The Promise of China

SEMA News—December 2013

INTERNATIONAL

The Promise of China

U.S. Specialty-Equipment Companies Visit an Emerging Market

By Linda Spencer

 

From left: Peter MacGillivray, SEMA vice president of communications and events; Bill Miller, SEMA senior vice president of operations; Linda Spencer, SEMA senior director of international and government affairs; Xiuyun Zheng, general manager of Tuner Tribe; Liz Couch, international economist for the auto team of the International Trade Administration; and Bin Wang, vice general manager of Tuner Tribe pose for a picture at the September 12, 2013, Tuner Tribe-SEMA celebration. Local government officials announced that day the first annual Vehicle Modification Appreciation Day.
From left: Peter MacGillivray, SEMA vice president of communications and events; Bill Miller, SEMA senior vice president of operations; Linda Spencer, SEMA senior director of international and government affairs; Xiuyun Zheng, general manager of Tuner Tribe; Liz Couch, international economist for the auto team of the International Trade Administration; and Bin Wang, vice general manager of Tuner Tribe pose for a picture at the September 12, 2013, Tuner Tribe-SEMA celebration. Local government officials announced that day the first annual Vehicle Modification Appreciation Day. 

   

Twenty-two SEMA-member companies recently traveled to China for the 2013 SEMA China Business Development Conference. The program included a briefing by U.S. government officials, a visit to specialty-equipment shops, an evening at the Great Hall of the People (which serves as the seat of the Chinese parliament) and exhibiting at the China International Auto Parts Expo (CIAPE).

About two-thirds of the delegation had participated in previous SEMA overseas business-development programs to China and/or the Middle East, while this was the first time participating in an overseas SEMA event for a third of the companies and the first time exploring this market of 1.3 billion people.

“My pre-trip impression was completely different from my end-of-trip impression,” said first-timer Mark Turner, CEO of Daystar Products International. “The enthusiasts in China are now realizing what they want, and they are demanding quality U.S.-made products. They negotiate for higher quality, not for price. This is refreshing compared to the Walmart-junk frame-of-mind of the United States. With the aftermarket being only five years old in China—and the total number of people in China—growth is exponential.”

Kevin Floody, international business manager for K&N Engineering Inc., has participated on nearly all of the SEMA trips abroad and was equally optimistic.

“China is rapidly becoming one of the largest consumer markets in the world,” he said. “China’s middle-class population is set to accelerate and is expected to double to 500 million by 2020. If you haven’t done so yet, now is when you should change your perception of China as purely a country for manufacturing cheap products and start appreciating it as a huge consumer market.”

SEMA Member Participants on the 2013 SEMA China Trip

AEM Induction Systems
Baja Designs
Borla Performance Industries Inc.
Champion Oil
Coverking
Daystar Products International
eBay Motors
Escort Inc.
Injen Technology
K&N Engineering Inc.
Keystone Automotive Operations
MagnaFlow
Omix-ADA/Rugged Ridge
Penda Corp.
Prolong Super Lubricants
Quick Time Performance
Radflo Suspension Technology
Rigid Industries
SCT Performance
Spyder Auto
Stillwater Designs & Audio Inc. (Kicker)
Transamerican Wholesale

   
     

There are some challenges in China (and, in fact, in many other emerging markets), such as fragmented distribution and import duty, and vehicle modification in a “gray zone” regarding the legality of some products. But there was unanimous belief among the SEMA group that Chinese drivers like to make their cars stand out. From expensive sports cars to off-road warriors, customization is increasingly popular among a wide segment of consumers in China.

The importance of the automotive specialty-equipment industry is increasingly being recognized by the Chinese government at the provincial and local levels. It is also being seen increasingly among national officials as a source of jobs, revenue and a way boost to domestic consumption to offset the country’s slowing export base.

In fact, during the SEMA-member visit in Beijing, local officials declared September 12 as “Vehicle Modification Appreciation Day.” These local officials have heavily invested in developing the northern part of Beijing as a worldwide model of the industry, with a hotel, a showroom and a car-customizing mall all designed to grow the specialty-equipment market.

