“Of all the industries you could have picked,” I am frequently asked, “Why automotive components? It’s a mature industry.” And that’s true. In developed economies like the United States, automotive is a mature industry. But in developing economies like China, it can be a growth industry.

Ever since it joined the World Trade Organization in December, 2001, the production and sales of vehicles—trucks, buses and passenger cars— in China has increased by at least one million units each year. China’s auto industry has grown by an incredible 20 percent to 50 percent each and every year since WTO entry, and in 2008, China will produce over 10 million vehicles, most likely surpassing vehicle production in the United States.

Although everyone is on the China bandwagon today, that was not always the case. It wasn’t long ago that global auto executives questioned how a country whose per capita income is only $1,000 (approximately the level for China at the beginning of this century) could possibly afford to buy passenger cars. No one asks that question anymore. But, it should not have taken so long for industry observers to become believers. As early as 1992, anyone who believed that China’s economy would continue to grow, could easily predict, as day follows night, that China would have a very large auto industry. Quite simply, there is no other way to get people and goods around a country the size of China without a system of highways—and plenty of trucks, buses and passenger cars.

When I came to China in 1992, the first thing that struck me about the country was its size. China is big. Almost to the square kilometer, China is the same size as the United States, which meant that every industry was fragmented, and companies were doing business locally rather than nationally. As China’s transportation and telecommunications infrastructure improved, I reasoned, industries would begin to consolidate, and companies able to do business nationally would come to the forefront. Rather than investing in individual companies, therefore, it became more important to pick an industry and develop a strategy for creating the leading company in that industry.

But that begged the question: What industry? Fortuitously, I was invited to attend a Euromoney Conference in Shanghai in September, 1992, and I went there hoping to get some answers. As I describe in Managing the Dragon, here is what happened:

One of the featured presenters at the conference was Dr. Stefan Messmann, a senior executive with Volkswagen. In his remarks, he explained to the roughly 300 people in attendance that Volkswagen viewed China as one of its key growth markets. The company had already invested more than $350 million in two joint ventures, in Shanghai and Changchun, and had clearly taken an early lead in the race to develop China’s automotive industry.

I was surprised. At that point, it wasn’t clear that China even had an auto industry. The streets were filled with bicycles and a couple of trucks here and there, but passenger cars were few and far between. The ones you did see were typically imported Mercedes, which usually belonged to government officials. But here was a high-ranking Volkswagen official saying that China was going to develop a major automotive industry. More important, he was saying that Volkswagen, a major player in the global industry, was counting on China for a great deal of growth. I sat up in my seat and started to listen more closely.

But, autos are a big industry that accounts for over 12 percent of global GDP. What segment of the auto industry should I focus on? When he finished his presentation, Dr. Messmann opened the floor for questions. His response to the first provided an answer.

“What’s your biggest problem?” somebody asked.

Without a moment’s hesitation, Dr. Messmann replied, “Our biggest problem is getting an adequate supply of high quality parts.”

When I’d been in investment banking, I had called on a number of companies in the automotive components area. Though times were tough then, in the late ’70s, I looked back at financial statements from the ’50s and ’60s and saw that these companies had all been very profitable. This had been America’s growth period in autos. GIs returning from World War II, people like my dad, wanted to get on with their lives and were buying houses, refrigerators, and cars in huge numbers. As General Motors, Ford, and Chrysler expanded production, components companies could literally fill up their plants for the year after three golf dates with buyers from the Big Three. If Messmann was right, the same thing was now about to happen in China 40 years later.

“Wow!” I thought to myself. As Yogi Berra had said, “This is déjà vu all over again!”

Dr. Messmann gave me the first hint that auto components might be a good industry to investigate. After all, if companies like Volkswagen were looking for new suppliers in China, there seemed to be a vacuum that needed to be filled, and that spelled opportunity.

I didn’t see Dr. Messmann again until last week, nearly 16 years later. In writing Managing the Dragon, I learned that he had left Volkswagen and was now teaching law at Central European University, a very interesting English-speaking graduate school in Budapest that was founded by George Soros, one of Hungary’s most famous émigrés. After communicating by e-mail, Dr. Messmann invited me to Budapest to meet CEU’s senior faculty and to deliver a lecture at the school.

What a great two days! Dr. Messmann and CEU could not have been more hospitable, and Budapest is a fabulous city that is full of history. As I also learned, CEU is one of a kind. Founded in 1991 with the explicit aim of helping the countries of Central and Eastern Europe and Central Asia transition from dictatorship to democracy. CEU’s 1400 students come from 80 different countries. As I stood there answering their questions, I was struck by the fact that the students surrounding me were from Slovakia, Russia, Uzbekistan, Kazhakstan and Nigeria, countries I rarely come in contact with. Like students everywhere, they were eager to learn more about China and how they might do business here.

Just as Dr. Messmann opened my eyes to the auto components opportunity in China 16 years ago, he has now opened my eyes to a new part of the world. I want to learn more, but my instinct is that this is a very interesting part of the world that may be a great connection for any China business. The region is comprised of countries that, like China, have emerged from closed economies and are now rapidly making up for lost time. These countries have much in common with China, including a lower cost perspective, and are rich with many talented and motivated people with a strong desire to get ahead.

Once again, thank you Dr. Messmann.

Forrás: http://managingthedragon.com