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STRATEGY: Why Volkswagen is losing foot in China (Part 3/3)

August 29th, 2015 4 comments

Volkswagen China. Picture courtesy ibtimes.comMore stormy weather ahead for the Volkswagen brand in China?

This third section concludes our Strategy coverage of Volkswagen’s current woes in China. In Part 1 we studied how the lack of affordable SUV lineup was penalising the German carmaker, and in Part 2 we analysed how its over-reliance on sedans and a potential slip up in quality as well as market forces moving away from the brand both at the lower-end with first time buyers and the higher-end with replacement buyers was hurting Volkswagen. Now that the scene is set, what next? What plans has Volkswagen put in place to ensure prompt and healthy recovery from a year-on-year evolution that has never been so precarious?

See also:

Why Volkswagen is losing foot in China (Part 1/3)

Why Volkswagen is losing foot in China (Part 2/3)

3. What next

Firstly it is adequate to put the last couple of months into perspective, which is three full decades of ultra-domination of the Volkswagen brand in Chinese sales charts. Then, let’s go through Volkswagen’s plans for the next few years, some of them potentially offering a solution to the SUV and sedan predicaments the brand is currently finding itself in in China.

2012 VW Santana China September 2012Volkswagen has been dominating the Chinese car market since 1984 and the Santana.

Readjustment

Official CAAM sales data, covering locally-assembled vehicles only, shows a 31% year-on-year decline for the Volkswagen brand in July in China at 152.300 sales vs. 219.203 a year ago and a 33% decline of its sedan sales at 133.176 units vs. 197.332. Five of its star nameplates have plunged by more than 40% year-on-year: the Santana, Jetta, Magotan, Passat and Polo. Volkswagen head offices have remained very discreet about the brand’s Chinese July results, preferring to compile year-to-date figures instead. In their worldwide July sales report they state China sales are down 8% so far in 2015 at 1.48 million, which for once doesn’t add up with 2014 figures released by CAAM: Volkswagen implies 210.000 units in July 2014 including imports whereas CAAM says 219.203 excluding imports, and 180.000 units in July 2015 incl. imports. Even if VW imports are stable year-on-year at 28.000 units, the overall July decline would be 28% instead of the 14% implied by VW.

Volkswagen China. Picture courtesy scmp.comVolkswagen may need to fast-track its launch plans for China to return to growth.

These are all frightening figures regardless, but in actual fact part of a logical readjustment. Since its introduction in the country in 1984, Volkswagen was frequently selling more than double the monthly volume of any other brand in China. In July 2014 for example, below VW and its 219.203 sales was Toyota at 81.714 units. This July, Toyota is at 96.359 vs. 152.300 for Volkswagen, arguably a more ‘natural’ gap. In the face of increased competition, a smoothing out of sales differences atop the brands ranking is to be expected and reflects a natural evolution towards more fragmentation, a characteristic of maturing markets.

What is certain is the thawing of Volkswagen’s market share in China – as natural as it can be – has a devastating effect on the Volkswagen AG Group worldwide results. Last week VAG announced its second-quarter profit fell 16% due in large part to weakness in China, the #1 new vehicle market in the world. In my Strategy feature “Where is China headed?”, written 3 months ago, I mention that a record 75 new nameplates have kick-started local production in the past 12 months (only one VW: the Lamando) and new factories are still opening on a monthly basis. This combined with a more shaky growth environment gives the perfect recipe for “blood” and aggressive price wars. We are seeing the start of this bloodbath before our eyes with Volkswagen potentially starting to lose foot in China.

VW Taigun. Picture courtesy betterparts.orgThe Taigun: what Volkswagen really needs for China?

SUV plans

Part 1 of this Strategy series showed in detail how Volkswagen had missed the SUV boat in the past 12 months by keeping its lineup to a lonely and extravagantly expensive two models: the $31.300 Tiguan and imported Touareg. The Volkswagen Group recently unveiled outlandish SUV plans for the next few years, namely 25 new SUV models by 2020. Among them, nine will be VW-branded but surprisingly, these worldwide launch plans seem to ignore China’s pressing needs altogether as far as the Volkswagen brand is concerned (see below).

Volkswagen AG SUV launch plans until 2020:

Model Launch Would help VW in China?
New VW Tiguan 2015 A little
Bentley Bentayga 2015 No
Audi TT Offroad 2016 No
New Porsche Cayenne 2016 No
Seat Compact SUV 2016 No
Skoda Montania 7-seater 2016 No
VW Tiguan XL 2016 A little
VW Cross Blue 2016 A little
New Audi Q5 2017 No
Audi Q8 2017 No
New Skoda Yeti 2017 No – could hurt VW
VW Golf SUV 2017 Yes
VW Cross Coupé 2017 A little/Yes
New VW Touareg 2017 A little
Audi Q1 2018 No – could hurt VW
New Audi Q3 2018 No – could hurt VW
Seat City SUV 2018 No – could hurt VW
VW Polo SUV 2018 Yes
VW Tiguan CC 2018 A little
VW Golf SUV Convertible 2018 No
Porsche Cayenne Coupe 2018 No
Audi Q1 Convertible 2019 No
Skoda Superb X 2019 No
Lamborghini Urus 2019 No
Seat 20V20 2020 No
VW Taigun TBC Yes

VW Golf SUV. Picure courtesy autozeitung.deNot before 2017: the VW Golf SUV.

Last January, President and CEO of VW Group of America Michael Horn told Auto Express UK: “Car companies are producing SUVs like crazy at the moment. We have to get the next Tiguan and mid-size SUV right, but then there is room for derivatives – whether that’s models which are priced upwards or downwards”. A glaring lack of urgency in these words, yet Chinese car buyers want small, affordable SUVs and they want them yesterday. Let’s look at the next Volkswagen-branded SUV launches in detail, assuming they will also occur in China at roughly the same times, which is no guarantee so much so these plans seem to have been drawn with only Europe and the U.S. in mind. How so very 1990.

VW Cross Coupe GTE. Picture courtesy autobild.deMake or break: the VW Cross Coupé could be a surprise blockbuster in China.

The new VW Tiguan will be unveiled at the Frankfurt Auto Show next month, along with an XL seven-seater variant scheduled to be in dealerships in mid-2016. With starting prices well above $30.000, these two models have little chance of significantly impacting VW’s fortune in China: they will mainly help prevent SUV sales from declining in a booming market. It goes the same for the VW Cross Blue (2016), totally suited to the U.S. market but not anymore to the Chinese one – although it was when it was planned – and the new Touareg (2017) – all too big to impact Chinese volume. Profits may welcome these arrivals with arms wide open though, provided they are all assembled locally. The Cross Coupé (2017) has that little bit of sexiness in its lines and size that could make it a surprise blockbuster in China: the jury is still out on this one.

VW Polo SUV Concept. Picture courtesy autoexpress.co.ukThe VW Polo SUV could reach Chinese shores by 2018 at the earliest: 3 years too late.

Not before 2017 do we finally answer the question “Will this SUV help VW in China?” we asked in the table above with a resounding “Yes”: the Golf SUV is scheduled to launch in Europe at that time, but Volkswagen would be smart to try and accelerate the process greatly for China. The year after that should arrive an even better solution for the Chinese market: the VW Polo SUV, based on the T-Roc Concept presented at the 2014 Geneva Auto Show. Keeping in mind the 2nd generation Honda HR-V, Hyundai ix25 and Kia KX3 will be well established by then… The Tiguan CC and Golf SUV Convertible also scheduled for 2018 seem superfluous, and we finish on the big question mark: the Taigun, based on the Up! minicar and unveiled as a concept at the 2012 Sao Paolo Auto Show, seems to us to be the perfect Volkswagen answer to China’s current SUV craze. Don’t keep your hopes too high though: its production is not even confirmed for now.

