As illustrated in Africa and Latin America, Chinese manufacturers have been working extra-hard under the radar to secure less developed markets that will form the bulk of global car sales growth over the next couple of decades. Their approach to Eastern Europe is very similar. There are currently three Chinese assembling hubs in the region – in Russia, Ukraine and Bulgaria – acting as a very convenient springboard for further expansion throughout the continent, including all the ex-USSR nations and potentially Western Europe.
Even though their market share is limited to around 3% for now, Russia is currently the overseas country delivering the largest volume for Chinese manufacturers with 83,207 sales in 2012, up a whopping 50% on 2011. Import tariffs are too high to allow sizeable direct imports from China, so the 4 main Chinese carmakers present here have already all invested very significantly to assemble locally and as a result are registering extremely strong growth rates so far in 2013: in April Geely was up 88% to #23 brand, Great Wall up 124% to #25, Lifan up 21% to #27 and Chery up 16% to #28.
Chery has the longest (and most troubled) history in Russia: the Chery Amulet ranked within the monthly Top 20 as early as 2007 but the brand saw sales plummet on the back of poor quality perception, to which Chery responded by rebranding their cars Vortex. Since last year though, the Chery brand is back in Russia with encouraging success. Model-wise, the Lifan Solano (aka 620) was the best-seller in 2012 at #41 followed by the Geely MK (#54), Great Wall Hover (#55) and Vortex Tingo (aka Chery Tiggo – #95).
Although Russia does not qualify as a “less developed” market, its structure heavily weighted towards low-cost models like the Lada range and Renault-branded Dacias make it one of the biggest opportunities for Chinese manufacturers worldwide. However in Eastern Europe too, it’s in the developing car markets that we see the Chinese grab their highest market share. Ukraine is the only market in the world with regular available sales data outside China to have repeatedly crowned a Chinese models in the monthly rankings. The Geely CK ranked #1 there in July 2012, December 2012 and January 2013 and was among the Top 10 best-sellers for 9 of the last 12 months.
But the CK is not a one trick pony: Geely was the 2nd most popular brand in Ukraine in March 2013 below just Hyundai with 7.5% share, it is up 205% year-on-year in April and ranks #4 so far in 2013… The Geely Emgrand EC7 hit #9 in March 2013, the MK-2/Cross was #15 that same month and the MK was #19 last September. All in all Chinese carmakers currently command around 10% of the Ukrainian car market.
Other Chinese actors in Ukraine include Chery, 25th brand so far in 2013, BYD up 504% in April to 26th and placing the F3 at #42, Great Wall at #32 and MG at #34, placing the MG 350 at #77 in April. Another example of Chinese manufacturers immersing themselves in the local culture, Chery manufactures at the local ZAZ plant from CKD kits and sells the Chery Fulwin 2 as the ZAZ Forza which ranked among the Ukrainian Top 10 from May to August 2012.
Another milestone event for Chinese manufacturers in Eastern Europe was the opening of the Great Wall factory in Lovech, Bulgaria, in February 2012. This is the very first automotive plant set up in Bulgaria and as a result Great Wall has played the ‘made in Bulgaria’ card to the fullest since, with great results: it was #10 brand in the country over the first 6 months of 2012 and quickly went up to #2 overall with 10.5% share below just Volkswagen in October and December 2012, placing the Steed pick-up in pole position that same month, the Voleex C10 at #2 in April 2013 and the Hover at #6 in December…
Great Wall’s Bulgarian hub is planned as the focal point for their expansion throughout Europe, and Bulgarian exports have already started to trickle down in sales stats for countries like Macedonia where in December 2012 Great Wall was the #10 brand with 4.7% share and the Voleex C10 was #5 model at 3% share. This expansion will likely reach more neighbouring markets in the near future, once again the less mature ones like Serbia (where Chery ranked #25 in 2012), Bosnia, Kosovo, Montenegro and potentially Albania and Moldova.
A fourth Chinese assembly hub is scheduled to open in the region this year in Belarus, where Geely has set up a joint venture with Belarusian company BelDzhi and is in the process of launching the locally assembled SC7. The assembly facilities, located in Zhodino and Borisov, are scheduled to produce 60,000 cars/year for the first three years, with capacity potentially doubling in 2017. From that 4th hub, exports towards Russia and Kazakhstan are on the cards.
Launching from their 3 hubs in Russia, Ukraine and Bulgaria and potentially a 4th one in Belarus, Chinese carmakers are getting ready to expand further in Eastern and Western Europe in the very near future. Russia will remain by far their biggest opportunity in the region with local assembly plants already in place and ready to gear up to surf on the growing demand for affordable cars in that market.
Stay tuned for Part 4 of this series: Asia!