And it’s not just in the largest cities such as Beijing and Shanghai, with populations of about 20 million and 23 million. Consumerism is growing throughout China. In fact, the fastest-growing markets in China are outside the gridlocked roads of Beijing and Shanghai. This year’s event included buyers from throughout the country.

A full 100% of the participants responding to a post-event survey said that they actively pursue business in China.

“We have doubled our business in the country every year for the past three and have commitments from our partners to quadruple growth in 2014, based on the relationships we have established and additional vehicle coverage we have provided,” said Justin Oltz, SCT Performance vice president of sales. “We see this growth continuing well into the future as the Chinese automotive market continues to grow and outpace every other market in the world.”

Dan Green (second right), director of the trade facilitation office of the U.S. Embassy in Beijing, spoke with Ed Rossi (left), vice president of sales for Injen Technology; Rick Trudo (second left), president/CEO of SCT Performance; Jeff Victer (center), director of global sales for Prolong Super Lubricants; and Justin Oltz (right), vice president of sales for SCT Performance.Dan Green (second right), director of the trade facilitation office of the U.S. Embassy in Beijing, spoke with Ed Rossi (left), vice president of sales for Injen Technology; Rick Trudo (second left), president and CEO of SCT Performance; Jeff Victer (center), director of global sales for Prolong Super Lubricants; and Justin Oltz (right), vice president of sales for SCT Performance. 

 

Deputy Assistant Secretary Craig Allen (front right) briefed the SEMA delegation on doing business in China and provided some insider tips on market developments. Deputy Assistant Secretary Craig Allen (front right) briefed the SEMA delegation on doing business in China and provided some insider tips on market developments. The three-day program opened with a briefing by U.S. officials that included Allen; Daniel Green, director of the trade facilitation office for the U.S. Embassy in Beijing; Liz Couch, international economist for the auto team of the International Trade Administration; Daisy Wang, trade policy specialist for the market access and compliance office of the U.S. Embassy in Beijing; and Joshua Halpern, commercial officer for the Department of Commerce at the U.S. Embassy in Beijing.

     

Al Azadi (left), president/owner of Omix Ada/Rugged Ridge, exchanged business cards with buyers.Al Azadi (left), president/owner of Omix Ada/Rugged Ridge, exchanged business cards with buyers. “We’ve sold our Jeep accessories and performance products to China for many years now, but visiting this many customers and prospects in just one trip was never practical,” Azadi said. “Thanks to SEMA’s well-coordinated schedule, we met most of our existing customers and many prospects in just two days. We feel that China, with the highest number of Wranglers sold outside the North America and with higher-income consumers buying these vehicles, has the potential to become the number-one destination for our products outside North America. It is never easy learning how to conduct business in a foreign land, but we are betting it will be rewarding at the end.”

 

Mark Turner, CEO of Daystar, visiting a local retailer and wholesaler.

Mark Turner, CEO of Daystar, visiting a local retailer and wholesaler. “My pre-trip impression was completely different from my end-of-trip impression,” he said. “The enthusiasts in China are now realizing what they want, and they are demanding quality U.S.-made products. They negotiate for higher quality, not for price. This is refreshing compared to the Walmart-junk frame-of-mind of the United States. With the aftermarket being only five years old in China—and the total number of people in China—growth is exponential. Prior to our trip, the Chinese market was not part of our long-term strategy. After the trip, I am encouraged that it could be part of our five-year plan.”

     

Attendees at the declaration of September 12, 2013, as Vehicle Modification Appreciation Day

Attendees at the declaration of September 12, 2013, as Vehicle Modification Appreciation Day included Beijing local officials; Tuner Tribe officials (Bin Wang, vice general manager of Tuner Tribe, far right); Josh Halpern, commercial officer for the Department of Commerce at the U.S. Embassy in Beijing (fourth from left) and Bill Miller, SEMA senior vice president of operations (second from right).

