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Strategy: How Chinese carmakers are setting themselves up for success (Part 1: Africa)

Fennec fox. Picture courtesy of Fransisco Mingorance:National Geographic Traveler Photo ContestLike this fennec fox, Chinese carmakers have been walking against the wind in Africa. And it’s worked.

With the Beijing Auto show approaching fast, I though it would be timely to publish an updated version of my 5 Part strategy study of how successful Chinese manufacturers are abroad. Part 1 is Africa.

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

For the first time in the history of car manufacturing, Chinese carmakers sold 1 million cars outside of China in 2012, and estimates show chances are they have repeated that feat in 2013. Chinese manufacturers are now relying more and more on export markets to boost their bottom-line, especially as conditions have worsened for local passenger cars at home over the last couple of years. However as I described in my article “China: How local brands may finally find their mojo at home“, the Chinese are learning how to sell low-cost overseas and applying these strategies at home, making themselves more competitive in the process.

In fact, while the long-dreaded Chinese ‘invasion’ of the West European and American car markets is still a long way off, Chinese manufacturers have been working extra-hard under the radar to secure less developed markets that will form the bulk of the global car sales growth over the next couple of decades.

And this is why they will win.

Speranza A516 EgyptSperanza A516 in Cairo, Egypt

First case in point, Africa.

Apart from Toyota, Hyundai and a bunch of other Japanese manufacturers, no one currently has a lot of time for a continent that is still finding its way into development. Except the Chinese, who started assembling cars there almost a decade ago, as part of a push to be deeply involved in the infrastructure building of the continent. So we’re not just talking cars, but roads, rail tracks, mining and much more.

Egypt was the first cab off the rank when Chery used the Cairo plant previously run by Daewoo to assemble its cars under the Egypt-exclusive Speranza brand in 2004 – apparently because the Chery brand suffered poor quality perceptions after an earlier launch there. Success: Speranza was the 4th most popular passenger car brand in Egypt between 2008 and 2011, selling more than Toyota! Successful models include the A516 (#9 from 2007 to 2009) and the Tiggo (#14 in 2011). Since 2012 however, other Chinese manufacturers have stepped up a notch in Egypt…

Golden Dragon Haice Egypt 2012The Golden Dragon Haice was the best-selling Chinese model in Egypt in 2012.

The Golden Dragon Haice managed to rank as high as #6 in September 2012 and finished the year as the best-selling Chinese model at #15, and the Geely Emgrand EC7 has done much, much better, finishing the year 2013 in third position overall with almost 5% of the market on its own! King Long, Brilliance and JAC models have also started to appear within the monthly Top 30.

Holland Car Abay V2Holland Car assembles the Abay (aka Lifan 520) in Ethiopia.

In Ethiopia, Lifan and JAC have cooperated with Holland Car, the country’s first car brand, to assemble models locally including the Holland Car Abay (a rebadged Lifan 520), Tekeze (JAC Tongyue) and Awash (JAC B-Class), all named after Ethiopian rivers. Since 2010 Lifan assembles cars under its own name in the country and has recently introduced the X60 SUV. No sales data for that country so it’s hard to gauge their success (not as high as Lifan would want according to but a second example of clever re-branding to fit the local culture as a first step.

Foton Slip SUP Kenya 2012The Foton SUP is assembled in Kenya since 2011.

In Kenya, Foton launched its first domestically produced truck, the SUP pick-up, in June 2011 using an existing local factory, and has opened its own US$50m assembly plant in Nairobi in March 2012 with a capacity of 10,000 annual units. Chery is also thinking about a Kenyan plant, initially limited to produce 1,000 units in 2013. As a result, Chinese manufacturers now hold 20% of the Kenyan car market…

Geely Emgrand EC8 Kuwait. Picture courtesy of qabaq.comGeely Emgrand EC8 in Kuwait

Either from these 3 assembling hubs or through straight exports from China, Chinese carmakers are organising their expansion towards other African countries. The Egyptian hub makes it more practical to export to Libya, Algeria, Sudan, Syria, Jordan, Saudi Arabia, Kuwait, the UAE and Iraq notably, where the Great Wall Deer seems to be particularly successful. Another potential hub for the region could be Iran where Chery has been assembling cars since 2006, with the Fulwin 2 hitting a record #4 last month.

JAC Tojoy MadagascarJAC was the #2 most popular brand in Madagascar at the end of 2012.

