Published on June 28th, 2017 | by Daniel Sherman Fernandez0
Chinese Car Brands Taking On Rivals Head-On
Until recently, Chinese automakers were widely considered to be cheap, low-quality marques that were too weak to compete with global giants. But in the past two years, several Chinese brands have snatched market share from foreign rivals. Chinese brands accounted for 44.4% of light-vehicle sales in China in the first 5-months of the year, up 6% points from 2014.
Leading the attack are GAC Motor Co., SAIC Motor Corp. and Zhejiang Geely Holding Group. Over the past year or so, the proprietary brands of all three companies have increased sales more than 60%. What is even more impressive is that they have begun to compete on product, rather than price.
While most of their domestic peers still sell vehicles for less than 70,000 yuan (USD10,100), these three companies have launched sales of new sedans and crossovers with starting prices above 90,000 yuan. That’s well within the price range of foreign mass-market brands, which typically price their entry-level vehicles from 80,000 to 100,000 yuan. One of the chief enablers for the migration up the pricing ladder is improved product quality.
J.D. Power and Associates spotted this improvement in its 2016 Initial Quality Study of foreign and domestic brands sold in China. GAC’s Trumpchi brand ranked sixth, while SAIC’s MG car brand ranked 18th. That was a higher score than new models marketed by Volkswagen through its joint venture with SAIC. To be sure, Chinese brands still engage in price wars. After the government raised the sales tax on vehicles with engine sizes up to 1.6 liters, many domestic brands cut prices to prop up volume. But Geely has made it clear that it won’t follow suit. Supported by four new models including three compact crossovers and a sedan Geely boasts that it will boost annual sales more than 30% this year anyway. And Geely may pull it off.
Late last year, Geely and Great Wall Motor Co. China’s largest crossover manufacturer each created new premium marques. This year, Geely will introduce a compact crossover for its Lynk & CO brand. In time, the brand also will market sedans and multipurpose vehicles. All of these vehicles will be based on a compact car platform jointly developed by Geely and its Swedish brand, Volvo. Meanwhile, Great Wall plans to introduce three crossovers this year for Wey, a brand named after company founder Wei Jianjun. To ensure good quality, Great Wall has enlisted a wide range of global suppliers.
For the first time, China’s carmakers have declared war on their foreign rivals. Can global automakers afford to ignore them? Let’s wait and see.