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China July 2018: Focus on the All-new models

Lynk & Co 02

Now that July China wholesales have been studied, we can focus on the all-new locally produced launches for the month so you are up-to-the-minute on the fastest-evolving market in the world. Note these updates remain based on wholesales data. The big news in July is the sudden and unexpected freefalling of SUV sales at -8.2%. This edition of the All-new models reveals an issue that will quickly become front and centre over the next few months: all manufacturers present in China have been working overtime over the past couple of years on engineering as many SUVs as possible to make sure to ride the popularity wave. Even though SUV thirst seems to have dried up among Chinese buyers, the carmakers’ SUV tap is far from being done with as we are now witnessing the launch of SUVs conceived years ago, except that it has now become harder than ever to succeed in this now depleted segment. A perfect illustration of this phenomenon is the 5 SUVs making their first appearance in the Chinese charts in July out of 7 new launches, the rest being EVs, with no “traditional” sedans. You can also keep track of the fast-expanding list of all active Chinese brands by consulting our Exclusive Guide to all 175 Chinese Brands, updated live.

1. Lynk & Co 02 (#141 – 3.040 sales)

Launched in December 2017, the Lynk & Co 01 inaugurated Geely’s new semi-premium brand that has its sights on the European and US markets. A true exploit, the 01 has kept seeing its wholesales climb up to this day with a new volume record every month. This is a really great sign that retail demand has not slowed. It is now time for Lynk & Co to expand its lineup with this 02, which I had the chance to test drive as part of the Beijing Auto Show last April, before launching the 03 sedan later this year. The 02 is shorter in height and length than the 01, giving its a sporty crossover look. The mechanics are Volvo – the XC40 specifically – making it one of the best Chinese models I ever drove. So far so good. At 122.800 to 192.800 yuan (US$18.000-28.250 or 15.400-24.200€), the 02 is priced at a premium vs. mass Chinese SUVs with similar dimensions, logical in order to establish the Lynk & Co brand as aspirational, but remains very affordable when compared to foreign competitors such as the Mazda CX-4 (140.800-215.800) or Nissan Qashqai (139.800-189.800).

Lynk & Co 02 interior. Picture

Lynk & Co’s archenemy among the Chinese is the equivalent venture at Great Wall Motors, WEY, and the 02 comes full frontal with the WEY VV5 (150.000-163.000). There’s great news right from the start for Lynk & Co: with over 3.000 wholesales for its first month, the 02 starts with a bang and already outsells the WEY VV7 (3.032) while coming very close to the WEY VV5 (3.508). To a lesser extent, it also competes with larger Chinese SUV blockbusters such as the Haval H6 (103.000-146.800) and Geely’s very own Boyue (98.800-159.800) whose volumes will remain inaccessible to the 02. The Director of Lynk & Co’s Zhangjiakou factory which produces the 02, Xiangbei Tong, told me in April that the production target for the 02 in 2018 is 82.000 units. That’s ambitious, and we place the bar for success at 6.500 monthly sales.

Bar for success: 6.500 monthly units

2. Toyota IZOA (#165 – 2.538 sales)
7. Toyota C-HR (#381 – 151 sales)

Finally! Almost two years after hitting dealerships in Europe, North America and most Western markets, the Toyota C-HR has landed in China. Last February we took the C-HR on a 5.000 km trip to the Australian Outback and were very impressed. It is now time for Chinese customers to discover Toyota’s daringly designed blockbuster, and it does look like this vehicle was designed with China in mind in the first place, so fitting it is to the current SUV trends. Until a couple of months ago that is, and Toyota might very well find they have waited way too long to launch the C-HR in China as the SUV bubble is now suddenly and spectacularly bursting. As it is the case with the Corolla and Yaris already, Toyota has launched two twin versions of the C-HR, one for each joint-venture. GAC-Toyota keeps the original name while FAW-Toyota re-baptises it IZOA.

Toyota IZOA interior. Picture

I estimate Tyota has missed out on 130.000 to 160.000 sales of C-HR in China by not having launched it at the same time as other markets two years ago. An illustration of Toyota’s tardiness is the stupendous success of direct competitors by Honda, the Vezel and XR-V twins (the same way the C-HR and IZOA are split between two joint-ventures) which have racked up over one million sales in China alone since their simultaneous introduction in late 2014! That’s how much Toyota misjudged its crossover priorities for China. The IZOA is priced from 149.800 to 175.800 yuan (US$21.950-25.750 or 18.800-22.100€) and the C-HR from 144.800 to 179.800 yuan (US$21.200-26.350 or 18.200-22.600€), aimed at the Honda XR-V (127.800-162.800) and Vezel (128.800-189.800) as well as the Nissan Qashqai (139.800-189.800) and Hyundai ENCINO (129.900-155.900). Toyota should not be shy in predicting sales for this blockbuster couple, however they might be hampered by the sudden falling out of Chinese customers with crossovers.