Ethiopia and Kenya can also be used as relays to Tanzania, Mozambique or Madagascar where some Chinese carmakers already have a solid presence: JAC was up to #2 brand with over 8% share over the third quarter of 2012 below only Nissan, and Great Wall was 7th in Q1 2013. Further West, Chinese carmakers now hold 20% of the Senegal and Cote d’Ivoire markets, with latest Cote d’Ivoire data showing Great Wall at #10 in 2010. The logical next step in Western Africa for Chinese car makers would be assembling cars in Nigeria…

Assembling cars in Nigeria would enable them to carve up a significant market share there as well as in neighbouring Ghana, Cameroon, Gabon, Mali and Burkina Faso, all at various stages of development but destined to grow fast in the next decade and beyond. South Africa also seems to be a missing link right now, however when you realise that it is currently the only mature market on the continent, it’s easier to understand why the Chinese haven’t spent too much energy trying to crack it yet. I will spend more time talking about Chinese carmakers’ strategies in mature markets in Part 5 of this series.

ZX Auto GrandTiger Libya 2011aZhongXing/ZX Auto GrandTiger in Libyan Civil War outfit

Another way Chinese models have come under the spotlight in export markets has been through government agreements, notably in Libya, albeit in a totally unexpected way (you also will see its impact on the Cuban car market in the next installment of this series). During the 2011 Arab Spring, Libyan rebels got their hands on a batch of 5,000 ZX Auto GrandTiger pick-ups that the government had recently received and fit their heavy artillery on them, catapulting the vehicle onto worldwide TV screens for a solid 6 months. A marketing opportunity that ZX Auto fully embraced, boasting about its reliability and featuring the Libyan civil war on giant LED screens at the 2012 Beijing Auto Show (see the full Libya article here).

Stay tuned for Part 2 of this series: Latin America!

This Post Has 15 Comments
  1. Chinese vehicles are still frowned upon in South Africa due to some manufacturing bringing in dodgy vehicles and then disappearing from the scene. We South African are very loyal to brands and keep a ‘grudge’ against those who ‘hurt’ us. Hyundai for instance messed things up in the late 90’s and had to fight hard for years to gain some respect. We want to see commitment in manufacturers and the Chinese brand coming of age is GWM (Great Wall) The perceptian of their commercial vehicles are not that bad but models chosen as passenger cars need a rethink. Chinese brands will eventually become more acceptable here, persistence will be the winning factor here. South Africans were once just as scepticle about Japanese cars, and Toyota has been the market leader for 30 years.

  2. Its a good investment on their part, the market is growing there and it gives them the ability to grow their industry while building machines that may not be as desired around the world for the next few decades (due to their overall quality in comparison to other manufacturers)

  3. Even though there are probably too many Chinese brands, eventually those that create a quality car will succeed in foreign markets purely due to economies of scale.

  4. Almost all Chinese automakers, the state-owned (example Chery, Jac, Brilliance, FAW) or private (Geely, Great Wall) constantly illegally copied European / American / Japanese cars.

  5. Very interesting article. I think the Chinese are using the right strategy: conscious that their products still can’t match the Western World expectations in terms of styling and quality, they are building up a name and, most importantly, money in those markets where a car is not requested flashes, bling bling and LEDs everywhere.

    As for the number of Chinese brands, yes, it is astonishing and it seems like every day new brands with questionable names are born, but let’s also consider the dimensions of the market: as Aero said, China is 10 times Japan and more or less the same size as Europe, where more than 30 brands exist… Also, it may be a stretch, but also USA had an incredible amount of small brands at the beginning of the motoring era: most of them were bought, merged, or simply disappeared and probably this will happen in China too.

    But most important of all: the fennec picture is simply ADORABLE 😀

  6. @Pedro

    I know what you mean. I find remembering all the Chinese car brands a chore too. But it’s something we will have to get used to, unfortunately. China has a population 10 times that of Japan, and this figure is similarly reciprocated in the Chinese automotive industry. But like Matt has pointed out above, names and brands are expendable, so long as the Chinese car companies can achieve economies of scale. It’s quantity over quality for the Chinese, but quality over quantity for the Japanese and Koreans. It’s as simple as that.

  7. I don’t think the chinese brands will have a similar succes like the japanes and korean once had. Simple reason: when japanese and korean carmakers spread out to the world there was a catchy bunch of 3 or 4 brands only whereas the chinese are a confusing mass of dozens of names. it’s confusing and not memorable for the people.

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