 

Zheng Yong, a Beijing local government official, declared September 12, 2013, as “Vehicle Modification Appreciation Day

Zheng Yong, a Beijing local government official, declared September 12, 2013, as “Vehicle Modification Appreciation Day” at Tuner Tribe, a Beijing-based upscale mall of specialty-equipment shops. Participants in the recent SEMA trip to China had the opportunity to visit the retailers, installers and wholesalers at the mall before attending a party hosted by Tuner Tribe in honor of our industry.

     

Officials from Oklahoma-based Stillwater Designs & Audio Inc. (Kicker) who participated in the China trip.

Officials from Oklahoma-based Stillwater Designs & Audio Inc. (Kicker) who participated in the China trip.

Including Bart Deal (left), director of international sales, and Steve Outhier (right), director of product planning—talked with buyers about their lineup of sound systems.

 

A few of the SEMA delegation outside the Great Hall of the People

A few of the SEMA delegation outside the Great Hall of the People before attending a dinner at the iconic building, which in Tiananmen Square.

The building is used for legislative and ceremonial activities. and functions as the parliament building for the People’s Republic of China.

     

Attendees at the opening ceremony in the SEMA Hall of the CIAPE

Attendees at the opening ceremony in the SEMA Hall of the CIAPE included Joshua Halpern, (front left); George Hsieh, (second from left), brand manager for AEM Induction Systems; Daisy Wang, (third from right), trade policy specialist for the market access and compliance office of the U.S. Embassy in Beijing; and Liz Couch (far right), international economist for the auto team of the International Trade Administration.

 

Paula Argiropoulos (left), international sales manager for Rigid Industries, demonstrated the company’s product features to buyers.

Paula Argiropoulos (left), international sales manager for Rigid Industries, demonstrated the company’s product features to buyers. “Going into China, I had a completely different perception and may have had preconceived notions on the markets. After attending the SEMA event, I now have a better understanding of the growing aftermarket industry in China. It is projected that by 2015, China will become the second largest consumer market with enough purchasing power to buy 14% of the world’s products.

     

Josh Abbott (right), international sales manager for Borla Performance Industries Inc., enjoyed a steady stream of buyers in the company’s booth

Josh Abbott (right), international sales manager for Borla Performance Industries Inc., enjoyed a steady stream of buyers in the company’s booth, which featured stainless-steel performance exhaust and induction products manufactured by the company based in Oxnard, California. Noted Abbott: “We are putting more and more emphasis on export in general, and China naturally represents a significant part of this expansion. China’s economic engine is going strong and while this growth has been slowing a bit, we’re still talking GDP growth rates roughly triple much of the Western world’s. This is being clearly represented in their car sales which is at an all-time high with close to 20 million vehicles sold in 2012. Add to this their approach and enthusiasm for performance and the bases are there for a beneficial business relationship with the country.”

 

Karl Dedolph (second from right), director of the racing and performance division of Champion Oil, talked about the specialty formulations of the company’s products

Karl Dedolph (second from right), director of the racing and performance division of Champion Oil, talked about the specialty formulations of the company’s products and why they are well-suited for the Chinese market.

Dedolph said that the aftermarket performance industry in China exceeded his company’s expectations as an emerging market. “It is showing strong growth as a new market,” he said. “The global aftermarket will continue to expand in the coming years.” He expects sales in China to increase by more than 100% by 2020.

     

Justin Oltz (far right), vice president of sales for SCT Performance, talked to buyers and discussed the importance of the Chinese market to SCT’s company strategy.

Justin Oltz (far right), vice president of sales for SCT Performance, talked to buyers and discussed the importance of the Chinese market to SCT’s company strategy. “We have doubled our business in the country every year for the past three and have commitments from our partners to quadruple growth in 2014,” he said. “We see this growth continuing well into the future as the Chinese automotive market continues to grow and outpace every other market in the world.”

 

Edwin Preza (left), sales manager for Spyder Auto, answered questions from buyers.

