Everyone's a winner

Alysha Webb explains why there will be many who�ll gain from Shanghai�s inaugural Formula One event besides Schumacher et al, not least the local economy

When Shanghai held its first Formula One race on 26 September, Jiading, the Shanghai suburb where the track is located, was thrown into the international spotlight. The district�s mayor hopes it will stay there. �With a Formula One race being broadcast from Jiading for the next seven years, Shanghai and Jiading will be known around the world,� Jin Jiazhong told the local media.

One-hundred-and-fifty-thousand spectators attended the race weekend, including tourists, media and race team-related personnel, more than 300m more people watched the race live on TV and 400m watched a delayed broadcast. Jiading is looking to that publicity to help it realise its �one spot and three roads� tourism strategy. The three roads are: the race weekend itself, Jiading�s automotive industry, and the international automotive museum being built; Jiading as a place to come to understand the scientific basis of automotive manufacturing; and touring the area�s historical sites.

A visitor to Jiading, located on the flat, treeless ground east of Shanghai, might wonder at the mayor�s grand vision. But there�s no denying the economic impact Formula One has brought to other cities. At least some of that is bound to accrue to Shanghai in the form of new hotels and other tourism services, higher international visibility, and more automotive industry investment. Auto manufacturers are also hoping the race will boost their business in China.

A Formula One race can be a cash cow. Montreal figures the Formula One race brought 300,000 visitors and $40m to the city on race day. But Montreal also offers an example of the risk Shanghai is taking in investing millions of dollars for the Formula One track and the seven-year licence. Displeased at the Canadian Government�s ban on tobacco advertising at the venue last year, Formula One supreme Bernie Ecclestone removed Montreal from the 2004 race calendar.

The firm grip Ecclestone�s company, Formula One Management, keeps on the race also means some host cities can only generate revenue through ticket sales, food and beverage rights and a few other items, points out Datuk Mokhzani Mahathir, chairman of Malaysia�s Sepang International Circuit. Though Kuala Lumpur�s clubs and restaurants get a lot of business on Formula One weekend, the Sepang Circuit is located outside the city and therefore doesn�t share in that bonanza, he says. Shanghai will face the same problem.

Perhaps mindful of that risk, a marketing manager at the Shanghai International Raceway Co, which is in charge of the race track construction and management, was cautious about predicting the economic impact for the Shanghai race. �As this is the first year that Shanghai is holding the race, it�s hard to know the impact the race will have on Shanghai�s economy,� he says. �We can only look at the impact past races in other cities have had on the local economy.�

That was enough, however, for the state-owned company to invest 2.65bn RMB to build the track, and surrounding recreational facilities. �A 2.8-plus sq km zone will be developed into a sports, recreational and entertainment centre, and a holiday resort to tap into Formula One-related resources and promote automobile-related culture,� says the manager, who asked not to be named. �It will have beautiful surroundings, be easily accessible and unique in style.�

The track won�t lie fallow during the months between Formula One races. A variety of motocross and auto races are planned, said the manager. �In addition, the Formula One track will be used as a venue for auto makers and other related companies to unveil new car models and hold other public relations activities,� he says.

Jiading is looking for the Formula One race to develop more than just its tourism industry. The city is already home to a Shanghai Volkswagen plant, and various automotive supplier factories including Visteon and Delphi. Luxury villas are going up, and the Government offices display an elaborate plan to make a little Wolfsburg - home of Volkswagen�s headquarters in Germany - in Jiading.

It dreams of much more. Jiading is building a 50bn yuan �Shanghai International Auto City�, that will include an auto theme park, logistics centre, R&D centres and exhibition centre. Mayor Jin figures more automotive companies will want to invest in Jiading after seeing it on TV during the race.

To be sure, automotive companies are putting money into Jiading and not just in facilities directly related to the race. Toyota is building a Technology Research and Training centre in the Shanghai International Automobile City, for example. It declined to name the total investment.

Jiading�s infrastructure is also getting a big boost. Four new expressways are being built to connect the area to the rest of China. Six new four-lane roads costing more than 640m yuan each are being built leading to the race venue. New hotels and a shopping mall are going up.

The city�s telecommunications network will also become world-class - at least on race day. Seventy-six special phone booths with internet connections will be set up outside the circuit and Shanghai Unicom and Shanghai Mobile will have special vehicles on the scene to stabilise the wireless phone and internet networks, among other measures. �The system is unprecedented compared with past Formula One races,� bragged Shanghai�s Liberation Daily newspaper.

Marketing edge

Auto manufacturers with teams in the race are looking for the race to provide a marketing edge. China�s auto industry is the world�s fastest growing, with sales rising 70% in 2003 compared to the previous year to more than two million cars. Despite slower sales this year, China is still the Holy Grail of the industry and the market is very competitive. DaimlerChrysler, Honda, Renault, BMW, Jaguar, Renault, Ferrari, and Toyota all have Formula One teams. All are selling cars in China; most are making cars here, too.

�Formula One offer massive exposure for any brand involved at a high level,� says Paul Chadderton, head of global public relations for Jaguar Cars Ltd. �It�s relevant in countries where a brand is not well established.� Jaguar was officially launched as an import brand in China in March.

As a promotion, it will put the names of the first 20 mainland China Jaguar buyers on a race car - a perk sponsors pay US$5m for - and invite them to receptions with the drivers and other special events.

The Renault Group is importing cars into China while awaiting Beijing�s approval to start building passenger cars in China through a joint venture with Dongfeng Motor Corp. The French company is using Formula One to boost brand awareness.

In the middle of a mall filled with luxury shops in Shanghai, a Renault Scenic MPV and Laguna Sedan sit beside a bright yellow Formula One Renault racing car. Literature on a nearby card table contains specs for the two passenger cars, and also a glossy book about Renault�s Formula One history and even a tiny diagram of the pit area.

�I think the Formula One promotion is a success,� says Tony Qian, Renault brand manager for Shanghai ZhongTai Motor Sales Ltd, an importer. �Compared to other brands, Renault is not as well known in China. (Now) many people showed us they are willing to buy the Renault vehicles.�

The promotion was a success from another standpoint. Zhongtai doesn�t have the budget for TV advertising, but local television stations came by to film the display because of the Formula One tie-in.

Alysha Webb is a business journalist based in Shanghai.