In 1980, Europe and North America generated 83% of global auto sales. By 2009, it had come down to 51%. By 2020, it is expected to dip further to 35%. Asia will drive this shift – it will contribute 65% of the global sales by 2020.

This West to East is the big shift in the auto industry and will redefine in many ways the way the auto industry is structured today. Emergence of China as the largest car market – rather than the US – has already triggered many changes.


What does this mean for Indian car companies and customers? Michael Dunne, the president of Dunne & Company Ltd, should have some interesting perspective on the issue. His Hong Kong-based investment advisory firm specialises on Asia's car markets.

An American, Dunne is a longtime Asia hand - he headed JD Power's China business. His just published book, American Wheels, Chinese Roads, is an insightful take on General Motors in China and gives a good peek into the dilemmas, opportunities and challenges that auto MNCs are grappling with in China.

In an interview to Malini Goyal, he spoke at length about China, India and the future of car industry:

What's your take on the auto world's center of gravity shifting from the West to the East?

I don't think people have absorbed the fact yet that the world's center of gravity in both auto production and auto markets has already shifted to Asia. Today the four countries – Japan (7 million), Korea (3 million), China (20 million), India (2 million) – alone produce and sell over 30 million cars already. You can put Asia easily at 35 million plus – which far surpasses US and Europe.

What does it mean for Asian car market?

Everybody is trying to become stronger in this market. Even as that happens Asia must come to terms with massive amount of fuel demand, national security and environmental concerns. There must be a steady shift to smaller fuel efficient vehicles and thrust on alternative energy.

What future trends do you see in Asia?

One thing is clear – the way things are, China will have far too much capacity. By 2015 it is looking at a capacity of 40 million cars and trucks. At best Chinese demand will absorb 25-30 million. They will push exports – already up 50% this year – to the emerging markets. In 2011, they are looking at 0.5 million exports which should go up to 2-3 million by 2015.

Do you see the global rise of Chinese auto firms like SAIC?

Chinese auto OEMs are still at least five years away from their American counterparts in their evolutionary cycle. State-backed companies like SAIC have not made progress the way Chinese government had expected. 95% of the exports are still being done by the entrepreneur-led private companies like Geely, Chery, Great Wall and BYD.

Remember, Chery, Geely were never invited to the (government-managed) party. But they are the ones who are pushing boundaries. Beijing does not like them – but it has to tolerate them.

China wants its OEMs to be world class and has taken the JV route. I see China leveraging and taking control of JV as a possibility. I see overcapacity and other issues to push for consolidation in the Chinese auto industry.


What's the future of the Japanese firms?

Since the 1980s and 90s, the Japs have been on a tremendous roll. But they have not done well in China. They need to change that to maintain their dominance. If they stall in China, it would have global repercussions for them.

There is lot of buzz around China and E-vehicles. Are you betting on them to lead?

There is a perception that China is leading on E-vehicles. It has ambitions to lead in that segment. Energy security is important for China as car sales surge. But it realises that it does not have the technology. It is now saying that let's not put the cart before the horse. They are working on pushing efficiency in diesel and petrol vehicles. I would still bet on Toyota, Honda on this.

How would you stack up Indian auto companies vis-a-vis the Chinese?

Chinese companies believe in first shoot and then aim. Home-grown Indian firms are more strategic in their approach. Chinese firms can manufacture at much lower costs. But Indians have to now find ways to reduce costs – that will be their challenge.

Small car is the flavour. Helps us get a sense how globally it is playing out?

The real issue is not so much the size but the fuel efficiency of new engines. Customers look for space and comfort. Companies that can power slightly larger and more spacious vehicles with small, gas-sipping engines will enjoy an edge. Look at VW's development of a brand new very fuel efficient 1.4 liter engines to power many of the its subcompact and compact cars..

What kind of future do you see for standalone smaller firms like Suzuki, Peugeot?


Look for these two proud brands to be muscled aside or absorbed by larger, more financially resourceful companies within five years. VW is already trying to have its way with Suzuki, though with just 20% ownership they do not yet have enough leverage to take charge

Rise of Hyundai on the global map today - does it have a message for the car industry?

Even in an industry with chronic overcapacity and too many brands, it is still possible to make breakthroughs in design and quality that win over new buyers. Hyundai enjoys probably the best momentum of any major car maker in the world right now. They have convinced American buyers (with a 10-year 100,000 miles warranty) that they are serious about quality and perceptions of the Korean brand have vastly improved. Now, the challenge is to persuade Chinese and other Asian buyers of the same.

Structurally, how does India's car market compare with China?


China has developed a genuine car culture in the space of less than 10 years. People are crazy about car ownership and are willing to spend lots of money on a new car. There 90% of purchases are

still settled in cash. Look at luxury - Half of Audi A6 models sold globally are sold in China. The largest market in the world for the Mercedes S Class is China.

Indian consumers still think of cars mostly as practical tools. This difference in cultural attitudes helps explain why the Chinese market for cars is 6 times larger than India's.