Edwin Preza (left), sales manager for Spyder Auto, answered questions from buyers. “Spyder Auto is absolutely thrilled to have been part of the successful trip to Beijing,” he said. “We received great interest from many buyers and are excited to be a part of the growth of this new market. We are very pleased to see the buyers looking for quality products, and we are excited to be a part of [the SEMA China trip].”

     

Injen Technology, a manufacturer of high-performance air-intake systems and exhaust systems for cars and trucks, was represented on the China trip by Edward Rossi (left), vice president of sales, and Ron Delgado (right), the company’s president.

Injen Technology, a manufacturer of high-performance air-intake systems and exhaust systems for cars and trucks, was represented on the China trip by Edward Rossi (left), vice president of sales, and Ron Delgado (right), the company’s president. Noted Delgado: “We visited China for the first time four years ago, and we have gone back every year since. Every pre-conceived notion we held about China soon dissipated under the shadow of endless rows of modern high-rises! People in China are warm and very welcoming. They have elevated the concept of hospitality to an art. Beijing is a thriving, bustling city that never rests! One cannot imagine the volume of cars and traffic until you see it for yourself. China’s economy is one of the fastest-growing economies in the world. As a market, it has been virtually untapped by western manufacturers.

 

Ryan Lai (foreground, second from right) of eBay Motors talked with buyers.

Ryan Lai (foreground, second from right) of eBay Motors talked with buyers.

Dan Tsuchiya (back right), eBay’s director of merchant development and Sumip Patel, the firm’s Cross Border Trade Manager back center), also participated in the program.

“It’s important for us to learn the market and what’s possible for our U.S. sellers when they start selling into China,” Tsuchiya said. “It’s one of the BRICS countries, and when one understands the increasing wealth in the country and the desire for what we have in the West, it’s clear that this is a growth opportunity.”

     

Debra Sweet (center), international sales manager for Penda Corp.

Debra Sweet (center), international sales manager for Penda Corp. “What I appreciated the most about my experience was that the entire trip was very thoughtfully planned out to give me the best opportunity to meet the proper buyers for my product line. Without the assistance of SEMA providing pre-approved buyers, I would have spent at least six to 12 months to establish the same number and quality of leads that I gained in just two days,” noted Sweet.

 

“China is rapidly becoming one of the largest consumer markets in the world,” said Kevin Floody (second from right), international business manager for K&N Engineering.

“China is rapidly becoming one of the largest consumer markets in the world,” said Kevin Floody (second from right), international business manager for K&N Engineering. “China’s middle-class population is set to accelerate and is expected to double to 500 million by 2020. If you haven’t done so yet, now is when you should change your perception of China as purely a country for manufacturing cheap products and start appreciating it as a huge consumer market.”

     

“The international automotive landscape is changing, and China is most certainly one of the countries that is leading the way in positive growth and higher expectations,” said Brad Otoupalik (far right), MagnaFlow’s director of international business development.

“The international automotive landscape is changing, and China is most certainly one of the countries that is leading the way in positive growth and higher expectations,” said Brad Otoupalik (far right), MagnaFlow’s director of international business development.

“MagnaFlow is working to be a part of that growth in a powerful way by bringing our high-quality products and 30-plus years of research to the consumer marketplace in China. The trip with SEMA was an excellent showcase of the potential market while allowing us to directly connect to many distributors, shop owners and enthusiasts.”

 

Radflo Suspension Technology, a California-based manufacturer of performance shock absorbers, responded to inquires from resellers about the company’s line of products

Radflo Suspension Technology, a California-based manufacturer of performance shock absorbers, responded to inquires from resellers about the company’s line of products designed to improve vehicle handling and performance. “China as a market for our products has become a large focus of our business,” said Glenn Classen (right), the company’s president. “We have seen a huge demand and expect exponential growth through our dealer base for products we both manufacture and sell. We think it’s great that our Chinese customers are looking for quality and are able to identify with our brand.”

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