One Market Equals 20% of the World’s Population

SEMA News—December 2016

INTERNATIONAL

By Linda Spencer

One Market Equals 20% of the World’s Population

The 2016 SEMA China Program Travels to Shanghai to Explore Opportunities

  2016 China Business Development Program
The delegation visited a large shop focused exclusively on musclecars, including Mustangs, Camaros and Corvettes.
   

One in five people in the world reside in just one country: China. A delegation of SEMA-member manufacturers recently traveled to this nation of 1.4 billion people to check out the automotive specialty-equipment market firsthand. During the four-day program, a dozen manufacturers met with pre-vetted buyers, toured top off-road and performance shops and were briefed by U.S. government officials based both in China and at the U.S. Department of Commerce headquarters. The delegation was struck by how the market, while clearly in its early years, has developed such a passionate enthusiast base with such strong potential.

“It is an emerging market with tremendous potential that I believe can and will dwarf any other market within a decade or so,” said Josh Abbott, international sales manager for Borla Performance Industries. “This is the perfect time for any company to set foot there and start planting the seeds. We will definitely come back next year.”

In 2015, vehicle manufacturers placed a total of 914 passenger models in the Chinese market. Of those, the most popularly customized include those exported from the United States and other countries as well as Chinese brands and other makes sold in China but not available in the United States or Canada.

Popularly Customized U.S.-Made Vehicles Being Exported to China

2016 China Business Development Program
For the second year in a row, Borla Performance increased its investment in the Chinese market during the China Auto Salon by setting up two booths—one in the SEMA section and an additional one on the main show floor, which attracted a large number of consumers.

 

2016 China Business Development Program
David Hill (second from right), sales manager for K&N Engineering Inc., and Robert Hordossy (third from left), K&N’s senior director of international business, met with existing and potential customers who traveled to the Shanghai-based China Auto Salon/SEMA section from throughout the country.

 

2016 China Business Development Program
“Our booth was so busy—we met so many potential customers—now comes the follow-up!” said Bob Scheid (second from left), director of business development for McLeod Racing LLC. Based in Placentia, California, the firm supplies clutch components, flywheels and other performance products for overseas and U.S.-branded cars and trucks.

         

Spurred by a growing middle class, increasing disposable income and recognition of an enlarging enthusiast market, U.S. vehicle manufacturers have started sending their most iconic vehicles to China, and that bodes well for U.S. specialty-equipment manufacturers. General Motors just announced that the sixth-generation Corvette will be officially exported to China. That follows the arrival of the Mustang and Ford’s announcement that it will export the ’17 Raptor to the China market.




2016 China Business Development Program
Leon Skarshinski, commercial officer for the U.S. Embassy in Beijing, provided a briefing on the specialty-equipment market in China. Skarshinski, Jessica Tan (also from the U.S. Embassy in Beijing) and Elizabeth Couch, from the auto team at the U.S. Department of Commerce headquartered in Washington, D.C., spent the week with the SEMA delegation, allowing for each delegation member to meet one-on-one with the U.S. government officials. “What was inspiring about the SEMA booth was the fact that U.S. attendees had many products on display that were found nowhere else at the show [under-the-hood specialty parts, dynamometers, full clutch kits, etc.],” said Skarshinski. “As a matter of fact, a significant number of the local exhibitors were focused strictly on ‘cosmetic’ products. For those who extended their showing to more advanced products, such as exhaust systems, air filters and hydraulics, there is no doubt that the quality of our U.S. producers was far superior. And the good thing is that serious Chinese car enthusiasts realize this and are willing to pay for this quality.” Skarshinski has high hopes for this market, noting that “the specialty-parts market in China is in its nascent stages but is growing as consumers (typically the younger and newly established middle class) realize that they do not have to simply settle for stock factory vehicle parts.” He said that the key to growing this market is for U.S. companies to continue to raise awareness and build demand among target demographics.
   

This global strategy for some of the best platforms for customization allow U.S. manufacturers to develop products for both their U.S. customer base and overseas customers with one set of tooling, though those making engine-related products should take note of engine sizes being sold in China.

“What has become more interesting is the fact there is a lot more focus on vehicles with engines less than 3.0L because of the high tariff for importing vehicles with larger engines,” said Kevin Floody, aFe Power’s director of international sales. “This is why the Ford Mustang 2.3L Ecoboost is doing so well in China, unlike in the United States or other international markets.”

Off-Road Market Strong

As the popularity of off-roading grows—particularly for Jeep and pickup owners—so does the number of companies in the industry. Ford is bringing a version of its hugely popular F-150 into China next year.

“By introducing it to the world’s largest auto market, we hope to inspire a new generation of off-road enthusiasts,” said Chairman and CEO of Ford Motor China John Lawler in a recent statement announcing the decision to export the Raptor.