VW Cross BlueMore suited to the U.S. market: the 2016 VW Cross Blue.

Looking at how fast the Chinese car market evolves – writing this article even 4 months ago would have required drastic copy changes – by 2018 when Volkswagen will have a true SUV lineup, Chinese car buyers will likely have moved on from cheap SUV to something else – bigger, better, cheaper, more efficient – and Volkswagen may have missed the boat again. These launch plans truly have to change to benefit fully from what China has to offer volume-wise and to ensure Volkswagen’s numerous Chinese factories won’t idle out by then.

Renault Duster Colombia 2014. Picture courtesy renault.com.coThe Duster: Renault’s best-seller worldwide and Volkswagen’s worst nightmare.

The low-cost question

Volkswagen has been eyeing the tremendous worldwide success of Renault’s “entry range” – sometimes Dacia-branded – over the past decade and has been mulling a low-cost brand to cover all bases in China and emerging markets for a while now, proof being this December 2012 The Truth About Cars article presenting it as a fait accompli. These hesitations have cost the German manufacturer dearly now that Chinese carmakers are back on track thanks to cut-thorat pricing and easy-to-the-eye urban crossovers. As we have described in Part 2 of this series, even the low-end VW Santana and Jetta don’t look like so much of a bargain anymore in the face of tremendous recent quality improvements of domestic brands such as Geely. It has never been Skoda’s role to attract the Chinese first time car buyer as the Czech brand is strangely positioned much higher in China than it is in Europe, and Volkswagen benefits from such wide appeal and recognition here that launching an entirely new brand in this market seems like an insurmountable task, let alone a foolish one – also the reason why Renault will not launch Dacia in China.

VW Polo Vivo South Africa 2014. Picture courtesy of claremont.co.zaLow-cost inspiration? The South African VW Polo Vivo.

Last June, CEO Martin Winterkorn told Bild am Sonntag a budget-car “family” is coming, with an SUV, saloon and hatchback, but not before 2018. Note the use of the word family and not brand anymore. Volkswagen already has enough factories spread across the country to churn out this family of budget-cars fast. The recent market slowdown could be used to free significant chunks of production and allow the insertion of these new models. But successfully branding, positioning and selling low-cost vehicles is a skill only Renault has managed to master so far, and it took the best part of a decade. You could argue Volkswagen has already been doing low-cost for a while in Brazil with the Gol and in South Africa with the Citi Golf and the Polo Vivo. But China is a different beast that evolves at lightning speed, in comparison Brazil and South Africa are frozen in time.

Baojun 560 China July 2015bA low-cost VW Tiguan? General Motors’ Baojun 560.

General Motors understood this half a decade ago when creating the Baojun brand in collaboration with SAIC. The result: 300.000 units of the 730 MPV are now on Chinese roads less than a year after launching, and it took roughly a month to get 10.000 buyers for the all-new 560 SUV. Sales figures that are keeping Volkswagen’s Chinese head office awake at night. The cherry on the cake: the incredible success of the Baojun brand over the past 12 months is an absolute slap in the face of Volkswagen’s hesitation at launching a similar offer in China: all Baojun models inspire themselves greatly from Volkswagen’s design, in the end looking suspiciously similar to what a low-cost VW Touran and Tiguan could have been…

With all of this taken into account, Volkswagen’s return to Chinese growth could come down to four elements:

1. Make drastic quality improvements and price cuts to the Jetta and Santana.

2. Fast-tracking the launch of the much awaited Chinese budget-car family.

3. Advancing the Chinese launch of both the Polo and Golf SUV and potentially Cross Coupé SUV.

4. Green-lighting the Taigun mini SUV for China-only as a test.

BSCB readers: now it’s your turn to give your opinion. What do you think is the key to Volkswagen’s return to growth in China in the long term? Tell us in the comments section of this article.

Categories: China, STRATEGY

STRATEGY: Why Volkswagen is losing foot in China (Part 2/3)

August 26th, 2015 2 comments

VW Passat China crash test. Picture courtesy auto.sina.com.cnVolkswagen suffers from an over-reliance on its sedan lineup.

In July the Volkswagen brand dropped 31% year-on-year in China to 152,300 sales (imports excluded). In Part 1 of this Strategy series we studied the first reason behind this fall from grace: the absence in Volkswagen’s lineup of any affordable SUV, a situation that is likely to last until 2018. In Part 2 we look at the second main explanation for this precarious situation.

2. Sedans under attack

In China, the sedan segment describes all passenger cars that are not SUVs or MPVs and therefore also includes hatchbacks, although these are a lot rarer than sedans – three-box-cars – as perceived in Europe. Volkswagen has always excelled in the sedan area. Unfortunately for the German manufacturer, sedans are currently under attack in China and are solely responsible for the unusual market decline this market is experiencing, at -19% year-on-year in July. But if we remove sedans, the Chinese overall sales would be up 19% year-on-year instead of down (see below).

Segment Jul-15 Jul-14 Evo
Sedan 694,069 860,626 -19%
SUV 403,091 286,852 41%
MPV 107,807 117,243 -8%
Microvan 74,300 88,452 -16%
Total SUV/MPV/Microvan 585,198 492,547 19%
Total Passenger Cars 1,279,267 1,353,173 -5%

The imploding of the sedan market is literally unheard of in China, a market that has regularly gained ground year after year for the best part of the past three decades. Right now, an affordable SUV offering is becoming vital for a brand’s sales performance in the #1 market in the world, which is uncharted territory. But as we detailed in Part 1 of this Strategy series, Volkswagen has missed the SUV boat and put all its eggs in the sedan basket with 87% of its sales still happening in the latter segment. If Volkswagen-branded locally assembled cars are down 31% in July, Volkswagen sedans are down an even more depressing 33% year-on-year, going from 197.332 units in July 2014 to just 133.176 last month.

VW Jetta China July 2015Chinese VW Jetta sales are down 43% year-on-year in July.

This is still by far the highest volume for any brand in China in the sedan segment – and overall, but the freefall is real and affects all of Volkswagen’s stars: the Golf (-11%), Lavida (-16%), Sagitar (-36%), Bora (-40%), Santana (-42% despite the arrival of the Gran Santana hatch), Jetta (-43%), Magotan (-44%), Passat, CC (-49%) and Polo (-50%) are all plunging a lot faster than the market. Toyota, Chevrolet and BMW also rely too much on their sedan lineup with up to 85% of their sales still happening in that segment, yet they are not suffering as much as Volkswagen is at the moment. Why are Volkswagen sedans particularly hard-pressed?

Model July sales July evo Price range (yuan) Price range (US$)
Volkswagen models
VW CC 2,101 -49% 252.800-342.800 39.450-53.500
VW Magotan 9,024 -44% 199.800-334.800 31.200-52.200
VW Passat 5,872 -49% 169.800-322.800 26.500-50.400
VW Lamando 6,031 new 145.900-213.900 22.800-33.400
VW Sagitar 17,212 -36% 131.800-225.800 20.600-35.200
VW Golf 12,958 -11% 121.900-238.300 19.000-37.200
VW Lavida 29,425 -16% 112.900-168.900 17.600-26.400
VW Bora 10,489 -40% 107.800-148.300 16.800-23.100
VW Polo 9,528 -50% 85.800-158.900 13.400-24.800
VW Santana 14,840 -42% 84.900-138.900 13.200-21.700
VW Jetta 15,696 -43% 82.800-119.300 12.900-18.600
Chevrolet Sail 9,301 -18% 59.900-73.900 9.300-11.500
Chinese models
Geely GC9 3,200 new 119.800-229.800 18.700-35.900
ChangAn Eado 10,214 -22% 73.900-119.900 11.500-18.700
Geely Emgrand 11,373 107% 69.800-100.800 10.900-15.700
ChangAn V5 2,696 18% 65.900-79.900 10.300-12.500
Brilliance H330 3,025 -35% 65.800-75.800 10.300-11.800
Baojun 630 1,207 -33% 65.800-95.800 10.300-14.900
Great Wall C30 1,096 31% 64.500-83.500 10.100-13.000
Geely Vision 5,921 282% 52.900-65.900 8.250-10.300
BYD F3 6,330 -2% 49.900-70.900 7.800-11.100
ChangAn V3 5,285 26% 43.900-48.900 6.850-7.650
Geely Panda 2,453 98% 37.900-59.900 5.900-9.300

