Earlier you talked about resilience, indicating that it was absolutely important to be patient because setting up internationally takes time, concretely how long does it take on average?
From what we know from our experience, which is historically specific to the automotive industry, you first need to make yourself known to your target customers and explain your competitive and product advantage several times.
Then you know, if you manage to convince them, that you can be selected to respond to a call for tenders. As I was saying earlier, if you are good on the first try, and we have already had examples of companies that we have accompanied in the past, then after only 6 months you can win a contract.
Usually you have two years of development until the start of the serial life, but in general it takes between 12 and 24 months to win a first market.
Very often companies come to us when they have already failed, that is to say that companies try to do it by themselves and eventually realize that distant markets are not so simple because there is the cultural aspect to take into account.
We do not do business in Korea or China in the same way as in Europe. When after 3-4 years these companies still have not managed to get any business, they eventually say: “Well, maybe I’ll let SNECI accompany me with their local approach”.
We have a few examples like that which are quite nice.
What does SNECI bring to a French company that wants to set up abroad, what do you do for them, so we understand that you have local teams that know the local culture very well but otherwise what do you bring to them?
Our teams are sales engineers, so they know the products.
We have reached a critical size that allows us to cover all vehicle technologies and that allows us to be the interface and even sometimes to challenge the suppliers on their product by asking them “Why do you have such and such a characteristic on your product? Do you know that in such and such a market we are going to expect another feature? So can you develop it, how long will it take to do so, etc.?
Challenging customers requires them to have a commercial sensibility to highlight the added value of the product.
Locally you also have competitors, so you have to fight against them and then we put, according to the market won, a team rather oriented development and people who will be rather specialized on the quality part and on the logistics part.
We are going to be in support during the series life. We accompany the equipment manufacturer by providing them all the support functions.
That’s quite a lot of people, how many people are involved in a company abroad?
It depends on the size of the business, when we start, it will generally be 1 or 2 people, today there are some suppliers that we support where there is a significant volume of business and where we have 5 or 6 people working full time on these suppliers.
Do you also lobby public authorities in each country?
In some specific cases, yes, it is a mix between monitoring and lobbying, it is trying to understand how regulations evolve.
After that, I will remain realistic, we are not as important as suppliers’ associations and we are not necessarily going to be able to influence regulations.
However, we report to the authorities our feelings in order to be able to influence one way or the other.
Are there any foreign markets that are difficult to penetrate?
I would say that Asia is perhaps more difficult, because it is more distant, more culturally distant, at first but, as I said earlier, once you are established, things settle down, it is perhaps the first market that is difficult.
Then, once you have succeeded in creating this relationship of trust (this is why it is important to be present every day to explain in the customer’s language why the product has this or that characteristic and why it is necessary to choose this orientation rather than another), you can develop business over time.
So we have another question on LinkedIn, “What do you think are the most popular areas of the world for the international development of our suppliers outside the North African Area ? Are we talking about French or English speaking countries?
So, if we reason today in terms of volume, China is still by far the world’s largest automotive market, since this year we should have 75 million vehicles produced and there will be more than 25 million, more than a third in China.
We finally come back to one of the questions from the beginning, which is to say, “Are we going to be export or produce locally?” It’s true that in China, typically, there are very few cases today where we could sell without producing locally, except as I was telling you about very specific services, for example related to cyber security, …
But very few products could be sold locally without having a local presence.
Is it easier to settle in Europe? Or is it not because we are right next to a country that it is easy to set up there?
When we accompany companies in their first stage of development, we often ask them the question: “Would it be more interesting for me to set up here or there?
Today, we have little demand in Western Europe, it must be clear, the requests we have for suppliers are more for Eastern Europe or North Africa.
But if each country has advantages and disadvantages, each country is also trying today to attract investments to itself and therefore proposes tax reductions or subsidies to attract suppliers in the establishment of new industrial sites.
Do you have a case study to share with us, an equipment manufacturer that had a hard time setting up and that you helped?
Yes, I was talking earlier about the examples of suppliers who had tried to do it by themselves, we are now working with an equipment manufacturer that we have been supporting for 3 years now, which is partly located in France on its development and in South Korea.
It has been appointed for the first time by car manufacturers and also by Tier 1 and Tier 2 suppliers, and its volumes have exploded.
So, it is currently thinking about how to establish itself locally, if not for all at least for part of its activities to support local growth.
It’s true that previously it had tried to do this remotely and it had been much more difficult.
You take care of French companies that want to set up abroad, but on the other hand you also accompany foreign companies that want to set up in France. Are there many requests from foreign companies that want to set up in France?
Yes, so we don’t have them every day but two important things to remember.
Are there many French companies that want to develop and do business with French customers? Today you have Stellantis which is the 4th manufacturer in terms of volume, Renault with Alliance which is also in the top 3, so finally cutting yourself off from Renault Nissan and Stellantis means cutting yourself off from almost 20% of the world market.
And if we look at Europe, it’s even worse, because you cut yourself from almost 40% of the market.
So finally, the suppliers who want to continue to have a significant volume of business have to consider coming this way.
I am thinking in particular of the Italian suppliers with the merger between PSA and FCA, who are now realizing that, because of their geographical location, they do not have a footprint that corresponds exactly to the wishes of the new Stellantis group.
We are currently considering setting up operations in France, either on our own or through consolidation because, let’s be clear, today there has been a consolidation movement at the carmaker’s and therefore there will necessarily be the same consolidation movement at the suppliers in the years to come.
So, you know the automotive sector very well, it’s your historical trade, you are established worldwide, in 10 countries, does the French automotive industry and more particularly the suppliers have a good brand image abroad?
Yes, I think that the Germans benefit from the image that they have in the industry, but the French have the advantage of being more flexible, more reactive and more easily adaptable to customer demands, and this is often what we try to promote with the suppliers that we accompany internationally.
In short, German quality is known worldwide, but it may be a bit overrated, French quality is just as good.
With the advantage that we have in France on the development capacities because we have very high-level training, because we have the research tax credit, and so these are things that are extremely interesting for international customers.
As I mentioned in my introduction, the automotive industry is currently undergoing a revolution. Are you seeing a reshuffling of the cards at the global level?
Yes, with the advent of the electric vehicle, we are seeing more and more new players emerge, because let’s remember that the thermal vehicle brought a barrier to entry where the historical manufacturers were, I would say, 15-20 years ahead and could therefore benefit from this barrier to entry.
With the advent of the electric vehicle, you have new players, be it TESLA, but also Google and maybe tomorrow Apple.
In addition, the Chinese manufacturers, who for years had closed their doors to Europe and who are now starting to develop strongly in Europe.
Do you have requests from Chinese manufacturers to settle in France and maybe in Europe?
They manage their business development by themselves, but we have requests for local quality support in China, so we work with a number of them locally.
Thank you very much Stanislas, thank you for agreeing to talk about the international development of French suppliers. Thank you all for following this 6th episode of “Be My Guest la FIEV”.
Find more about the part 1 of this inteview here.