INTERNATIONAL
By Linda Spencer
Positive Developments In China’s Specialty-Equipment Market
Demand Is Strong; Will Laws Be Updated Soon?
David Borla (right), vice president of sales & marketing for Borla Performance Industries, showed a video about the company’s products to consumers at the SEMA sections of the China Auto Salon and Tuner Tribe events. Borla has participated in every one of SEMA’s overseas trips to China, Russia and the Middle East. Borla produces stainless-steel performance exhaust and induction products for a wide array of cars, trucks and SUVs.
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Seventeen SEMA-member companies presented their products in a two-city visit to China during the September 2014 SEMA China Business Development tour. The SEMA delegation had the opportunity to exhibit both in Beijing and Shanghai. The group was briefed by the U.S. Embassy and participated in networking events in both cities, where members had the chance to meet with buyers from throughout the country. Buyers attended the SEMA events from 23 provinces located throughout China. Following a dinner with buyers and a briefing by the U.S. Department of Commerce on the tour’s opening day, the SEMA delegation exhibited at Tuner Tribe. This 110,000-sq.-m. indoor/outdoor complex of automotive shops and businesses is dedicated to China’s emerging modified-car culture. Established in 2009 with investment from the Nanmofang Township government of Chaoyang District, Beijing City, and with additional support from the Beijing Municipal Commission of Commerce, Tuner Tribe is the only commercial street in China dedicated to car-tuning culture.
The following day, the group traveled 665 miles from Beijing to Shanghai—the two biggest cities in China—to exhibit at the China Auto Salon (CAS). At each event, the SEMA section was open only to pre-vetted buyers or those who could show proof that they were professional resellers.
Positives
The 2014 delegation witnessed a very different market from the one that was explored by the first group that traveled with SEMA to China 10 years ago. Among the positive changes:
SEMA President and CEO Chris Kersting (left) posed with Zhang Xiaoping (right), chairman of the board for Ruili Group China, which owns the China Auto Salon.
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China is now the largest vehicle market in terms of annual sales. An expected 23 million passenger vehicles will be sold in 2014, up from a record-setting 20 million in 2013.- The growing middle class affords more people the ability to upgrade their vehicles. A recent report by McKinsey & Company noted that this is the fastest-growing segment of the Chinese population and estimated that more than 75% of China’s urban consumers will fall into that demographic by 2022. As their incomes rise, middle- and upper-middle-class consumers buy more luxury goods. Today, all of the major brands earn a significant portion of their global revenue in China.
- Interest in modification has spread around the country.
- China is gradually transforming from a market dominated by first-time buyers to those experienced in buying a vehicle and, increasingly, those seeking a second car.
- There is a growing desire for consumers to differentiate themselves and show their individuality. According to a recent article on smartplanet.com, a new generation of wealthy, globally connected consumers is emerging. Timothy Coghlan, the luxury brand consultant behind mansuit.com, is quoted as saying that a new generation of young, wealthy Chinese urbanites are now confident enough to stand out from the crowd. “Buying a luxury car is no longer enough,” he said. “They want to show their identity through their purchases. We see this in the fashion sector, too. It’s not about buying the brands my friends have anymore. It’s about buying the brands my friends don’t have, to show my individual take on the world.”
- An estimated 600 million people in China are connected to the Internet. And with this connection, Chinese consumers can follow the latest trends and are increasingly brand knowledgeable.
- The Chinese distribution system is growing increasingly sophisticated. Wholesalers often have a presence throughout China with numerous outlets and/partnerships in the major cities as well as in more underserved markets.
- Consumers are no longer concentrated in just the major cities but rather throughout China.
- SUV sales are up 480% since 2008 to 3.7 million last year, or around 20% of China’s total vehicle sales, according to a recent Associated Press story.
Brett Webster (right), Matrix Films president speaks to buyers at the Beijing Tuner Tribe event. Matrix Films is a U.S.-based manufacturer of top-coated urethane films designed to protect from stone chips and other environmental damage.
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Participants on the 2014 SEMA trip to China exhibited in both Beijing and Shanghai. The delegation also had the chance to network more informally at various events. Rick Trudo (right), president and CEO of SCT Performance and Bully Dog, spoke with buyers at the opening networking event in Beijing.
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Ian Lehn (right), president of BOOSTane, and Anthony Caputo (second right), the company’s director of sales, were first-time participants in the SEMA China Business Development program.
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Challenges
There are also some continuing hurdles:
- The rules and regulations surrounding vehicle modifications in China are out of date, and the regulations governing China’s legal system for car renovation leaves many gray areas. They haven’t changed since the original Road Transport Act was written back in 2003 when the automotive specialty-equipment industry was just starting in China. In a much-welcomed law revision, vehicle inspection periods have changed from every two years to six years. Current laws require owners to satisfy inspectors once every two years for vehicles that are up to six years old
- Intellectual property rights issues remain.