Domestic brands are back

Volkswagen has no offering contained below the symbolic 100.000 yuan price point (US$15.600), when Chevrolet does: the Sail, priced from 59.900 to 73.900 (see above). On the contrary, it is rare to find a Chinese model priced above that same 100.000 yuan barrier. If up until 2014, the price advantage of Chinese manufacturers was justified by poorer quality, reliability and performances, this is becoming less and less true. Sedans are where domestic manufacturers have been lagging behind in recent years, but they are catching up on lost time, and fast.

Geely Vision China 2015. Picture courtesy 91aiche.comVastly improved: the US$ 8.250 Geely Vision.

The most striking example is Geely. As I detailed in my coverage of the 2015 Shanghai Auto Show, Geely models have improved so drastically over the past 12 months than they put Volkswagen fares to shame in some quality aspects. All the while when costing significantly less: the interior quality of the newly revamped Geely Vision (starting price US$ 8.250) has nothing to be ashamed of vs. the much dearer VW Santana (starting price US$13.200)… My words were: “the slow and soft opening of the Geely Vision glovebox is lightyears ahead of a VW Santana glovebox that crashes onto your knee with a flat, hollow and very cheap “clang!”.

Model China starting price US starting price
VW CC US$ 39.450 US$ 33.595
VW Passat US$ 26.500 US$ 20.995
VW Sagitar / Jetta US$ 20.600 US$ 15.695
VW Golf US$ 19.000 US$ 17.995

At the same time, even though all Volkswagen models described in this study are manufactured locally and thus benefit from much lower labour costs as well as the recent devaluation of the Chinese currency, the cars that are also on sale in the U.S. are frankly over-priced in China (see above). In short, Volkswagen has some margin to move down in China when pricing is concerned. In the face of increased competition, miking the Chinese cow will become harder and harder for the German carmaker.

Geely Panda CrossNo foreign competition: the Geely Panda starts at US$ 5.900.

Reliability issues

Has Volkswagen been resting on its laurels in China? Even its low-end Jetta and Santana are priced significantly higher than equivalent Chinese fares, and it looks like they are already truly scraping the bottom of the barrel as far as German quality is concerned. Volkswagen is still the most popular brand for Chinese consumers, one proof being the long queue for VW leaflets at the latest Shanghai Auto Show. But whereas the German brand has sold more than double any other brand each month of the past 30 years it has been present in China, it is not obliterating competition when looking at JD Power Chinese satisfaction surveys (see examples below).

JD Power Sales Satisfaction Index 2015

Both Volkswagen joint-ventures are well below the leaders (#8 and #12) in China’s Sales Satisfaction. Source: J.D. Power Asia Pacific.

JD Power Customer Service Index 2015

Volkswagen also lags behind (#19) in Customer Service Satisfaction… Source: J.D. Power Asia Pacific.

JD Power Initial Quality 2014…but still tops Initial Quality scores (Note: this is not consumer perception). Source: J.D. Power Asia Pacific.

Another element that may have negatively impacted the Chinese customer’s reliability perception of the Volkswagen brand is its recent local recalls. Faced with VW’s reluctance to admit its fault, the Chinese government had to interve – no less. In March 2013, VW recalled over 380.000 vehicles in China, but not after the state television featured complaints about vibrations, loss of power and sudden acceleration in models including the Golf, some of it linked to dual-clutch gearbox flaws. The situation was so serious that it warranted a public apology by the head of VW China Jochem Heizmann at the 2013 Shanghai Auto Show.

In November 2013, 640.000 VW Group vehicles were recalled in China due to issues related to the lubricant replacement in seven-speed dual-clutch gearboxes. In August 2014, China’s General Administration of Quality Supervision, Inspection and Quarantine had to step in and contacted Volkswagen to deal with complaints of broken rear shafts from Sagitar owners, after the German carmaker claimed the problems were isolated incidents and vowed to sue anyone spreading “untrue” information about their products, according to U.S. website The Truth About Cars. In April 2015, Volkswagen announced the creation of a “Special Channels” program to “further enhance customer care and ensure customer satisfaction”, recognising the negative reliability perception it is now facing.

VW SantanaVW Santana in Urumqi, Western China.

Volkswagen: the default foreign choice

One of the first foreign carmakers to manufacture locally along with Citroen, Volkswagen has long been synonymous with the status that is associated with car ownership in China. It is still to this day an extremely aspirational brand, that has managed to remain relatively affordable for the well-off urbanites from the East Coast, as I described in my April 2013 article China: How local brands may finally find their mojo at home. Volkswagen has catered for and evolved with Chinese car buyers needs for the past three decades. This status as the “default brand” in China has enabled the continuation of its sales dominance, but it also means Volkswagen has become the one brand that Chinese buyers put in the balance when hesitating with a Chinese marque.

In a sense, Volkswagen is the safety valve of foreign manufacturers in China: when consumers mull a return to their much-improved domestic carmakers, Volkswagen sales are the first to suffer as a result. The more significant the shift towards domestic carmakers, the more fragile VW sales. A few years ago when domestic carmakers were at their lowest, Chinese consumers would rather pay almost double for the assured reliability and status of a Volkswagen Jetta or Santana. After a couple of years of much-advertised reliability trouble (see above) and constant progress from domestic carmakers, this same choice between Volkswagen and local fares is starting to weigh in favour of brands such as ChangAn and Geely. In short, Volkswagen is taking the brunt of the reconciliation of Chinese buyers with their domestic brands.

BMW 3 Series L China September 2014. Picture courtesy of auto.ifeng.comVolkswagen may be losing replacement sales to more luxurious brands such as BMW.

Is the market moving away from the Volkswagen brand?

Apart from its vulnerability to local brands, Volkswagen’s woes in China may also have to do with timing. Four full years after the government put in place licence plate limitations to curb congestion and pollution in Shanghai and Beijing, a dozen cities have since been added to the list. As a result, the East Coast market is slowly but surely moving towards saturation. Increased wealth in these regions enable consumer tastes to move up the luxury scale and further away from bargain basement options. When faced with the prospect of replacing their 2009 Lavida, well-to-do Beijing car buyers may opt for a BMW 3 Series L or Mercedes GLA instead, as Volkswagen may not offer anymore the status recognition they once enjoyed.

Volkswagen may be losing consumer upwards, but they are getting less consumers in at the bottom of the price range. Thanks to aggressive marketing efforts and dense dealer networks, first time buyers in less developed areas of the country nowadays tend to prefer a cheap domestic SUV such as the JAC Refine S3 to a low-end Volkswagen sedan such as the VW Jetta. Seeing the Chinese market as silo’ed segments is an error that Volkswagen has made in the past: the domestic SUV buyers of today are the foreign sedan buyers of yesterday.

In Part 3. What next? we will look at what the future holds for Volkswagen in China.

Categories: China, STRATEGY

STRATEGY: Why Volkswagen is losing foot in China (Part 1/3)

August 22nd, 2015 18 comments

Volkswagen China. Picture courtesy AP Photo/dapd, Nigel Treblin, File via finacnytrh.comChinese sales of Volkswagen-branded cars slumped 31% in July.

