China’s automotive giants take on the world with innovative vehicles without a ‘made in China’ price

Chinese automakers are rolling out vehicles set to compete globally with innovative technology and build quality-- and less so on price

PUBLISHED : Friday, 28 October, 2016, 6:17pm
UPDATED : Friday, 28 October, 2016, 10:47pm

China’s domestic automakers are struggling to build brand power on the international stage, despite improvements in quality and design that have made them popular among mainland consumers.

“Chinese automakers have seen significant improvement in quality standards, but many of the brand names are still little-known to the world,” said Michael Yu, managing partner for auto M&A services at Deloitte.

More than a decade ago, quality was the major barrier for Chinese automakers in winning market share at home or selling their cars abroad. But thanks to tie-ups with foreign partners and the Chinese government’s support, Chinese marques have won increasing recognition at home.

Chinese automakers had a 42.21 per cent share of the domestic market for passenger vehicles in the first nine months of the year, up 1.41 percentage points from a year earlier, according to the China Association of Automobile Manufacturers (CAAM).

However, the lack of brand recognition is still a problem when they go global, especially in mature markets such as the US and Germany where long-established brands dominate, Yu said.

Chinese auto exports dropped 11 per cent in the first nine months to 49,300 vehicles from the same period of last year, CAAM data showed.

In an attempt to build market share, Chinese manufacturers have sought to compete on price even though their vehicle specifications are close to other foreign marques, industry experts said.

The battle for consumers’ hearts and minds has been easier in emerging markets where widespread automobile ownership is a fairly new concept and these markets do not have well-established brands.

“Although there are other challenges such as political unrest and currency risks in emerging markets, handling these problems should be less tough then finding a way to enter mature markets,” Yu said.

Yu said Chinese automakers will continue to expand into emerging markets in Asia, Africa, Latin America as well as Eastern Europe to diversify income.

Hangzhou-based automaker Geely Automobile’s export focus is also in emerging markets.

From an export push that began in 2003, Geely has since expanded its distribution network to include more than 30 countries worldwide, featuring 500 sales points across Russia, Saudi Arabia, Iran, Iraq, South Africa, Egypt, Sri Lanka, and Peru.

“Despite any potential political unrest and adverse impact of weakening currencies in emerging markets against the US dollar and the yuan, we believe there will be further growth in the international markets,” said Ashley Sutcliffe spokesman for Geely.

“In the near term, the company will focus on emerging markets such as Eastern Europe, Brazil and the Middle East before expanding into developed markets over the medium to long term,” he said.

As a leading home grown automaker, Geely, which acquired Swedish automotive brand Volvo in 2011, is shifting its focus towards luxury vehicles in an effort to build its brand premium and attach greater importance to quality.

Over the past decade, Geely has transitioned from its price-focused strategy of making affordable cars to creating refined cars focusing on technology and quality, Sutcliffe said.

However, it will take time for these efforts to produce results in markets like the US.

Geoff Broderick, vice president and general manager of Asia-Pacific automotive operations at consulting firm JD Power, said consumers in the US are aware of the Swedish heritage of Volvo, but they don’t know its Chinese owner Geely.

Winning over consumers in the US and other developed markets will take some time, said Broderick, who sees better opportunities in the short term for Chinese brands in emerging markets.