Zhao Fuquan: Construction of a Powerful Country Must Have Systematic Evaluation Indexes


Zhao Fuquan, Dean, Institute of Automobile Industry and Technology Strategy, Tsinghua University

The Necessity and Importance of Establishing an Evaluation Index System for Auto Powers

I once described the connotation of a powerful automobile country. That is to say, automobile powers are represented by having world-class local auto companies. These companies have excellent brands and competitive products, control the key core technologies and occupy a certain market share in the world. At the same time, the country has a complete supply chain system that is dominated by local companies and controls core technologies. In other words, a strong car country depends on the overall competitiveness of local car companies in the world market, rather than the size of the local market. For example, in Korea's domestic market in 2012, there were just over 1.5 million vehicles. However, Korean car manufacturers have sold nearly 8.2 million vehicles globally. This is a strong testimony to its strong position in the automobile industry; while China has nearly 20 million local markets, As the local car prices are not yet strong, it is still not a car power.

The above is the basic judgment of a car power, but this is only a "result" rather than a "reason"; it is only a determination of "sex", rather than a "quantity" analysis. We cannot help but ask how to quantify the position of a country’s automobile industry in the world. A country is committed to building a world-class car companies, building a car power should start from what aspects? How should the state and the enterprise interact? How should different national and corporate efforts in different dimensions be grasped? What are the results and how should they be evaluated? The premise of accurately answering these questions is to further refine and determine the basic elements that make up a powerful automobile country. In other words, we need to establish a scientific system of automobile powers evaluation index system.

For the automotive industry, it is not easy to establish such an evaluation system. The automobile industry is a highly complex system project. It not only has a long industrial chain, involves a wide range of fields, and has many related elements. These factors are related to each other, affect each other, and restrict each other. There are both national and corporate factors; both need capital and management, but also need technical support. It will sort out and refine many factors that affect the automotive industry and form a number of core elements for building a strong automobile country. It is a prerequisite for a deep understanding of the automobile industry, and it also provides reference and guidance for building a powerful automobile country. In this sense, the process of establishing an evaluation index system for automobile powers is a process of deepening understanding of the automotive industry, a process of summing up the experience of successes and failures in the development of other countries’ automotive industries, and a process of exploring the path to a strong automobile country, and its necessity. The importance is self-evident.

Research on Systematic Evaluation Indexes of Auto Powers

Based on this understanding, we have made preliminary attempts to establish an evaluation index system for automobile powers. In the process of completing this work, we carefully and repeatedly considered the selection of evaluation indicators, and finally established the following three basic principles, namely, the evaluation indicators must meet three requirements: First, representativeness. The automobile industry is complex and involves a wide range of issues. The evaluation index system must be able to cover all aspects of the automobile industry and its related areas, fully represent the key elements needed to strengthen the automobile industry, and do as little as possible. To be more specific, that is, in our evaluation system, any index is not strong enough for the automotive industry to become stronger. Second, independence. There are many factors that affect the automotive industry, and many factors interact with each other. However, it is obviously not appropriate for the factors with excessively high degree of correlation or high degree of coincidence to be classified as different indicators. Therefore, the selected indicators must be able to represent a certain area or a certain area, have relative independence, and any one index can not be replaced by other indicators, so as to describe the strength of a country's automobile industry with as few indicators as possible. Third, guidance. The establishment of the evaluation index system is not simply a matter of ranking the auto industries of various countries. The more important purpose is to sort out clearly and clearly the various factors that affect the auto industry and their relationships, and to learn from the development of foreign automobile powers. Experience, to find out the crux of the Chinese auto industry is not strong, gap geometry, so as to guide the direction of China's auto industry, depicting the path.

Based on the above principles, we systematically analyzed the various factors affecting the automotive industry, taking into account the degree of importance and relevance, taking into account the availability of data, and finally put forward a set of evaluation system for automobile powers that includes the nine major indicators. The nine major indicators are market share, brand strength, product competitiveness, core technology control, manufacturing capacity, supply chain capacity, sales and service capabilities, basic industrial level and talent level. The following brief description of each indicator:

First, market share. This is the primary factor that best represents the strength of a country’s auto industry. Market share is the basic premise for enterprises to survive, and it is also an intuitive embodiment of the company's scale. The market share mentioned here does not mean the share of a country’s enterprises in the local market, but the comparison of the share of auto companies in the global market.

Second, brand power. As one of the consumers' most important awareness of products, the brand is not only the intangible accumulation of the company's comprehensive strength over the years, but also the soft strength of the company's long-term efforts, and it is also a symbol of corporate image and quality. The world's automotive powers have a world-renowned car brand. For this indicator, we use the Forbes data as a benchmark to compare the company's corporate value, brand value, and corporate competitiveness.

