World: How the Chinese are setting themselves up for success (Part 5: Mature markets)

Qoros 3 The Qoros 3 was unveiled at the Geneva Motor Show last April.

* This is Part 5 of 5 in my series on Chinese carmakers abroad. See also Part 1 (Africa)Part 2 (Latin America)Part 3 (Eastern Europe) and Part 4 (Asia) *

The first 4 Parts in this series have shown Chinese manufacturers securing the less developed markets in each region as springboards to expand further. Less developed means smaller and less sophisticated but also less regulated as far as pollution and security are concerned. These last two aspects have been the main barrier to the Chinese carmakers’ entrance in mature markets to date, and specific strategies have had to be developed to address this. This is why I am grouping all ‘mature markets’ in one article, independent of their geographic location.

Brilliance BS6 Crash Test 2007. Picture courtesy of autozeitung.deBrilliance BS6. This 2007 crash test put a dent into Chinese carmakers’ plans in Western Europe.

Chinese manufacturers have learnt this the hard way back in 2007 when disastrous crash tests for the Brilliance BS6 and Landwind SUV meant these two carmakers and all other Chinese manufacturers that were seriously thinking about setting shop in these regions had to postpone their plans. 7 years later, manufacturing quality has improved and there are a few mature markets where the Chinese have started to make their mark, among them Australia, Italy and the UK. The launch of the new Qoros brand by Chery at the 2013 Geneva Auto Show is another important milestone even though European sales of the brand will remain limited.

Great Wall V200 Australia October 2012The Great Wall V-Series is the first Chinese model to break into the Australian Top 50

The main success story so far for a Chinese manufacturer in a mature market is Great Wall in Australia. You can see the full details in my article Australia: An interview with Daniel Cotterill from Great Wall and hear the experience of a very happy Great Wall customer met in Bourke last week here. Great Wall launched in Australia in 2009 and finished 2012 as #17 brand with sales up 27% to 11,006 units and 1% share, totaling over 30,000 to-date. Even though these figures seem small, they are based on only two models and as a result it is actually one of the most successful car brand launches in the country in the past decade, as the market is already completely saturated with over 50 brands present, way more than in the US which is 14 times bigger…

The Great Wall V-Series pick-up (aka Steed) is the first Chinese model to break into the Australian Top 50, finishing 2012 at #49 with 7,490 sales, up 35%, and the Great Wall Australian range has only one other model, the Hover SUV.

Even if 2013 and 2014 year-to-date figures have been disappointing, one of the key factors in Great Wall’s success in Australia has been to embrace the brand’s provenance rather than hide it. Both their slogan ‘The Great cars of China’ and strong positioning on price are unapologetic. The main element to remember here is that by focusing on a sturdy workhorse (the Steed pick-up truck), Great Wall is building itself a solid reputation of reliability under the harsh Australian climate which is at polar opposites with the likes of Hyundai when they first launched there, as evidenced by the healthy amount of repeat business the brand is already experiencing. Chery, Geely and Foton are also present in Australia but not successful at this stage.

DR1 Europe April 2011The Riich M1 is assembled and sold in Italy as the DR1

Italy is the only mature market to assemble Chinese models. Chery cars are assembled by the DR Motor Company since 2007 in Macchia d’Isternia, North of Naples. The range is composed of the DR1 (Riich M1), DR2 (Chery Kimo) and DR5 (Chery Tiggo) however sales dropped from 2,938 in 2011 to just 710 in 2012 and 435 in 2013.

The Great Wall Hover ranked #32 in Italy in December 2011. More of a freak event though.

Great Wall also imports in Italy which became the first Western European country to welcome a Chinese model within its monthly Top 50 in December 2011 when the Great Wall Hover ranked #32. This was a freak event though as it seems Great Wall sold all their stock that month to dealerships but continued to sell to consumers all through 2012 even though official sales figures were down from 1,675 in 2011 to just 10 (!) in 2012, before going back up to a still extremely shy 235 in 2013.

The MG6 has disappointed in the UK so far.

The UK is the third mature market where the Chinese are gaining valuable experience. MG, now owned by SAIC, was reintroduced there in 2011 with the MG6 albeit with disappointing results: the model ranked only #203 with 772 sales for its first full year in 2012 and was down 82% over the first Quarter of 2013. Inspired by its Australian success, Great Wall soft-launched there in 2012 with the Steed pick-up and finished the year as #15 LCV brand with 476 sales and 0.2% share. Very small numbers still but the footprint is there.