In July the Volkswagen brand dropped 31% year-on-year in China to 152,300 sales (imports excluded), with its year-to-date total down 10% to 1.52 million units. That’s 160.000 less new Volkswagen on Chinese roads after 7 months than in 2014. The German manufacturer’s star models are all falling sharply in July: the Tiguan (-9%), Golf (-11%), Lavida (-16%), Sagitar (-36%), Bora (-40%), Santana (-42% despite the arrival of the Gran Santana hatch), Jetta (-43%), Magotan (-44%), Passat (-49%) and Polo (-50%). Never in the 30 years presence of the brand in China had it displayed such a precarious year-on-year evolution. Why has Volkswagen come to lose its foot in China? Is this the end of the manufacturer’s implacable domination in the country? What solutions have been put in place to ensure prompt and healthy recovery? We give a few pointers to better understand Volkswagen’s current predicament in China. While Audi (-6%) and Skoda (-27%) are also in difficulty this month, we will focus this Strategy Analysis on the Volkswagen brand, not the Volkswagen Group at large.

VW Tiguan China July 2015. Picture courtesy auto163.comThe Tiguan is still Volkswagen’s cheapest SUV.

1. No affordable SUV

It is Volkswagen’s over-reliance on its sedan range that is penalising it in China. It’s no secret that the SUV segment is currently red-hot in this market and has been so for at least 18 months. In July, sales in this segment were up 41% in a market otherwise down 7%. Most manufacturers, including foreign ones, have scrambled to extend their SUV offer to benefit from the newfound craze of Chinese consumers for this type of vehicles. Not Volkswagen, who has been offering the Tiguan and Touareg for years here. Hyundai with the ix25 and Kia with the KX3 have devised China-only (at first) affordable SUV options, while Honda with its HR-V has split the booty into with the XR-V and Vezel, one for each of their Chinese joint-venture. So Volkswagen is among the few foreign manufacturers to have not reacted fast to the new SUV trend in China.

Brand SUV 2015 SUV mix SUV 2014 SUV mix
Haval 350,063 100% 235,204 100%
Honda 196,564 41% 101,018 23%
ChangAn 196,447 34% 68,907 15%
Volkswagen 149,029 10% 146,659 8%
Ford 130,307 27% 123,380 24%
Hyundai 127,622 23% 142,684 20%
JAC 126,115 69% 18,231 17%
Buick 119,571 24% 47,989 8%
Nissan 112,956 26% 106,084 20%
Beijing Auto 101,738 43% 9,368 7%
Audi 97,062 36% 109,368 33%
Chery 95,847 43% 90,318 33%
DongFeng 92,114 31% 0 0%
BYD 80,729 32% 57,327 22%
Kia 76,167 23% 79,375 20%
Peugeot 66,651 29% 56,661 23%
Zotye 64,595 61% 29,132 34%
Toyota 58,839 11% 75,597 13%
Lifan 55,947 60% 32,477 36%
Mercedes 51,283 40% 24,888 29%
GAC 50,189 67% 43,646 68%
Chevrolet 42,877 12% 37,972 8%
Brilliance 40,863 51% 17,227 18%
Geely 38,288 13% 32,766 14%
BMW 22,441 14% 25,865 14%
MG 18,078 55% 0 0%
Baojun 9,158 4% 0 0%

SUV sales and SUV ratio of locally assembled sales (SUV mix) 7 months 2015 vs. 7 months 2014

Volkswagen’s SUV mix among its locally assembled sales in China stands at 10% so far this year: the lowest of all mass manufacturers. In contrast, Honda’s SUV mix has gone from 23% to 41%, Buick’s from 8% to 24% and Mercedes’ from 29% to 40%. But the real force behind the SUV surge in China is domestic manufacturers: in the space of 18 months, they have reclaimed over half of total SUV sales in their home country. With the SUV market currently standing at 5 annual million units, we are talking about around 2 million SUV sales going to domestic manufacturers virtually overnight.

MG GS China February 2015bLaunched in February, the GS already accounts for over half of MG sales in 2015.

The year-on-year evolution of the SUV sales ratios of Chinese carmakers is telling: ChangAn goes from 15% to 34% thanks to the CS35 and CS75, JAC from 17% to 69% thanks to the Refine S3, Beijing Auto from 7% to 43% thanks to the Huansu S2/S3, Zotye from 34% to 61% thanks to the T600 – itself a copy of the VW Touareg, Lifan from 36% to 60% thanks to the X50 and X60, Dongfeng from nil to 31% thanks mainly to the AX7 and MG from nil to 55% thanks to the GS. And this is only the start: as I detailed in my coverage of Auto Shanghai 2015, each Chinese carmaker mentioned above has at least one additional SUV on the verge of hitting the market. Lifan, for example, unveiled the X40 and X70 there, in effect tripling its SUV range in less than 12 months.

Foreign carmakers Price range (yuan) Price range (US$)
VW Tiguan 199,800-315,800 31,300-49,400
Hyundai ix35 169,800-242,800 26,600-38,000
Skoda Yeti 165,800-241,800 25,900-37,800
Honda Vezel 128,800-189,800 20,100-29,700
Honda XR-V 127,800-162,800 20,000-25,500
Hyundai ix25 119,800-179,800 18,700-28,100
Kia KX3 112,800-186,800 17,600-29,200
Chinese carmakers
MG GS 119,700-179,700 18,700-28,100
Changan CS75 108,800-143,800 17,000-22,500
Haval H6 95,800-141,800 15,000-22,200
Zotye T600 79,800-115,800 12,500-18,100
Changan CS35 78,900-92,900 12,300-14,500
Baojun 560 76,800-89,800 12,000-14,000
JAC Refine S3 65,800-84,800 10,300-13,300
BAIC Huansu S3 61,800-72,800 9,700-11,400

Chinese SUVs are redefining the segment in the price department, and it’s very difficult for foreign manufacturers to really compete with these offerings, unless they create a local, low-cost brand. It’s the direction SAIC-General Motors has taken a few years back when launching the Baojun brand. Taking flight last year with the 730 MPV, Baojun launched its first SUV last month: the 560, starting at US$12,000 and attracting almost 10.000 customers straight from its first month on sale. In comparison, the VW Tiguan starts at US$31,300 and even the Skoda Yeti, Volkswagen’s (not so) low cost offering in Europe, is priced and perceived as an upmarket entry in China: it starts at US$25.900 vs. $20.000 for the Honda XR-V.

Haval H6 China June 2015. Picture courtesy auto.sohu.comHaval H6 Coupe

But the perception that Chinese carmakers are winning in the SUV segment only because of their pricing is erroneous: the best-selling Chinese SUVs in fact compete in the same price range as the cheapest foreign offerings. The Haval H6, uncontested leader of the segment for over two years, can set you back 141.800 yuan for its top-end variant, the Changan CS75 ends at 143.800 yuan and the MG GS at 179.800 yuan while the Kia KX3 – smaller, granted – starts at 112.800 yuan and the Hyundai ix25 at 119.800 yuan.

Volkswagen has missed the SUV boat by not getting a Polo-sized SUV ready for China in 2015 and with no plans to do so in the next two years. While Hyundai, Kia and most impressively Honda have all stricken when the iron is hot, and can see the future with a little more confidence. But even then, all foreigners are extravagantly priced for rural areas that are starting to fall in love with SUVs and fuelling the exponential growth that domestic carmakers are enjoying in the segment. What Volkswagen really needs in China is a low-cost SUV. It’s coming, but not before 2018: “We will bring a budget-car family to market in 2018, with an SUV, saloon and hatchback,” Martin Winterkorn told Bild am Sonntag last June. Volkswagen has been mulling a low-cost brand in China for years and already has the production capacity to churn it out. Waiting until 2018 to bring it to market is not viable in a Chinese market environment where trends make a u-turn every year.