Third, product competitiveness. The competition between countries is the competition of enterprises, and the competition among enterprises is the competition of products in the final analysis. We decompose this indicator into two dimensions: product variety and product performance. The product variety represents the ability of the company to fully meet consumer needs and grasp market segments. This dimension is based on the evaluation of various countries' automotive product type matrix, and at the same time it introduces product grade factors to give greater weight to products that are biased toward high end; product performance. This is the quality of products that consumers can directly perceive. We have selected several important performance indicators such as safety, economy, dynamics, warranty cycle, and key functions that are relatively easy to quantify.

Fourth, the core technology controls. The core technology is the blood of the company. The core technology is the power of the company's hematopoietic capacity. From a national perspective, controlling core technologies is an important prerequisite for ensuring industrial safety. From a business perspective, controlling core technologies is the fundamental guarantee for sustainable competitiveness. According to the independent development, cooperative development, and outsourcing of the company's core product areas including product platform (platform quantity, platform model derivative ability and scale), powertrain, automotive electronics, cutting-edge technology (new energy, information, and intelligence), etc. , technical reserves, and research and development capabilities (R & D investment, team size, etc.), a total of five dimensions to do a comprehensive evaluation.

Fifth, manufacturing capacity. For the auto industry that highly emphasizes economies of scale, high-efficiency, high-quality, and low-cost large-scale manufacturing capabilities are particularly important. We quantify and compare manufacturing production capabilities from the perspectives of total capacity, automation, quality assurance capabilities, flexible production capabilities, and globally consistent production and process technologies.

Six, supply chain capabilities. There are thousands of auto parts, most of which come from suppliers rather than automakers, and there are second-level and third-level suppliers below the first-tier suppliers.... The technical content, cost, performance and quality of the entire vehicle depend largely on the level of the supplier. Supply chain capacity determines the ultimate competitiveness of the product. Supply chain capabilities include two dimensions: supply chain integrity and supplier level. The former mainly evaluates the local suppliers' control of core components and quantifies them by analyzing the cooperation model between the entire vehicle company and parts and components companies; The evaluation is based on the technical strengths, business areas and turnover of major auto parts suppliers in various countries.

Seven, sales and after-sales service capabilities. This is the link in the final realization of the value of the automobile industry, and it is also the link of the automobile directly to the consumer and the product to the commodity. Excellent sales and after-sales system can even make up for the lack of product power and win more favors for consumers. The sales capacity is mainly evaluated by comparing the sales channels (number and distribution of outlets) of auto companies in various countries; and the evaluation of after-sales service capabilities refers to the evaluation data of third-party auto companies.

Eighth, the basic industrial level. The automotive industry is closely related to many basic industries. Industries such as raw materials (iron and steel, rubber, plastics, etc.), equipment manufacturing, machinery manufacturing, electronics, petrochemical, etc., have a direct or indirect influence on the level of the automotive industry. To this end, we selected a number of major automotive-related basic industries for evaluation, and quantified this indicator according to the country's leading industrial sectors and extent.

Nine, talent levels. Talent is the most valuable core resource for a country and an enterprise. For a highly complex and extensive automotive industry, it requires a large number of engineering technicians and management personnel who are solid, professional, knowledgeable, and adaptable. The level of automotive talent and the number of people directly determine the future of the automotive industry. Based on the assessment of the level of automotive talent, we have selected four dimensions: the number of automotive talent, the proportion of technicians, the academic and technical level of talent, and the four years of management and technical personnel. Among them, the number of automotive talent is measured by the relative value of the number of automotive employees in a country as a proportion of the total number of employees in the manufacturing industry; the academic and technical level of talent is evaluated by the level of qualifications, patents, dissertations, and strengths of engineering companies in various countries.

In accordance with the evaluation index system of the above-mentioned automotive powers, we analyzed the eight major countries and measured them in terms of percentiles. The results show that: Germany, Japan, and the United States are in the first echelon of automobile powers with scores above 90; South Korea, France, and Italy Scored between 60-75 points in the second tier, while China and the United Kingdom scored close to 40. Judging from the results of the evaluation of automotive power indicators, South Korea has seen a significant increase in the automotive industry in recent years. It has greatly surpassed the trend of Germany, Japan and the United States. However, its overall strength is still far behind that of first-class powers, mainly reflected in its brand power. Supply chain capabilities, basic industrial standards and talent levels. The United Kingdom, as the birthplace of modern industry and a traditional automotive powerhouse, still has strong automobile manufacturing capabilities. However, the overall level of market share, brands, products, and technologies has fallen sharply. Compared with other manufacturing powerhouses, the United Kingdom has become a non-automobile power. Its comprehensive index score is close to China. China, on the other hand, has a shortage of the 9 major indicators compared to the world's leading automotive powers. The gap is obvious in terms of brand power, core technology control, supply chain capacity, basic industrial level and talent level.



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