China’s drivers rush to buy SUVs, betting bigger is safer on nation’s chaotic roads

Sport-utility vehicle sales benefit from ‘arms race’ for safety, rising by more than half in first quarter, with buyers placing more value on survival, and looks, than performance, analysts say

PUBLISHED : Monday, 25 April, 2016, 5:44pm
UPDATED : Monday, 25 April, 2016, 5:50pm

Chinese drivers are rushing to buy sport-utility vehicles (SUVs) in an “arms race” for safety on the country’s hair-raising roads, analysts say, with SUV sales rising despite a slowing economy.

SUV purchases in the world’s number one car market rose more than 50 per cent in the first quarter of 2016 from a year earlier, while saloon-car sales fell 9.3 per cent, according to industry data.

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“The primary reason is a fairly primitive one,” says Robin Zhu, car industry analyst at Sanford Bernstein in Hong Kong. “It’s about survival. It’s about people’s desire to feel safe on the roads, because [SUVs] are bigger, and in low-speed collisions, from a consumer psychology point of view, you’d rather be the one in the SUV.”

Another 50 models new to the Chinese market will go into production in the country this year, according to consultancy IHS Automotive, many of them which will be shown at the Beijing auto show which opened on Monday.

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China’s roads have a reputation for danger, with footage of horrific traffic accidents from the country’s ubiquitous surveillance cameras broadcast daily on television.

The World Health Organisation estimates that more than a quarter of a million people are killed on the country’s roads every year – over four times official government statistics.

Death rates remain comparatively high because of inadequate rescue systems and poor treatment, according to a study by Chinese researchers published last year in medical journal The Lancet.

A businessman in an SUV in Beijing, who asked not to be named, said he chose it “because it makes me feel safe when I drive”.

Bill Russo, automotive chief of advisory Gao Feng in Shanghai, said the appeal of an SUV comes from a feeling of “command” and the perception “you can deal with anything the road throws at you”.

Rising road rage on China’s congested streets has also made SUVs more popular, said Zhu. Traffic police handled more than 17 million cases of driver aggression last year, according to public security ministry statistics.

“There’s a bit of an arms race going on,” he said.

Analysts say that while consumers in the US and other countries may be drawn by the image of SUVs going off-road in rough conditions, in China most of them are based on ordinary cars.

“The so-called SUVs today are sedans on stilts,” said Zhu.

The so-called SUVs today are sedans on stilts
Robin Zhu

More Chinese buyers have turned to SUVs as their fuel economy has improved and a drop in oil prices have made the vehicles more affordable to run.

The most popular models are “small, car-based crossover types”, said Russo, noting that “the vast majority” have engines smaller than 2 litres.

“They’re economical SUVs, they’re not big, gas-consuming environmentally unfriendly vehicles,” he said.

Chinese buyers are content with small engines in large bodies, said Michael Dunne, CEO and strategist at Dunne Automotive in Hong Kong.

Ten years ago educated urbanites preferred saloon cars because larger vehicles were associated with rural people and construction workers, he said. But in the last two years, SUVs have become fashionable.

“They’re not that interested in acceleration, passing, speed. They’re more interested in the look,” said Dunne.

They’re not that interested in acceleration, passing, speed. They’re more interested in the look
Michael Dunne

But the boom may not last, executives warn. “Even if now the SUV is popular, in the future there will probably be a change,” said Toyota China head Hiroji Onishi, suggesting that minivans could see their appeal widen.

At the same time, while higher margins in the SUV segment have made the vehicles a driver of profits for foreign carmakers, increasingly popular cheaper, local models have made significant inroads in claiming market share.

Chinese companies such as Great Wall, Changan and Wuling have become national brands, Russo said, and in March six of the 10 top-selling SUVs were from Chinese firms.

According to association data, Chinese carmakers accounted for 60 per cent of SUV sales in the first two months of the year, compared to only 20 per cent of saloon-car sales.

The best-selling SUV in China, the Haval H6, costs from 88,000 yuan (HK$105,000) according to the company’s website. The best-selling foreign-brand SUV, the Volkswagen Tiguan, goes for 200,000 yuan and up on major car-sales portal Autohome.