- Classic cars are still not allowed to be imported except under limited exemptions.
- Pickups are increasingly popular, but their use in top-tier cities is often restricted.
Members Optimistic
SEMA members Bully Dog and SCT Performance introduced their new parent company Derive Systems at SEMA China program this year.
Royal Purple International Sales Manager George Shepherd (right) and Vice President of Professional-Consumer Sales Wayland “Butch” Cox (second from right) exchanged business cards with buyers at a networking event—one of several held during the program. “Demand for U.S. products is strong in China,” Cox said. “It is a performance-driven market, and we were welcomed in China with open arms by true performance enthusiasts.”
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“We have seen a big surge in sales in China,” said Rick Trudo, president and CEO of SCT Performance and Bully Dog. “The market is really starting to grow, and the opportunity given SEMA members there has really helped us fast-track the growth. I would also say that the market has matured since we started going there five years ago. We have noticed that the middle class is growing, and their interest in specialty-equipment products has further fueled the growth of our industry in China.”
BOOSTane representatives said that their company’s greatest potential comes not in high performance but from restoration and protection from a lowering fuel quality compounded by the rising demand of an automotive aftermarket. The company has already established an office in Shanghai and looks forward to taking advantage of an opportunity that it would not have otherwise had without the help and guidance of SEMA. The perspective the company gained from its travels through China with SEMA was that fuel quality is a global issue.
Injen Technology was also excited to visit China and participate in the 2014 CAS in Shanghai.
“This show was like a mini-SEMA Show in Asia,” said Ed Rossi, Injen Technology’s vice president of sales.” The automotive excitement and buzz warmed our hearts, knowing that our performance industry is transcending to other continents and cultures. Injen’s successful marketing efforts are paying great dividends, with the help of the SEMA China Business Development Conference.”
For many aftermarket companies, the primary opportunities reside with vehicle platforms, such as Jeep JK, Raptor and now the Mustang, but other platforms are becoming visible as well.
“The Chinese market is very interesting and provides ample opportunity across many product segments and vehicle platforms for companies with strong brands that appeal to the Chinese enthusiast,” said vice president of sales for Weld Racing Kyle Fickler. “The SEMA China Business Development Tour is a great opportunity to get exposed to a broad cross section of the Chinese enthusiast market, and it provides excellent networking and selling opportunities.”
SEMA CEO and President Chris Kersting made opening comments at the 2014 SEMA China event.
It’s been 10 years since SEMA first traveled to China, and this was the fifth SEMA China event that brought SEMA members to meet with pre-vetted buyers. | 
Nick Gramelspacher, (second from right), vice president of sales & marketing for Meyer Distributing, and Cody Ziegler (third from right), the company’s national sales manager, also met with buyers. “China was much more into hot trends than I had imagined,” Gramelspacher said. “They know what good-quality products are, want them and are not afraid to pay for U.S. quality. We can’t wait to come back and get additional new business.”
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Ruby Stratz (second left) of Keystone Automotive Operations conducted business with buyers at both venues. Each company was provided with an interpreter in Beijing and in Shanghai, though a growing number of buyers speak at least some English. Exhibit fees—which were subsidized by the U.S. Department of Commerce—covered booth costs for both events as well as hotels, meals and transportation between the two cities.
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Karl Dedolph, director of international sales for Champion Oil, was shocked at the breadth of interest in a variety of automotive performance segments.
“China has plenty of super cars and touring cars,” he said, “but what surprised me was the tremendous enthusiasm and support for sport compact, drifting and diesel. Chinese auto enthusiasts follow all the new and hot global products for customization, personalization and performance. As an outsider, it’s very comfortable to engage buyers in discussions about cutting-edge technologies—especially when we present our products in conjunction with SEMA and the Business Development Tour.”
Some SEMA-member visitors were impressed by the Chinese demographic of young, first-time vehicle owners.
“Not only are many of them enjoying their first-ever vehicles, but they are also immediately pursuing ways to enhance the appearance, styling and performance of their vehicles,” said Tim Wheeler, vice president of global sales for ROUSH Performance. “The Chinese market is hungry for products that can personalize their rides.”
Each participant was provided with a 3x3-meter booth at the events in both cities. Scott Giles (far right), CEO of Iowa-based SuperFlow Dynamometers and Flowbenches, talked with potential customers.
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Kyle Fickler (second left), vice president of sales for Weld Racing, talked to buyers about the company’s high-performance wheels for performance cars, trucks and the luxury performance segment. The 17 SEMA-member companies that exhibited in both Beijing and Shanghai met with buyers from 23 cities and provinces throughout China.
