growing base of enthusiasts there,” Myroniak said. “Car owners are hungry for information to help them customize or tune their vehicles, and a surprising number of them are very familiar with SEMA-member brands.”

Florida-based SCT Performance, a manufacturer of electronic control units, concurred that the market can be an important one for high-performance products.

“We believe the market in China is untapped and growing each year,” said an SCT Performance’s Rick Trudo. “It offers a great opportunity for us as we work with the Chinese to develop the performance market.”

Buyers and SEMA exhibitors pose on the steps of the Great Hall of the People prior to the dinner.

Located at the western edge of Tiananmen Square, The Great Hall of the People functions as the People’s Republic of China’s parliament building and is the venue of ceremonial activities.

In addition to the one-on-one meetings, the dinner provided a networking opportunity with buyers. Many SEMA members scheduled additional private meetings with potential customers throughout the week.

 

William Brekke (fourth from right) and Daniel Green (fourth from left) spent the morning with the SEMA delegation. Following a private briefing in which the group discussed the growing Chinese market as well as the challenges hampering its obtaining its full potential—including a less-than-optimal system of enforcement for counterfeiting and other intellectual-property concerns and the need for additional progress in the creation of pro-industry laws concerning customization—the government officials accompanied the SEMA delegation to the opening of the CIAPE Show and visited the SEMA booth.

     

Malcolm Johnson (center), CEO of Byrn Dana, heard some pointers from Ray Gross (left), CEO of Powersheen, and Andy Barbieri, vice president of business development at BDS Suspension.

About two-thirds of the participants were also here last year and, as Johnson gratefully noted, freely gave of their time and advice to help those participating on the SEMA China Business Development program for the first time, such as Byrn Dana.

 

Ben Mizban (left), president and CEO of Southern California-based T-Rex Grilles, spoke with a buyer interested in U.S.- manufactured billet grilles and grille assemblies. Mizban participated in the trip to expand to other markets where his company could increase sales and use SEMA’s muscles to connect and generate leads. He noted that he would be busy with follow up. “The ball is in my court now to follow up and turn some of the contacts I made into actual sales and future distributors,” he said. He is optimistic and believes that his products have great growth potential in the Chinese market.

     

Marcia Girard (far left), CEO of Girard Systems, and Gerald Pogue (second from left), the firm’s vice president and general manager, talked with buyers about the growing market for RV parks. Girard and Pogue’s research reveals a number of RV parks in the Beijing area, with another 17 under construction in just the surrounding area, providing some short-term opportunities for the firm as demand grows for the enjoyment of the popular American pastime. During a recent interview with SEMA, Wang Jidong, the RV association’s secretary-general noted, “There is a great potential for the growth of the RV market in China.” Jidong noted that change is coming fast in China as local governments and businesses build hundreds of RV camps nationwide.

 

Ivan Martinez (right), Exeter, Pennsylvania -based Keystone Automotive Operations’ global business development director, provides a light-truck distributor with information on Keystone’s high performance, accessories, wheels, automotive parts, truck accessories and import performance product lines. Martinez, in China with SEMA for the first time, noted that he participated in the China Business Development Program to “learn about the market and explore opportunities” and that, in his view, he sees real growth in the next five years. Martinez noted, “As China develops the taste for American vehicles and has more disposable income, the market should experience a level of expansion.”

     

David Thawley (second from right), senior manager of eBay Motors, a part of eBay Inc., talked with buyers at the SEMA CIAPE China Business Development Program about the online services the firm can offer to Chinese companies, given eBay’s position as the Internet’s largest marketplace for buying and selling automotive-related products. “We [eBay Motors] had a great and very productive time at the SEMA/CIAPE event,” said Thawley. “Recently, we’ve seen tremendous global growth in online automotive parts and accessories sales, and we are confident that Asia will continue to be a major driver of future growth. With more vehicles sold in China vs. the United States over the past year, the current nascent automotive aftermarket in China has an amazing amount of runway ahead! As a marketplace that connects buyers and sellers globally, and as the largest online retailer of automotive parts and accessories in the world, an event such as SEMA/CIAPE provides a tremendous opportunity for eBay Motors to connect with leaders in the automotive aftermarket. We’ll definitely be back next year!”

 

Simon Atik (far right), president of Evosport, based in Huntington Beach, California, participated in the SEMA China Business Development program to assess the market for the firm’s aftermarket accessories for BMW, Mercedes-Benz and Ferrari. “While the emergence of the aftermarket industry is still in its infancy stages, the obvious potentials are astonishing,” said Atik. “The biggest challenges will be educating the consumers and distributors of our brand, as the skillsets necessary to install and support performance specific products is extremely limited. Having established distribution in China almost a year ago, my primary goals were to meet with our current distribution network of dealers and gain greater clarity on the demands and needs of this growing market. Those goals were very much realized during this trip to a much greater extent with the participation in the SEMA event. There is an overwhelming current demand for our products, the future of which will be determined greatly by how well the Chinese government and legislation embraces this industry and the regulations that surround it.”

     

As part of the program, each SEMA exhibitor was provided with a turnkey booth and an interpreter for the day. The companies, which represented a broad range of products that included engine performance, interior and exterior appearance products, suspension and handling upgrades and mobile electronics, were kept busy meeting with pre-vetted buyers from throughout China.

The program was designed to minimize costs, with no need to ship large quantities of products. In fact, many companies hand-carried their brochures and samples.