Part 2 (Sedans under attack) and Part 3 (What now?) upcoming shortly.

 

Categories: China, STRATEGY

China 2014-2015: Toyota Prado best-selling import

August 21st, 2015 No comments

Toyota Land Cruiser Prado China 2015. Picture courtesy cheshi.comThe Toyota Prado is the best-selling import in China in 2014 and 2015 so far.

* See the Top 10 best-selling imports in China by clicking on the title *

For the first time on BSCB, we can share with you a closely guarded secret: the best-selling imported models in China. Toyota leads with the Prado, but premium carmakers also fare very well: the Lexus ES, Range Rover Evoque (in 2014), BMW X5, Range Rover and Mercedes S-Class (in 2015) also are very strong sellers in China. Interestingly, the Jeep Compass is also ranked very high at #3 over the first 10 months of 2014 and #4 over the first two months of 2015. The Porsche Macan is in the Top 10 in both rankings, an exceptional feat for the German supercar manufacturer.

Porsche Macan China 2015. Picture courtesy of autobild.deThe Porsche Macan ranks #10 import in China so far in 2015.

China July 2015 update: China July 2015: Baojun 560 lands with a splash in market down again

China H1 2015 update: China 1st Half 2015: Domestic carmakers regain ground in shy market

Full 10 months 2014 and 2 months 2015 Top 10 imports Ranking Tables below.

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Categories: China

China LCV July 2015: Wuling Mini Truck confirms leadership

August 19th, 2015 No comments

Wuling Mini TruckThe Wuling Mini Truck now rules the Chinese LCV market.

* See the Top 10 best-selling models by clicking on the title *

Thanks to LMC Automotive, we can study the Light Commercial Vehicle market in China, the segment hardest hit by the “readjustment” Chinese new vehicle sales are undergoing at the moment. LCV sales are down a harsh 26% year-on-year in July to just 244.853 registrations, bringing the year-to-date total to 2.182.350 units, down 27% on 2014 when 2.978.320 units were sold between January and July. That’s almost 800.000 Chinese LCVs gone in smoke in the space of a year. Not all LCV sub-segments are hit though, and July once again illustrate the new trend towards mini and small pickups: the Wuling Mini Truck goes completely against the grain with sales up another 29% year-on-year to 20.118 and now up 13% year-to-date. Similarly, the Foton Light Truck is up 13% in 2nd place.

Wuling Hongguang V China July 2015. Picture courtesy auto.sohu.comFlash in the pan? The Wuling Hongguang V is down 53% on March.

Reversely, microvans are going out of fashion faster than it takes to write these lines: the Wuling Rongguang is down 31% and the Wuling Sunshine literally implodes at -62% and just 12.256 sales vs. 32.319 a year ago. Only the Chana Mini Bus resists somewhat at – 9%. The third LCV trend we have observed, from microvans towards larger commercial vans, is now in question: the Wuling Hongguang V signs its 4th consecutive month-on-month decline, down to 14.001 sales in July, less than half its peak figure of 30.003 units hit in March.

Previous post: China 1st Half 2015: Domestic carmakers regain ground in shy market

Previous month: China LCV June 2015: Wuling Mini Truck takes off at +66%

One year ago: China July 2014: Now updated with Top 10 LCVs

Full July 2015 Top 10 models Ranking Table below.

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Categories: China

China July 2015: Focus on the all-new models

August 18th, 2015 3 comments

Baojun 560 China July 2015b

As is the tradition on BSCB, we now go into the detail of the all-new models landing into the largest new vehicle market in the world: China. Even though Chinese light vehicle sales are down for the 2nd month running in July, the rhythm of new introductions in the market remains as robust as ever. Keep in mind we only cater for the models that have kick-started local production as imports data is still closely guarded when it comes to China. After welcoming 6 new entrants both in March and April, 5 new nameplates in May and two in June, we are back up to 4 in July. No surprise at all: three of them are SUVs, the only segment still gaining ground in China (+41% in July).

1. Baojun 560 (#43 with 9.158 sales)

For you BSCB readers who have been following the Chinese market closely, this is one of the most anticipated launches of the year. The 560 was unveiled at Auto Shanghai in April exactly one year after the 730 MPV in another stroke of genius by the SAIC-GM-Wuling joint-venture, who made a clean sweep of their stand to only show the 560. No 730, 610 hatch or 630 sedan even though there was room for all of them… In one year, the Baojun 730 has sold no less than 300.000 units, making it the most successful new nameplate launch in the history of automobile in China. Can the 560 replicate this success in the SUV world? Even though this segment is a lot more crowded than MPVs with 112 locally produced SUVs on sale in China in July vs. 36 MPVs, the sky really is the limit for the 560.

Priced between 76.800 and 89.800 yuan (10.000 less than expected) or US$12-14k, and equipped with a petrol 1.8L engine mated with a 5MT, the 560 is a notch above the 730 (69.400 to 81.800 yuan) in terms of pricing. It competes full frontal with some of the best-selling SUVs in the country such as the JAC Refine S3 (104.000 sales so far in 2015 but 1.5L engine only), Changan CS35 (100.000 units, 1.6L engine), Chery Tiggo 3 (61.000 units, also a 1.6L engine) or the Haval H1 (40.000, 1.5L engine). A red-hot segment for sure, and judging by the Baojun 560 start this month at 6.451 sales, we have another blockbuster on our hands. In fact, the 560 will be an interesting test to see whether the success of the Baojun brand, which has until now been exclusively built on the 730 MPV – mostly successful in the countryside – is transferable to the SUV segment – traditionally popular in urban areas.

If the Baojun 560 manages to spread the SUV craze into rural China, it could definitely aim at fighiting the Haval H6 as China’s best-selling SUV. For now, battling at the same level as the JAC Refine S3 and Changan CS35 would be an excellent stretch-target.

Bar for success: #25 or 15.000 monthly sales

Weichai Enranger G3 China July 2015

2. Weichai Enranger G3 (#202 with 1.043 units)

Weichai Auto is a new Chinese manufacturer owned by Weichai Power, a state-owned company specialised in the manufacturing of diesel engines for vehicles, marine vessels and power generators. Weichai Auto launched the Enranger “brand” (sub-brand?) in December 2013 and will probably need to revise the name sounding dangerously similar – and annoyingly autocorrecting – to Endanger, if exports markets are in the works. The G3 is its first offering, a small MPV and a pickup will follow before the end of the year. Although only officially launched on July 30, the G3 already appears just outside the Chinese Top 200 with over 1.000 sales this month. Powered by a… Mitsubishi 1.5L petrol engine, the Enranger is priced at a cut-throat 57.900-70.900 yuan or US$ 9.100-11.100.

This places the G3 at the lowest end of the SUV segment in China, along with the BAIC Huansu S2 and the up-coming Lifan X40 and JAC Refine S2. Its success – or lack thereof – will test the lower limits of Chinese SUV offerings. Up until now consumers have resisted somewhat, with the BAIC Huansu S2 only seducing 12.000 buyers vs. 84.000 for the Huansu S3 for example. But this could be one of the directions the Chinese SUV market is moving towards, one that absolutely no foreign manufacturer can compete in.

