China’s SUV love affair boosts sales
Print Edition
CHINA’S love affair with SUVs is helping to cushion the blow of an unexpectedly painful slump in the rest of its crowded auto market.
Sales of SUVs, seen as the safest option on China’s rough, chaotic roads, soared 52 percent last year. That helped the overall market grow 7.3 percent — a sliver of its 45 percent peak in 2009 — even though car and minivan sales fell.
“Ten years ago, no one wanted an SUV because it was considered to be a bulky truck for peasants,” said Michael Dunne, a consultant on Chinese auto market strategy. “Now the cool factor has kicked in and SUVs are super-hot in the China market.”
Scrambling for a piece of that action, automakers from General Motors and Volkswagen to local players Great Wall and BYD are making SUVs the star of next week’s Beijing auto show, the biggest of the year in the world’s biggest auto market.
The show “will highlight the growing tension between international and local brands as they fight to outshine each other with new products,” said Namrita Chow of IHS Automotive in a report.
Overall sales growth is likely to fall further this year to 6 percent after economic growth fell last year to a 25-year low, though total volume might reach 25 million vehicles, Chow said.
Stocking warning
An industry group for Chinese auto dealers has warned against stocking up on inventory that might not sell. A few years ago customers waited months for delivery of popular models.
The speed of the decline surprised US, European and Asian automakers that are counting on China to drive revenue growth. They have poured billions of dollars into new factories and models designed for Chinese tastes.
“Nobody foresaw how quickly demand would slow,” said Dunne. “Prices will fall. Profitability will suffer.”
The SUV boom has helped to rescue Chinese automakers that had lost market share to bigger, richer foreign brands.
Total profit for Chinese brands fell last year despite 10 percent sales growth, said Robin Zhu of Bernstein Research. Zhu said that squeeze will worsen as more SUVs flood the market.
Chinese brands account for 65 percent of SUVs sold, dominating the market’s lowest tiers, where profits are slim.
Most Chinese automakers have left behind the days of quirky and bargain-priced but poor-quality vehicles. They have invested heavily in technology and brought in Western designers to create sleek models that could be mistaken for Japanese or Korean brands.
“The foreign carmakers are going to face more challenges,” said analyst John Zeng of LMC Automotive. “The quality and competitiveness of local carmakers are getting stronger and stronger.”
This month, BYD Auto unveiled the Yuan compact SUV, starting at 59,000 yuan (US$9,110) for the gasoline version and 209,900 yuan for a gas-electric hybrid. Also ahead of the Beijing show, Geely debuted the Boyue SUV, starting at 98,800 yuan.
At the show, automakers plan an avalanche of new SUVs ranging from 45,000 yuan compacts to luxurious land yachts with heated seats and video players.
The original off-road brand, Fiat Chrysler Automobiles’ Jeep, is due to debut its China-manufactured Renegade. Honda Motor Co plans to unveil two SUVs designed for China.
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