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Buyers lined up to be admitted to the SEMA section at the Shanghai-based China Auto Salon. The SEMA sections at both the Beijing and Shanghai events were open only to verified resellers.
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The ’15 Ford Mustang will be sold directly into the Chinese auto market for the first time early next year, and the ROUSH Performance team was blown away by the initial demand it was seeing for the company’s Mustang products as well as the knowledge that Chinese Mustang enthusiasts already had gathered about the company.
“We are very optimistic about the long-term opportunities in China,” Wheeler further explained.
Trent Kirby (left) operations manager for Baja Designs, showed buyers the company’s line of custom off-road lighting. The firm also produces lighting for ATVs, mining, industrial and agricultural uses.
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Scotie Selman (center), vice president of business development for Bully Dog Technologies, explained the company’s products to pre-vetted buyers. Bully Dog and 16 other companies exhibited at events in both Beijing and Shanghai.
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Karl Dedolph (left), director of international sales for Champion Oil, and Joseph Chen (second left), sales director for Champion Oil/Aisen International Corp., met with buyers throughout the tour. “China has plenty of supercars and touring cars,” Dedolph said, “but what surprised me was the tremendous enthusiasm and support for sport compact, drifting and diesel.”
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SEMA President and CEO Chris Kersting (right) checked out modified vehicles at the Beijing-based Tuner Tribe. Also pictured are Tony Sun (second right) from SEMA’s China office and Peter MacGillivray (center), SEMA vice president of communications and events.
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Allison Blackstein (center) chief operating office of Texas-based Dynocom Industries Inc., assisted two Chinese buyers while her interpreter (left) spoke with another booth visitor.
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Eileen Duran (second left), international sales manager for Transamerican Manufacturing Group (TMG) met with Chinese buyers. The California-based company is a manufacturer of tires, wheels, suspension systems, bumpers, drivetrain and accessories. The group owns the following brands: Smittybilt, G2 Axle & Gear, Rubicon Express and LRG. This is the first time TMG has participated on a SEMA overseas program.
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Buyers at the Tuner Tribe event met SEMA exhibitors. Pictured on the left in Matrix’s booth is Brett Webster, president of the Massachusetts based manufacturer of top-coated urethane films (second left) and in BOOSTane’s booth are Anthony Caputo (sixth from right in black), director of sales, and Ian Lehn, president (far right in black).
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SEMA exhibitors had the option to display project vehicles at Tuner Tribe and the China Auto Salon.
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Royal Purple International Sales Manager George Shepherd (second right) speaks to buyers about the company’s high-performance lubricants.
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Daniel Green (second right), director of market access and compliance, U.S. Embassy Beijing, talks with Kyle Fickler, vice president of sales for Weld Racing (far right) and Nick Gramelspacher, vice president sales & marketing for Meyer Distributing (second left, orange shirt) at the Beijing-based event held at Tuner Tribe. Looking on is Cody Ziegler (left), Meyer Distributing national sales manager. Also in attendance from the U.S. Department of Commerce was Liz Couch, international economist-auto team from the International Trade Administration, Washington, D.C., and Daisy Wu, who works with Green at the U.S. Embassy in Beijing.
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Ed Rossi, vice president of sales for Pomona, California-based Injen Technology (right) provides details on the company’s high-performance air intake and exhaust systems.
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Pictured: Tim Wheeler (left), ROUSH Performance vice president of global sales, and Ron Muccioli (center) ROUSH Performance executive director, business development. The Michigan-based firm, founded in 2005, provides performance products for Ford, GM, Chevy and Dodge vehicles.
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Marissa Muller (left), SCT Performance vice president of marketing, and Scotie Selman (right) Bully Dog Technologies vice president of business development, demonstrate their firm’s products.
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BOOSTane was a first-time exhibitor to the SEMA China program. The firm, located in Bonita Springs, Florida, offers a premium-octane concentrate for high-performance engines.
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Karl Dedolph (left), director of international sales for Champion Oil, and Joseph Chen (second left), sales director for Champion Oil/Aisen International Corp., met with buyers throughout the tour. “China has plenty of supercars and touring cars,” Dedolph said, “but what surprised me was the tremendous enthusiasm and support for sport compact, drifting and diesel.”
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eBay Motors Senior Manager of Business Development Ryan Tominaga (second right) talks with a buyer while one of eBay’s Asia-based staff answers a question for another.
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Chris Mann (left) SuperFlow Dynamometers & Flowbenches product manager, talks to potential buyers for their automotive test and remanufacturing equipment.
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SEMA CEO and President Chris Kersting made opening comments at the 2014 SEMA China event. It’s been 10 years since SEMA first traveled to China, and this was the fifth SEMA China event that brought SEMA members to meet with pre-vetted buyers.
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