Bar for success: #100 or 5.000 monthly sales

Roewe 360 China July 2015

3. Roewe 360 (#296 with 174 deliveries)

Roewe is breaking taboos: initiating a naming code that doesn’t end in -50 with the 360 which will eventually replace the 350. It will be priced between 80.000 and 150.000 yuan (US$ 12.500-23.500) and has already shown notable improvements in the less conservative exterior and much more refined interior with the now mandatory giant infotainment touch screen. It’s not a great time to launch a sedan in China with this segment freefalling 20% year-on-year in July, however this specific replacement was long overdue. As I pointed out at Auto Shanghai, the Roewe brand has been one of the most inconsistent in China with quality varying widely between the 350, 550 and top-of-the-range 950 as described in my coverage of Auto Shanghai 2015. That the 360 is catching up on lost time is great news for Shanghai Auto. But really what Roewe should be launching right now is a sexy compact SUV: at MG, SAIC’s other passenger car brand, the GS SUV offering, only just off the starting blocks, already represents 63% of its total July sales in China

Bar for success: #100 or 5.000 monthly sales

Foton Sauvana China July 2015. Picture courtesy fblife.com

4. Foton Sauvana (#327 with 64 sales)

The Sauvana fit in really well in the loud Foton stand at the latest Shanghai Auto Show. Even though it’s the heavy truck manufacturer’s first SUV, it seems like they are evolving in familiar territory with this no-frills but robust offering. Squarely aimed at the country’s rural areas, the Sauvana won’t reach the top of the sales charts just yet but could help the brand establish itself in the passenger cars world. After all, its Tunland pickup is already a success, both at home and in mature export markets such as South Africa and Australia. Foton says the Sauvana has been developed with the Toyota Fortuner in mind. It is powered by a choice of two turbo engines: a diesel 2.8L and a petrol 2.0L and priced between 125.800 and 167.800 yuan (US$19.700-26.200).

Bar for success: #200 or 2.000 monthly sales

Categories: China

China July 2015: Baojun 560 lands with a splash in market down again

August 15th, 2015 22 comments

Baojun 560 China July 2015As expected, the Baojun 560 is an instant blockbuster.

* NOW UPDATED with the Top 360 All-local models and Top 65 brands *

According to the China Association of Automobile Manufacturers, after dropping for the first time in 6 years in June, sales of new light vehicles in China decline for the second straight month in July at -7% to just 1.27 million registrations, the lowest monthly score since February 2014. Thanks to a good start of the year, sales are still up 3% so far in 2015 to 11.36 million. Medium/heavy commercial vehicle sales are unavailable for now. The SUV segment is the only one showing gains with sales up a stunning 41% on July 2014 to 403.091 deliveries. Reversely, sedans freefall 19% to 694.069 units, MPVs are down 8% to 107.807 and microvans down 16% to 74.300. The imploding of the sedan market is unheard of in China as we enter unchartered territory where an affordable SUV offering are becoming vital for a brand’s sales performance in the #1 market in the world.

VW Golf China July 2015. Picture courtesy caradvice.com.auAre we seeing the end of Volkswagen’s blanket domination of the Chinese market?

The brands ranking is turned upside down with manufacturers displaying completely opposite behaviours. The “big bang” of the month is perennial leader Volkswagen tumbling down 31% to 152,300 sales (imports excluded), pulling its year-to-date total down 10% to 1.52 million units. Heavily reliant on sedans which account for 87% of its total sales in China this month, the German manufacturer pays the price for its weakness in the booming SUV segment, with even its Tiguan down 9% year-on-year. All its star models are falling sharply in July: the Lavida (-16%), Sagitar (-36%), Jetta (-43%), Santana (-42% despite the inclusion of the Gran Santana hatch), Golf (-11%), Bora (-40%), Polo (-50%), Magotan (-44%) and Passat (-49%). In terms of year-on-year sales evolution, Volkswagen has never been in such a fragile position in China, a market it entered 30 years ago.

Honda XR-V China July 2015. Picture courtesy of auto.sohu.comHonda sales are up 50% year-on-year in China.

Toyota snaps up the 2nd place in the July brands ranking with sales up a splendid 18% to 96.400 units (imports excluded), taking a strong option on retaining the #1 worldwide spot above Volkswagen, while Honda takes off in third place: +86% (without imports) or +50% (incl. imports) thanks to its XR-V and Vezel twin crossovers adding up to 20.289 sales. Nissan is up 3% but down 14% when including imports, Hyundai slips down 32%, Ford is down 19% (-6% incl. imports & Lincoln) and General Motors is down 4% with locally-assembled Chevrolet sales imploding at -44% and Buick at -7%. Notice Peugeot (-27%), Skoda (-27%) and Citroen (-42%) also paying the price for their weakening SUV offerings.

Mercedes GLA China Julyl 2015. Picture courtesy wolfexp.netMercedes bucks the trend and improves its Chinese sales by 42% in July.

Chinese carmakers see varied fortunes: Changan is up 8% to lead the pack at #8 overall, Haval is up 27% to 38.851 units but with its namesake brand down 66%, overall Great Wall sales are down 2%. With the arrival of the 730 MPV and 560 SUV (see further down), Baojun sales are up 11-fold year-on-year (+975%!) to 33.325 whereas Wuling is down 41% to 32.185 not including microvans. Beijing Auto (+125%), JAC (+174%), GAC Trumpchi (+143%) and Brilliance (+39%) are reaping the benefits of model ranges now completely dominated by SUVs. The luxury game is also changing (all figures include imports unlike the raking below the jump): Audi is down 13% to 42.267 deliveries, BMW down 7% to 32.226 but Mercedes surges 42% to 29.540 units thanks partly to the success of the GLA crossover shooting up to #69 and 6.160 sales. This score earns Mercedes the premium pole position worldwide with 149.753 deliveries (+15%), edging past BMW at 147.513 (+6%) with Audi in third place at 146.100 (+1%).

Toyota Corolla China July 2015. Picture courtesy of auto.ifeng.comLike in June, the Toyota Corolla is the third best-selling nameplate in China.

In the models ranking, the Wuling Hongguang (-42%) and VW Lavida (-16%) stay on top but drop sharply, while the Toyota Corolla (+53%) rounds up the podium for the 2nd consecutive month. The Haval H6 is up one spot but down 13%, the Baojun 730 up two to #5, the Toyota Vios up 48% to #14, the BMW 5 Series slices its June ranking in two to jump to a spectacular 15th place overall (#9 among sedans!) and the GAC Trumpchi GS4 leaps 28 spots on June to land at #16 with 12.138 deliveries, meaning it is already the #3 SUV in the country behind just the Haval H6 (23.088) and VW Tiguan (17.466). The JAC Refine S3 is up 9 spots to #18, the Geely EC7 up 107% and 12 ranks to #23, the ChangAn CS75 up 111% to #24, Beijing Auto Huansu S3 up 17 to #26 and the Haval H2 up 12 to #36.

GAC Trumpchi GS4 China July 2015Taking the Chinese market by storm: the GAC Trumpchi GS4

As expected, the Baojun 560 SUV is an instant hit with Chinese customers, landing directly inside the Top 50 for its first month of sales at #42 with 9.158 deliveries in July. Among recent launches, apart from the GAC Trumpchi GS4 already a blockbuster, the Brilliance V3 is up 14 spots on June to #64 with 6.751 sales, already accounting for 53% of the brand’s domestic sales this month, the Changfeng Leopaard CS10 is up 44 ranks to break into the Top 100 for the first time at #91, the BYD Qin is up a further 15 spots to do the same at #85 and a record 4.030 sales, the Geely GC9 is up 31 ranks to #113 and 3.200 units, the Buick Verano up 43 to #122 and the BYD Tang up 41 to #231.

Previous post: China 1st Half 2015: Domestic carmakers regain ground in shy market

Previous month: China June 2015: First monthly year-on-year decline in over 6 years

One year ago: China July 2014: Market up 10% thanks to MPV and SUV sales

Full July 2015 Top 360 All-local models and Top 60 brands below.

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Categories: China

China 1st Half 2015: Domestic carmakers regain ground in shy market

July 28th, 2015 No comments

Haval H6 China June 2015. Picture courtesy auto.sohu.comThe Haval H6 leaps to third place overall so far in 2015.