The ’17 Ford F-150 Raptor will be built at Dearborn, Michigan, and will be available as a SuperCrew in China in 2017. China will be one of 96 global markets to receive the new F-150. While the Raptor will be the first pickup to be sold in China by an overseas manufacturer, many others, including the Raptor and the Toyota Tundra, are already sold in China through gray-market parallel importers.

The organizers of a huge off-road event that takes place annually in the fall in the Gobi Desert of Inner Mongolia noted that the Jeep Wrangler and Grand Cherokee and the Japanese Toyota series (including the LC 200 and the LC 100) are the SUVs of choice for truck enthusiasts. However, as the off-roading scene evolves, a growing number of Chinese have been purchasing fullsize pickups, leading to estimates that these mostly large U.S.-built pickups now make up 20% of the vehicles taking part in off-road events.

Ford F-Series trucks, Toyota Tundras, RAM trucks and, more recently, even the more niche Nissan Patrol and Escalade pickups have been spotted on tours put on by FB Life. As for small pickup trucks, they are seen on off-road racing tracks, as the smaller and lighter pickups are good fits for racing.

Other vehicles of choice for off-roaders are the Wrangler as well as vehicles not sold in the United States, including the Land Cruiser 70, Suzuki Jimny, Nissan Patrol Y62 (which will be sold in the United States as the Armada beginning in 2018) and Nissan Patrol Y61.

Also included are some off-road makes that are popularly customized in China and globally but are not sold in the United States, such as the Great Wall H5 and the VW Scirocco. Each of those vehicles has been measured at the overseas SEMA Garage, which is held in conjunction with the SEMA Business Development Program.

2016 China Business Development Program
Lu Bai (center), international marketing manager for Auto Accessories Garage, and Corey Rasmussen (left), the company’s product category manager, attended the SEMA program on behalf of the Frankfort, Illinois-based firm. They have already begun to follow up with potential customers on that company’s very popular social-media site WeChat, which is one of the top social-media platforms in China. (Facebook is not accessible in China.) “As a first-time participant in SEMA’s China Business Development Program, our goal was to develop long-term partners and establish ourselves in the China market,” said Rasmussen. “The warm response from buyers far exceeded our expectations. We’d like to thank SEMA for the opportunity to explore the international markets and the 80 new friends we have added on WeChat.”
 
   

Leon Skarshinski attended the SEMA China program for the first time in 2016, having recently arrived in China to begin serving as a commercial officer at the U.S. Embassy in Beijing. He was struck by the opportunities for U.S. companies beyond United States makes and believes that U.S. companies are well-equipped for making products for these platforms. He also saw the SEMA Garage as a good resource for U.S. manufacturers to access those hard-to-obtain vehicles.

“I see great potential for U.S. specialty-equipment companies in the Chinese market,” he said, “not just for the popular SUVs, 4x4s and sport/musclecars imported from the United States but also for other well-known Japanese and European foreign brands that are also found in the Chinese market and for which many SEMA members produce parts. Over the medium term, I would not be surprised to see SEMA members amply supplying quality parts for vehicles made in China. Be they vehicles produced in collaboration with U.S. automakers or standalone Chinese models, SEMA’s vehicle measuring program will be of great use in this regard.”

  2016 China Business Development Program
A crowd gathered as George Shepherd (far right), international sales manager for Royal Purple, demonstrated the company’s products to trade buyers from throughout China. On its first day, the SEMA section was open only to trade buyers, many of whom fly in for the event to be able to meet one-on-one with the visiting U.S. businesses.
   

Nick Niakan, CEO of California-based aFe Power, said this his company, as a manufacturer, clearly needs to adapt to the market and make sure products are being developed that are relevant to China and not just the United States.

“Even for iconic vehicles sold both in the United States and China and, in fact, exported from the United States, manufacturers should be aware of the differences in the vehicles,” he said.

aFe’s Floody reiterated that the Mustang 2.3 Ecoboost is very popular in China. “That is why we are focused on producing products for it,” he said. “Even though this version of the Mustang doesn’t sell as well in the United States or is less likely to be modified, it does have a lot of opportunity outside of the United States. The same is true for Cadillac and the ATS 2.0L turbo.”

McLeod Racing is one of a number of SEMA-member companies that make products for vehicles that are not available in the United States, including the Toyota Land Cruiser, Nissan Patrol and European version of the Ford Focus.

“We know that our international customers are looking for products that best suit their markets, and we are here to help with that,” said Bob Scheid, the company’s director of business development. “If we don’t make an application that our international customers need, then we will design and build it.”

Floody added that BMW is still strong, as is Volkswagen, and more and more buyers from China are taking a strong interest in products produced by U.S. aftermarket companies.

2016 China Business Development Program
This was the first visit to China for aFe Power President and CEO Nick Niakan (middle), shown here with Kevin Floody (right), the company’s director of international sales. Niakan was impressed with the market potential for U.S. companies, which exceeded his expectations. “My perception of the market is very different from what I saw,” he said. “China has been growing for many years now. Its middle class and disposable income are growing, and Chinese consumers are choosing to spend their money on their cars. This market will be huge. I would estimate that will grow tenfold in 10 years, so if you are not a player right now, you should think about coming and checking out the market. Chinese buyers want American products. They want parts for their Jeeps, Mustangs and Camaros. We will be back next year.”
 