Bar for success: 10.000 monthly units each

3. SWM G01 (#170 – 2.400 sales)

The SWM brand was launched in China in September 2016. Originally an Italian motorcycle brand, it was bought in 2014 by a joint-venture between Brilliance Auto and Xinyuan Holding (aka Shineray). Its initials stand for Sironi Vergani-Vimercate Milano but Chinese management canned that to replace it with Start Win More. SWM plays its Italian “heritage” to death with, for example, a Beijing Auto Show stand recreating an Italian caffe complete with a multitude of Italian flags. In a little less than two years, SWM has managed to sell over 110.000 units, a solid score that however remains far below the 300.000 units of annual capacity sported by its Chongqing factory. Worse, the brand is down a damning 36% so far in 2018. Some fresh metal was therefore badly needed… In comes the frustratingly-named G01 (why not X4, X5 or X6 to fit with the rest of the lineup?), priced from 79.900 to 152.000 yuan (US$11.700-22.250 or 10.000-19.100€) and sliding in between the X3 (59.900-82.900) and X7 (85.900-113.900).

SWM G01 interior. Picture

Local outlet pits the G01 against SUV blockbusters such as the Haval H6 (103.000-146.800) and Geely Boyue (98.800-159.800) but this seems a tad overrated: SWM models mainly find their clientele in less developed areas where buyers aren’t too worried about brand image but can still be tricked into purchasing an Italian-looking Chinese brand – the same way Borgward is playing the German card and MG the English one. In terms of targets, a worrying trend has seen previous SWM nameplates reach their highest volumes at the very start of their career: the X7 launched in September 2016, peaked at 7.168 sales in December 2016 (a very satisfying result in itself) but its first 5 months in market ended up being its 5 best months ever, while the X3 launched in July 2017 and peaked at 2.429 as early as for its 2nd month of sales in August, with its first 2 months remaining its best 2 ever. Therefore the fact that the G01 has instantly become SWM’s best-seller straight from its launch month shouldn’t come as a surprise but isn’t an indication of the model’s future success.

Bar for success: 5.000 monthly units

4. Kia Stonic (#271 – 864 sales)

Another worldwide crossover that has taken way too much time to reach Chinese shores, the Kia Stonic was originally going to be called KX1 to fit in with the rest of the brand’s Chinese lineup, but it looks like the Dongfeng-Yueda-Kia joint-venture that produces it has decided otherwise at the last minute. A competitor of the Honda HR-V, Toyota C-HR and Hyundai Kona elsewhere, the Stonic stuns with its Chinese tariff: from a tiny 69.800 to 79.800 yuan – that’s US$10.200-11.700 or 8.800-10.000€! In effect half the price of its twin the Hyundai ENCINO (the name of the Kona in China) itself available from 129.900 to 155.900 yuan… A rather troubling situation and a questionable marketing decision from the Korean sister brands, perhaps triggered by the absolute lack of success of the ENCINO so far (only 5.199 wholesales in 4 months).

Kia Stonic interior. Picture

What it means is that the Stonic competes not with Western models but with a range of Chinese crossovers such as the Baojun 510 (54.800-76.800), Changan CS35 (68.900-92.900) and MG ZS (73.800-115.800), a dangerous trajectory for the Korean brand that will forever struggle to meet the cost-cutting standards most Chinese carmakers are capable of at home. Moreover, the Stonic also competes full-frontal internally with the similarly-sized KX Cross, a crossover-looking variant of the Kia Rio, priced from 74.900 to 90.900 yuan. It might sell high volumes but definitely won’t be profitable for Kia… A strange equation from the Korean carmaker.

Bar for success: 6.000 monthly units

5. Lifan 650EV (#314 – 414 sales)

That Lifan is struggling in 2018 is not new news, but the freefall is accelerating with wholesales down a ghastly 71% in July vs. -29% so far this year. The low-cost Chinese carmaker had placed almost all its eggs in the same SUV basket and now that even this segment is struggling, there aren’t many ways to grow. Except perhaps EVs, hence the launch of this 650EV variant this month, priced from 168.900 to 175.800 yuan before government subsidies (US$24.750-25.800 or 21.200-22.100€) that will struggle to find its public.

Lifan 650EV interior. Picture

Bar for success: 1.500 monthly units

6. Chery Ruitesi Q2 (#329 – 366 sales)

Not much information is trickling in about this new EV, in essence an electric version of the previous generation Chery QQ launched by Chery itself through a new sub-brand with its own logo, therefore eyeing a status upgrade as a full-blown brand in case of success. The micro EV market is way too crowded already to allow this very bland Q2 to flourish in my opinion.

Bar for success: 1.000 monthly units

Previous month: China June 2018: Focus on the All-new models

One year ago: China July 2017: Focus on the All-new models

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