* See the Top 391 All-local models by clicking on the title *

* NOW UPDATED with the Top 10 best-selling Light Commercials *

Thanks to Automotive News China for helping compile this article.

If over the period the Chinese new light vehicle market is still up by 5% to 10.10 million units while sales of all new vehicles (including buses and commercial trucks) are up 1% to 11.85 million units, the unthinkable happened in June when the market actually declined year-on-year for the first time since December 2008. Imports are hit even harder at -22% over the first 5 months of 2015 to 434.423 units: SUV imports are down 20% to 278.022, sedan imports down 27% to 136.354 and MPV imports down 9% to 20.047, according to the China Automobile Dealer Association.

Wuling Hongguang China June 2015. Picture courtesy of cheshi.com2The Wuling Hongguang is still #1 in China but drops 19%.

However as Automotive News China points out, there is no need to panic. And this for 3 main reasons. First, Chinese sales look weak in 2015 because of an extraordinarily high base at the same time last year when sales where inflated by panic buying induced by rumors some municipalities would restrict car sales in order to ease traffic congestion and pollution. In Nanjing, panic buying pushed sales up 60% over H1 ’14 and that market is now down 19%. Second, the Chinese stock market has had a double negative effect: when it surged, consumers invested in it instead of buying a car, now that it is tumbling down, investors can’t afford to buy the luxury car they were planning.

VW Jetta China June 2015. Picture courtesy of product.xgo.com.cnThe Volkswagen Group, although down 4%, still has the 3 best-selling sedans in China.

Third, the method of Chinese sales reporting has changed this year, switching from wholesale to retail. Given Chinese laws allow automakers to set sales targets without consulting dealers, they have dumped excess car inventories on dealers, making wholesale deliveries higher than retail ones. With most automakers now reporting retail sales – closer to reality – the overall figure looks more disappointing that it really would if compared with retail sales in 2014. These 3 reasons will smooth themselves out over the next year or so and the market should start growing again, lifted by exceptional demand in more rural areas.

Baojun 730 China June 2015. Picture courtesy of autohone.com.cn300.000 Baojun 730 have hit Chinese roads in a year.

The Volkswagen Group is down 4% to 1.74 million units: the first time its First Half sales decline in China since 2005 when they fell 14%. General Motors is up 4% to 1.72 million deliveries, saved by SUV and MPV sales. In the detail: Buick is up 4% to 436.226 units, Chevrolet is up 0.6% to 317.408, Cadillac up 14% to 39.444, Baojun up 4-fold to 159.511 deliveries thanks to the 730 – this trend should continue in H2 with the arrival of the 560 SUV presented at Auto Shanghai, but Wuling is down 5.5% to 764.172 units.

JAC Refine S3 China June 2015. Picture courtesy auto.sohu.comThe JAC Refine S3 is the third best-selling SUV in China so far in 2015.

The Wuling Hongguang remains the best-selling vehicle in China by far but sees its volume reduced by 19% to 313.300 units above the VW Lavida at 233.200 (-11%). The top of the models ranking brings to light the return to form of domestic manufacturers in their home market rather spectacularly: the Haval H6 is up 20% to climb onto the podium with 172.000 deliveries while the Baojun 730 confirms its status of most successful nameplate launch in the history of automobile in China, adding up to 158.000 units so far in 2015 and 278.000 since introduction.

Haval H2 China June 2015. Picture courtesy autohome.com.cnHaval H2

The VW Santana (-6%), Jetta (-2%) and Nissan Sylphy (-2%) follow. Note that if Volkswagen underperforms in China this year, the German carmaker still has the 3 best-selling sedans in the country and places 6 nameplates in the overall 2015 Top 12: Lavida (#2), Santana (#5), Jetta (#6), Sagitar (#9), Tiguan (#11) and Passat (#12). Keeping with sedans, notice also the Toyota Corolla (+156%), Geely EC7 (+56%) and ChangAn Eado (+35%) making sparks.

Top 10 best-selling SUVs in China – H1 2015:

Pos Model 2015 /14 2014 Pos
1 Haval H6 172,006 20% 143,119 1
2 VW Tiguan 131,563 3% 127,549 2
3 JAC Refine S3 91,859 new 0
4 ChangAn CS35 88,754 65% 53,712 8
5 ChangAn CS75 86,909 1356% 5,971 38
6 Haval H2 77,158 new 0
7 Beijing Auto Huansu S3 72,822 new 0
8 Nissan X-Trail 70,253 87% 37,515 17
9 Ford Kuga 68,396 3% 66,225 5
10 Buick Envision 65,851 new 0

The SUV segment is the one where the progress of domestic manufacturers is the most spectacular. As we have studied in the Chinese Q1 2015 update, the pace at which Chinese carmakers have launched successful and affordable SUVs represents an additional pressure towards foreign carmakers and has played a significant role in the struggling of Volkswagen so far this year. Over the period, 6 of the Top 7 best-selling SUVs in the country are Chinese vs. just one at the same time one year ago! The JAC Refine S3, ChangAn CS35, CS75, Haval H2 and Beijing Auto Huansu S3 have all hit the bullseye with Chinese customers, while in the foreign aisle the Nissan X-Trail (+87%) and Buick Envision have seen the most impressive surges.

Ford Escort China June 2015. Picture courtesy of auto.163.comFord Escort

All-in-all, it’s an astounding 76 all-new locally-produced nameplates that have made their entrance in the Chinese sales charts over the past 12 months. If the Baojun 730 evolves at stratospheric heights, Ford must be commended for the launch of the Escort which was a risky move that was bound to cut deep into Focus numbers (-32%). The Escort shines at #18 and just under 107.000 deliveries. Further down the ladder, the Toyota Levin (#45), BYD S7 (#46), Honda Vezel (#59) and its twin the XR-V (#63) as well as the Hyundai ix25 (#68), VW Lamando (#72), Haval H1 (#81), Kia K4 (#86), Citroen C3-XR (#106) and Venucia T70 (#112): all are instant blockbusters and a testimony of the incredible buoyancy the Chinese market is still enjoying.

Wuling Hongguang V China April 2015. Picture courtesy auto.sohu.comWuling Hongguang V

Zooming in on the Light Commercials market down a harsh 27% to 1.937.497 deliveries, the Foton Light Truck takes the lead thanks to sales down ‘just’ 15% to 135.000 while all microvans, once reigning supreme over the segment, implode: the Wuling Sunshine (#2) is down 29%, the Wuling Rongguang (#4) is down 43% and the Chana Mini Bus (#6) down 41%. The new LCV trend in China is towards micro pickups – with the Wuling Mini Truck up 10% to 109.400 sales and #1 in June – and larger minivans. Perfect illustration: the thunderous arrival of the Wuling Hongguang V, a step up from the Rongguang and in essence the commercial version of the best-seller Hongguang MPV. The V sells a huge 119.538 units in H1 but seems to already have lost some steam by June at 15.999 sales after hitting 30.000 units in March.

Baojun 560 China June 2015. Picture courtesy auto.sohu.comThe Baojun 560 could help keep SUV sales growing fast in H2 2015.

What’s next for China? We touched on this in STRATEGY: Where is China headed?. In the coming months, we should see MPV sales flatten further but SUV deliveries continue to rise, especially with the imminent arrival of the Baojun 560.

Previous post: China June 2015: First monthly year-on-year decline in over 6 years

Q1 2015 post: China 1st Quarter 2015: Baojun 730 and Ford Escort superstars

FY 2014 post: China Full Year 2014: Growth cools to 7% to record 23.5 million sales

One year ago: China 6 months 2014: Santana makes it 4 Volkswagens in Top 6

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Categories: China

China LCV June 2015: Wuling Mini Truck takes off at +66%

July 28th, 2015 No comments

Wuling Mini Truck China June 2015. Picture courtesy dizmo.com.cnThe Wuling Mini Truck is the best-selling LCV in China in June.