2016 China Business Development Program
“We have been participating in this event for the past four consecutive years,” said Josh Abbott (second left, red shirt), international sales manager for Borla Performance Industries. “We use this opportunity to meet qualified dealer candidates, nurture our existing relationships and continue to learn about the market.

 

 

 

 

 

 

 

 

2016 China Business Development Program
This was the first time that Driven Racing Oil, headquartered in Huntersville, North Carolina, participated on the SEMA China trip. The company supplies custom-formulated lubricants and chemicals for performance enthusiasts and professional motorsports teams. Lake Speed Jr. (middle), the company’s general manager, said that the trip provided him the opportunity to explore the market. “The SEMA China trip provided a great introduction to the Chinese market,” he said. “You could not get a better introduction and understanding of the market for the time and dollars invested in this trip.”

 

 

 

2016 China Business Development Program
Jay Carpenter (second left) handles dynamometer sales for Dynojet Research. Among Carpenter’s takeaways from his first trip to China were the size of the market and the demand for aftermarket products for American brands. “This is my first time in China,” he said. “I was impressed with how large the Chinese specialty-equipment market is. Consumers there want American products for their JKs, Mustangs and Camaros.”
 

2016 China Business Development Program
The delegation had the opportunity to visit a wholesaler of performance products and wheels. Pictured here looking at the firm’s extensive stockroom are George Shepherd (left), Royal Purple international sales manager, and SEMA Senior Vice President of Operations Bill Miller.

 

 

 

2016 China Business Development Program
The SEMA section at the recent China Auto Salon drew big crowds. Attendance the first day was limited to pre-vetted trade buyers who came from throughout China to meet with the U.S. suppliers.

 

 

 

2016 China Business Development Program
First-time exhibitor Tire Penz, based in Niwot, Colorado, presented its line of paint and tapes to Chinese customers for the first time. “At first, we were concerned about doing business in China,” said D.J. Potter (third left), the company’s director of sales. “We knew little about the Chinese market and how it operated. However, deciding to attend the 2016 SEMA development tour gave us the insight we needed to succeed in China. Attending the tour appears to have been a very good decision for us. We feel confident that China is going to be a very good market for us. We met all the right local distributors that share our passion, and we are already reaping the rewards of this development tour.” 
 

2016 China Business Development Program
Aki Von, CEO of Blackstone, was one of four buyers who briefed the delegation on the opening night of the SEMA China program. The discussion provided a rare opportunity for an extended exchange of views on topics that included the latest trends, opportunities and obstacles for U.S. companies interested in doing business in China. During the program, the delegation had the chance to visit each of those buyers’ shops, which spanned the performance, styling and off-road sectors.

 

 

 

2016 China Business Development Program
SEMA, working with enthusiast media in China, arranged to have vehicles popularly customized in China but not sold in the U.S. on hand for delegation members to check out up close. Jim Moore (far right) briefed the SEMA delegation on the program. Throughout the week, show attendees stopped by to watch the SEMA measuring program in action and to ask questions.

 

 

 

2016 China Business Development Program
SEMA’s partnership with the U.S. Department of Commerce is making exporting to China less intimidating for SEMA members. “With these combined efforts, U.S. companies are not only meeting new customers and learning about the market but are also receiving assistance in addressing any export-related challenges that arise before, during or after their trip,” said Elizabeth Couch (second right), international economist for the automotive team of the U.S. Department of Commerce in Washington, D.C.

 

2016 China Business Development Program
Matt Cordato (right), SEMA vehicle product data specialist, spent the week measuring the vehicles so that SEMA-member manufacturers can make export-ready products from the resulting computerized images. The surface-scan files are available to members through the SEMA Garage Technology Transfer program. More information on the Tech Transfer program is available by contacting jimm@sema.org.

 

  2016 China Business Development Program
SEMA Chairman-Elect Wade Kawasaki (center) and SEMA Senior Vice President of Operations Bill Miller (left) greeted Mr. Zhang Xiaoping (right), chairman of the board for Ruili Group China, which owns the China Auto Salon. “Another China Business Development Program/China Auto Salon trip is in the books,” Kawasaki said. “SEMA’s international team did an outstanding job, and our members reaped the rewards of their efforts. If you have not done one of these, you really need to check it out. Just ask those who have gone!”
         

“We are very pleased to have entered the international arena and are fully committed to product development,” Floody said.

For more information about SEMA’s international programs, email Linda Spencer at lindas@sema.org or visit www.sema.org/international. Registration is now open for two upcoming overseas business development programs—to the Middle East (Abu Dhabi, United Arab Emirates, March 28–April 1), at www.sema.org/middleeast, and to Australia (Melbourne), at www.sema.org/australia.

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