Shanghai Englon TX4 Shanghai Englon TX4

Another angle Chinese manufacturers are starting to pursue is the delivery of electric public transport to big metropolitan cities. BYD is set to deliver 50 of its electric hatchback e6 to operate as London taxis while the first batch of 45 e6 has now arrived in Hong Kong, and will start manufacturing electric buses in California later this year. But the biggest development in that area happened last February when Geely acquired iconic London Taxi maker Manganese Bronze. Geely was already manufacturing and selling the London Taxi in China as the Shanghai Englon TX4 and is now looking into developing an electric version.

Qoros logo. Picture by theglobeandmail.com

The last element of the puzzle of Chinese carmakers in mature market is a rather puzzling one indeed. The new company Qoros is a joint-venture between Chery and Israel Corporation which was created in 2007 and has put together a European team of motoring executives and experts with extensive experience from mainstream brands to lead it. Gerd Volker Hildebrand, creator of the modern Mini design, came up with the first Qoros model, the Qoros 3, which was unveiled at the 2013 Geneva Motor Show along with two concept cars announcing the future of the brand.

Qoros sales are only now starting in China – very slowly for now with just a few hundred units so far in 2014. However, far from announcing the long-dreaded large scale invasion of Europe by Chinese manufacturers, Qoros say their main target is… the Chinese market, where consumers like buying European products but don’t like diesel. As a result, no diesel motorisation is planned in any of the future models, which considerably reduces their appeal in Western Europe, and Qoros predicts that only 10% of its sales will actually be in Europe. Its price point between 16,000 and 20,000 euros place it well above the budget brands currently selling like hotcakes there, but could be an interesting test to see whether European consumers are ready to buy ‘expensive’ Chinese cars. More details on Qoros’ launch plans in Eastern and Western Europe here.

Last bit of information, all Qoros cars will be made in Changshu in China, in a new factory that will initially have a 150,000 cars/year capacity, with the possibility to extend to 450,000/year. Not a single Qoros will be made in Europe. So in other words, Qoros is a Chinese brand that wants to sell European-designed models made in China to Chinese consumers thinking they are buying a European car. Tricky.

This concludes our series about Chinese carmakers abroad. I hope you enjoyed it!

This Post Has 12 Comments
  1. @matgasnier
    Hey Matt,
    glad you appreciated the info! 😀 As I said, I’m not really sure about Great Wall: I just looked at the numbers and put 2 and 2 together, but it remains a total guess.

  2. The Great Wall history in Italy is quite a mystery if you ask me… last month the Voleex C20R has been introduced, and apparently the Steed 5 LPG has been REINTRODUCED.
    I honestly thought the Hover 5 and Steed 5 were still on sale, and actually the Hover was on Quattroruote’s price list until a couple of months ago, but I just noticed that the price list was dated September 2011. I have checked their Italian website, and surprise! It shows the Voleex and the restyled Steed 5 LPG, while it still shows the Hover 5, the Steed and the Steed 5 Turbodiesel branded as KM0, or 0 Kilometer, which means that they have already been registered by the car dealers and sold as used, while actually brand new.

    So let’s do the math: I think that Great Wall, for some reasons I have no clue of, must have registered all their stock in December 2011 (which explains the astounding 32nd position of the Hover 5 in the sales chart, a feat I really couldn’t understand at the time but at the light of this seems to make sense), and kept selling their cars as KM0 until now, which may explain the 10 cars sold in 2012: it’s not that Great Wall disappeared from the Italian market, they kept selling decently well throughout 2012 but, by the registrations logic, whatever their dealers sold was already registered in 2011 so it seems like they sold nothing, whereas they did instead. Now the Voleex and Steed are back on sale “officially” again, and probably the updated Hover will be introduced again as it had its reasonable market share, and Great Wall will show figures again.

    This is only my understanding, I’m not sure things actually went like this – most importantly, I hope my explanation was clear enough…

    Cheers

    1. Hi Sonico,
      Thank you very, very much for these two very interesting comments. Makes a lot of sense! Now I understand the Great Wall figures…
      Best,
      Matt

  3. This month’s Quattroruote magazine features a very interesting article on the DR. Sales have been steadily falling since their peak in 2005, and the reason for this was the decision to take over the historical Fiat plant of Termini Imerese, in Sicily, after the previous gen Lancia Ypsilon was discountinued and Fiat decided to shut the factory. DR offered to take over the plant to back up their expanding ambitions and quite surprisinigly (even if, actually, their offer was more or less the only reasonable one) on December 2011 an agreement was signed between DR, Fiat, the Regione Sicilia and the Economic Development ministry.

