SUV sales will outpace sedans on China’s roads, carmakers say

Sports utility vehicles (SUVs) are the fastest-growing category of new cars on Chinese roads, attracting every major marque to throw their design, development and marketing resources behind this segment in the world’s largest vehicle market.

From Porsche’s Cayenne and Macan to Bentley’s Bentayga, or Maserati’s Levante to the home brand Great Wall Haval, every carmaker with an SUV in the product range is counting on the insatiable demand by Chinese customers.

The preference for the “command position”, which gave the driver an elevated view of the roads, was a “customer choice that transcends gender and race”, making SUVs the preferred vehicle type for many younger customers, said Uwe Ellinghaus, chief marketing officer of General Motors’ Cadillac.

SUV sales accounted for 37 per cent of the total vehicle sales in China last year, up from a mere 5.7 per cent a decade ago.

Ellinghaus and other car executives expect unit sales in the segment, which expanded 21 per cent from last year to 2.4 million units in the first quarter, to outpace those of compact cars, sedans and limousines eventually. Soon, there might be more SUVs on Chinese roads than other types of vehicles, they said.

Strong sales by Cadillac’s XT5 bolstered the US brand’s 2016 China sales by 45 per cent. The company sought to introduce a smaller, “subcompact SUV” to attract buyers with a lower budget and who were aiming for smaller vehicles, but still with the “command position”, said Andreas Schaaf, general director of SAIC General Motors Corp’s Cadillac division.

It is this explosive sales growth that is spurring Wei Jianjun, chairman of Great Wall Motor, China’s biggest SUV maker, to name his newest model Wey, after his own family name.

“Wey will lift our company’s gross profit margin to 26 per cent or 27 per cent this year,” said Wei, whose wealth is estimated at US$5.3 billion. “We will spend 200 million yuan to promote the Wey and upgrade 150 sales stores around the country for the model.”

Zhejiang Geely Holding Group, China’s largest non-government-owned carmaker, is using the elements of design and technology by its Volvo unit to launch a new marque called Lynk & Co.

The initial products, comprising an SUV and a sedan, can be customised and configured based on the user’s preferences through an app, which is even transferable from one vehicle to another.

Geely, which also owns the company that makes London’s black cabs, is aiming to sell 600,000 units of Lynk & Co by 2020, accounting for 30 per cent of the company’s two million annual sales target. The first model will go on sale in the fourth quarter.

“We expect to have 100 dealerships in the country’s largest cities when sales start and we hope the number can grow to 150 by the end of this year,” Geely spokesman Victor Yang said during the car show.

The carmaker’s earnings could increase over the next two years with possible upside from Lynk & Co if it proved to be a strong brand, Daiwa Capital’s analyst Kelvin Lau said.

“We are confident on the long-term benefits that Lynk & Co could bring to Geely,” he said.

Additional reporting by Daniel Ren in Shanghai