 

Malcolm Johnson (left), CEO of BrynDana International, participated in this year’s SEMA China Business Development program to explore the market for his company’s spray-on coating products. Johnson obtained a number of solid leads during his time in China. “The notion that U.S. manufacturers cannot export to China has been debunked,” he said. “The Chinese buyers with whom I met in Beijing are young entrepreneurs, and they are asking for high-quality U.S.-manufactured automotive products. SEMA organized a well-planned and highly professional trade show that allowed me to reach these buyers. I will attend this show again next year, along with the upcoming Dubai delegation.”

     

As consumers seek more powerful engines, the demand for high-performance brakes also grows. This increasing demand brought Jeremy Barras (right), export sales manager for StopTech/Power Slot, back to China to participate for a second year in the SEMA China Business Development Program. Compton, California-based StopTech manufacturers high-performance brake systems and components for the racing and street-performance markets. Its sister company, Power Slot, manufactures high-performance slotted brake rotors.

 

Zhang Ji (left), director general of the MOFCOM office of mechanical, electrical and high technology, presented SEMA Chairman Paul “Scooter” Brothers (second from left), SEMA Director of International Affairs Linda Spencer and SEMA Vice President of Communications and Events Peter MacGillivray (right) with an award recognizing the longtime partnership between SEMA and the MOFCOM trade show CIAPE. SEMA leadership has been working closely with the ministry to make additional progress in legalizing the use of all specialty-equipment products in China.

     

Ray Gross (second from right) was excited that the trip has yielded some potentially significant business and that his comfort in doing business in China is growing. He has noticed that his potential Chinese customers are not all that dissimilar from those in the United States. He is optimistic about the prospects for his company in China, noting that the market presented “great possibilities.”

 

Kenneth Merritt (left), vice president of OEM sales for Oregon-based Bushwacker, provided an overview of the company’s bestselling fender flares and other products for Jeeps and other light trucks to a buyer as the daylong one-on-one meetings got underway. Kim Ziebell, the firm’s executive vice president and CMO, is pictured on the far right.

     

Christopher Wood (third from right), director of sales, and Mike Messink (third from left), CFO of American Expedition Vehicles, discussed with potential buyers the range of products the company produces for the Jeep Wrangler. Jeeps are very popular in China, with a growing number of off-roading events throughout the rugged Chinese countryside, as well as ventures to more distant locations, such as Nepal and Mongolia. Wood noted, “The combination of increased Jeep Wrangler exports to China and a growing demographic of well-funded Chinese buyers has created steady sales growth for our high-end Jeep accessories. The challenge has just been protecting our brand from copying. There is no question that there is a market in China for our products and those of other 4WD accessory manufacturers. The trick is just protecting one’s IPR in China.”

 

Steve Outhier (center), director of product planning at Stillwater Designs and Audio Inc. (Kicker), enjoyed speaking with buyers interested in the firm’s mobile electronic products.
“We already sell into China,” said Outhier, “and we see great potential for expansion in this market. The conference helped me better understand the opportunities and challenges we face as we expand our presence. That was my goal for the conference, and I feel it was well met.”

 

     

Anzo U.S.A.’s General Manager George Lee (third from right) chatted with buyers, many of whom sought out the first-time participant that manufacturers lighting products for cars, trucks and SUVs.

 

Buyers crowded into the Injen booth during the daylong meetings. Ed Rossi (third from left), Injen’s vice president of sales, spoke with a buyer while Ron Delgado (second from right) spoke to another group. “Once again, we met many Chinese companies,” said Rossi, “and we have very firm plans to open accounts with two or three of them. The program has been fantastic for us.”

     

Pictured here are Brothers (left) and Green (second left) along with SEMA’s MacGillivray and U.S. government official Brekke (right) who has more than 30 years of experience in Asia. In the background is a project vehicle built by Beijing-based distributor BATT and featuring products from Bushwacker and BDS.

 

 

Kevin Floody (left), the international business manager for K&N Engineering Inc. and AEM Induction Systems, explained the company’s wide array of high-performance air filter and air intake systems designed for a range of sport-compacts, trucks and SUVs applications to one of the many visitors to K&N’s booth. “China continues to amaze me every time I return,” said Floody. “This market is maturing at such a rapid rate that it is like watching your children grow up. K&N is definitely glad China is part of its global markets.”

     

Rick Trudo (right), president and CEO of SCT Performance, spoke to an increasing number of buyers seeking SCT’s Ford and GM ECU tuning products and other under-hood products to improve engine performance. Trudo was so positive about the market that SCT has just set up an office in China to service its growing customer base. “SCT participated in the SEMA trip to China because of the success we had in 2010,” said Trudo. “We have added dealers and helped develop a tuner market while working with dealers and customers there. The Chinese continue to learn more and more about the performance industry, and we see a great opportunity for us to work with them and help this market continue to grow.”

 

Andy Barbieri, vice president of business development at BDS Suspension, met with buyers from Chengdu, China, who were interested in learning about the firm’s lifted suspension systems. “We decided to attend for a second year because of the success of our first trip last year,” Barbieri said. “Our goal was to build on the progress that was made last year. I was very encouraged by the number of new contacts that we met at the 2011 SEMA CIAPE conference and the growth of our existing Chinese customer base.” He is also optimistic about continued growth. “The number of new American vehicles being sold and the ever-increasing interest in customizing those vehicles will fuel the growth of the automotive aftermarket in China over the next five years and beyond,” he said.

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