    However, this overly ambitious move, together with the fact that lots of workers were already redundant, and the many political changes that keep crippling Sicily and Italy (leading to a continuos change of politicians and people involved) quickly dried up DR’s money, which was already quite tight, and diverted precious time that, in DR’s owner Massimo Di Risio words, was used to handle the Termini Imerese issue rather than develop the actual products. Furthermore, while DR had increasing difficulties in paying their workers’ salaries, it had become impossible to even pay Chery for the cars, which led to huge supply problems (I honestly haven’t understood if supplies were stopped or not, but it seems highly possible).

    Anyway, DR and Chery signed an agreement last September so the near future seems a bit brighter: the line up will still count on the current DR1 and DR5, and new models will include a DR0 (a city car smaller and even cheaper than the DR1, which seems to be the new Chery QQ with a different front grille) and the DR City-Wagon and City-Van, a rebadged Riich X1).

    Two additional notes:
    -the Grammar/Spelling/Geo Nazi in me is forced to notify that the correct spelling is Macchia d’Isernia, and not Machhia d’Isternaia 😉
    -the DR3 was announced (without much fanfare, actually) during the Termini Imerese agreement days, and was the first product planned to be built in the new plant… but it was never introduced to the market.

    Sorry for my endless rant, hope at least it was interesting. 🙂

  4. great wall in active on italian market, especially in pick up sale, also in this year they launch a new models, while new hover 5 wasn’t ordered because new hover 6 will arrive in second part of the year, from 2007 year in italy is sold between 8500 great wall vehicles and they have biggest share on the market when you compare them to other brands

  5. @Max

    Chinese automakers who illegally copied EU / U.S. / JP / KR cars to sell these copies in Europe. The audacity to say.

    I wonder why European automakers did not give the court copying automakers such as Chery, BYD, Geely, Great Wall, etc …

  6. Here the list of just some of Toyota models copyed by Great Wall:

    Great Wall Florid (Scion xA)
    Great Wall CoolBear (Scion xB)
    Great Wall i7 (Toyota Yaris)

    Then there’s the BYD:

    BYD F3 (Toyota Corolla)
    BYD F0 (Toyota Aygo)

    Then the Chery:

    Chery Tiggo (Toyota RAV4)

    Then the Dadi (?)

    Dadi (Toyota Land Cruiser)

    And many others Toyota’s fake

  7. Wow, that last part on Qoros baffled me. Here I was thinking that Qoros was the answer to China’s European assault… oh well, I guess we’ll have to wait a few more years for the real thing. It’s too bad MG’s UK sales are worse than expected, I think the new MGs are decent cars. I too am curious to know if the Europeans/Australians are read to buy ‘expensive’ Chinese cars… but I have serious reservations. As it is today, few are keen on getting a ‘cheap’ Chinese car, let alone an ‘expensive’ one. The Chery J6 in Australia is the strongest case in point; so cheap, but nowhere near successful. I guess pricing alone won’t do it, the Chinese will need to come up with other plans if they wish to succeed in mature markets. Great Wall’s case is the best example of marketing done right. It succeeded in large part because it served a niche market in ute-paradise, Australia. In any case, I’m quite confident the Chinese will indeed ‘make it’ one day. It’s only a matter of time.

    Once again, thanks Matt for this very insightful coverage on the Chinese auto scene. :]

  8. @dll.exe

    Well , who cares, they will design and make loads of models, with all of their millions of workers, the sky is the limit, not like in the west where no one can do nothing anymore, an old “mature civilization” headed towards decline. All unemployed, financialized or whatever.

    Anyways, they are doing a good job of trying to penetrate all markets worldwide, and lets hope that they create imitations of the 1965 Oldsmobile 98 or 1967 Chrysler Imperial or the Cadillacs of the 1960s and 1970s and start of 1980s and so forth, a lot of cool clones…

    Or the Lancia Gamma of 1978 – 1981 etc.

  9. Chinese Great Wall Peri is ilegal copy of European – Italy car Fiat Panda. Great Wall has the audacity to even sell their cars in Europe.

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