* See the Top 10 best-selling LCV by clicking on the title *

The June LCV rankings in China confirm once again a trend we described in detail in April: the move away from bargain basement microvans towards micro pickups and larger minivans. The perfect illustration of this trend towards micro pickups is the pole position of the Wuling Mini Truck this month with sales up an incredible 66% to 27.026 units in an LCV segment down 16% year-on-year to 305.247 registrations. Its minivan variant the Wuling Rongguang is for its part up 4% to 2nd place at 24.545 units while the Foton Light Truck, #1 in May and year-to-date, is up 41% on June 2014 to #3 and 18.753 deliveries. Sovereign a year ago, the cheap Wuling Sunshine (-40%) and Chana Minibus (-64%) implode. Meanwhile the Wuling Hongguang V is steadily losing steam after an explosive start: down 11% on May to 15.999 sales.

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Previous month: China LCV May 2015: Foton Light Truck outsells all Wuling models

One year ago: China June 2014: Now updated with Top 10 LCVs

Full June 2015 Top 10 Ranking Table below.

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Categories: China

China June 2015: First monthly year-on-year decline in over 6 years

July 15th, 2015 6 comments

GAC Trumpchi GS4 China June 2015The GAC Trumpchi GS4 sells 10.723 units for its second month in market.

* See the Top 366 All-local models by clicking on eh title *

This is it. I have been correcting numerous analysts describing a “slowing down” of the Chinese market over the first half of 2015, saying that it was instead the growth rate that was slowing down, not the market as a whole. Until this month. In June, sales of new light vehicles in China are down 3% year-on-year to 1.51 million units, the first monthly sales decline since December 2008, while total all-vehicle sales are down 2% to 1.8 million deliveries. In June, only SUVs stayed afloat with sales up a gargantuan 38% on June 2014 to 448.200 units while MPVs are now down 1% to 126.000, sedans down a harsh 15% to 846.200 deliveries and microvans down 22% to 91.000. The year-to-date total is still in positive halfway through 2015 at +5% to 10.10 million light vehicles while sales of all new vehicles (including buses and commercial trucks) are up just 1% to 11.85 million units.

Toyota Corolla China June 2015. Picture courtest of xgo.com.cnThe Toyota Corolla is up 3-fold year-on-year to #3 overall with 25.685 sales.

Select manufacturer results show very different evolutions. General Motors saw its sales go up just 0.4% to 246.066 units despite price cuts of up to 20%, whereas for the Volkswagen Group it is a nightmarish month: sales are down 17% year-on-year to 250.000 sales with the VW brand down an abysmal 22% and Skoda down 15%. Ford sales are down 3% this month to 83.506 deliveries. The luxury market sees Audi drop 6% to 47.831 units, BMW up just 0.2% to 40.200 and Mercedes surge 38% to 32.507 sales. Japanese manufacturers are holding the right end of the stick: Toyota announced sales up 42% for June at 100.600 units, its largest year-on-year gain since February 2014, Honda is up 26% to 73.381 sales on the back of blockbuster results for the XR-V/Vezel twin baby SUVs, Mazda is up 14% while Nissan’s gains were a much more modest 0.1% at 93.600 deliveries.

Ford Kuga China June 2015. Picture courtesy auto.sohu.comThe Ford Kuga sells a record 16.068 units this month.

In the models ranking, the Wuling Hongguang reclaims the lead off the VW Lavida despite losing more ground year-on-year at -29% vs. -17%. The Toyota Corolla is up a meteoric 216% due to a transition month between two generations a year ago to land directly in third place with 25.685 registrations, its strongest monthly result so far in 2015. Note that with the Levin (12.382) and Corolla EX (3.623), total Corolla sales add up to a stunning 41.690 units which would earn it the overall pole position by far (Hongguang: 36.310).

Nissan X-Trail China June 2015. Picture courtesy auto.qq.comAll-time record 15.558 sales and 19th place for the Nissan X-Trail.

The Nissan Sylphy is solid in 4th place, the Haval H6 and Baojun 730 both recede two spots to #5 and #7 respectively and the Buick Excelle GT is boosted by its facelift to #9. If the VW Tiguan is up 11% to a splendid 6th position, the Polo up 39% to #15 and the Passat up a timid 1% to #20, all other 6 VW nameplates placed in the Top 40 display double-digit year-on-year drops: Lavida (-17%), Jetta (-22%), Santana (-30%), Sagitar (-39%), Golf (-16%) and Bora (-41%). Ford compensates the freefalling of the Focus (-42%) by a very strong #14 spot for the Escort at 17.513 sales, while the Kuga is up 47% on June 2014 to a record 16.068 sales in 16th place and the Edge is already above the bar for success we fixed at #70 and 8.000 units last month at launch: up a spectacular 63 spots to #56 with 8.416 deliveries.

Ford Edge China June 2015Ford Edge

As described above, the SUV segment is the only one left to display year-on-year gains in June, and it shows in the models ranking. Belo the Haval H6, VW Tiguan and Ford Kuga, the ChangAn CS75 breaks its ranking record at #18 thanks to sales up 4-fold on June 2014 to 15.680, the Nissan X-Trail breaks into the monthly Top 20 for the first time at #19 with an all-time high 15.558 units (previous best: 14.121 last November), the Buick Envision remains solid at #23 as do the JAC Refine S3 (#27) and ChangAn CS35 (#28).

Honda XR-V China June 2015. Picture courtesy cheshi.com.cnThe Honda XR-V and Vezel twins add up to 21.000 deliveries in June.

The Honda XR-V (record 10.956 sales), BYD S7 (10.865) and Beijing Auto Huansu S3 (10.816) all stay at stratospheric heights, but the most impressive performance this month is arguably delivered by the GAC Trumpchi GS4: for its 2nd month in market it is up 66% and 36 ranks to a splendid 44th spot… Notice also the Honda Vezel at #46 (total HR-V/Vezel twins: 21.000 sales – equivalent to a combined 8th spot), Haval H2 at 10.010 units, the Zotye T600 up 102% year-on-year to #60 and the Brilliance V3 – the third SUV launched in May to improve drastically on an already very satisfying first month: up 36 ranks to #78.

Further down, the BYD Qin continues its unstoppable climb: up 16 spots on May and 281% year-on-year to a record #110 and 4.015 sales, the Mercedes GLA is up 69 ranks to #111, the Changfeng Leopaard CS10 up 80 to #135, Geely GC9 up 31 to #144 and VW Gran Santana up 119 to #188.

Buick Verano China June 2015. Picture courtesy xcar.com.cnBuick Verano

There are only two new nameplates making their entrance in the Chinese ranking in June, and they are all rather shy for now compared to the SUV launches from last month: the Buick Verano, introduced at this year’s Auto Shanghai, lands at #165 with 1.973 sales while the BYD Tang – the hybrid variant of the S7 – arrives at #272 with 412 units over one year after premiering at the 2014 Beijing Auto Show.

BYD Tang China June 2015BYD Tang

If the Verano should fine its way to the Top 50 very quickly, an arrival inside the Top 20 will mean some cannibalisation either from the Excelle and/or the Excelle GT. Much harder to predict the Tang’s career as this is an exclusively hybrid model. Beating the Qin sedan at its own game would open up a new trend towards energy efficient SUVs.

Previous post: China May 2015: Focus on the all-new models

Previous month: China April 2015: Wuling Hongguang, VW Group tumble in slow market

One year ago: China June 2014: Audi breaks record in market up 11%

Full June 2015 Top 366 All-local model Ranking Table below.

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Categories: China