Chinese cars set to consolidate their Saudi presence

CHINESE cars have not only been steadily increasing their presence in Saudi Arabia and elsewhere across the Middle East but have been making inroads for their luxury versions in recent years.

While the general perception is that the price factor weighs much in their favor compared to their counterparts from any other automobile manufacturing country in the world, inquiries suggest that those preferring cheaper cars have been snapping them up. Car buffs say the Chinese vehicles ought to be cheaper than what they are because of cheap labor. According to market leaders, Chinese cars are becoming more popular not only in the Middle East but also across North Africa. “The Chinese are also trying to conquer Europe, but they find the going difficult because they have to pass Europe’s strict crash test regulations,” Sulaiman Altwaijri said on behalf of one such dealer in Jeddah.

China, which became a net exporter of vehicles for the first time in 2005, has since become a significant supplier of low-cost vehicles, with the Middle East and North Africa (MENA) region a key growth market for Chinese car makes. With Chinese car exports expected to surpass one million units by 2011, Chinese brands could become commonplace on the region’s roads sooner than expected. Currently, Chinese brands have only a limited exposure to the MENA market, but this is all set to change as carmakers set up distribution and production partnerships with local firms.

Despite the growing strength of the premium vehicle segment in MENA, small, lower-cost Chinese branded cars are proving popular. This has led manufacturers such as Chery to focus on the region for expansion. Across the GCC, Saudi Arabia has great potential for low-cost new cars, which could enable Chinese carmakers to gain a foothold in the Middle East. Four new Chery models — Chery A5, Chery Eastar, Chery V5 and the SUV Chery Tiggo — have been launched in the hotly contested SUV segment. These models will still be cheaper than the more established brands of BMW and Mercedes. In Saudi Arabia, Tata has found a market where it can offer its vehicles at a much lower price due to lower taxation than in India where it is based.

Chinese carmakers are also seeking to strengthen their base across the lucrative and booming luxury car market in the Gulf.

Hazar Motors Trading Company Saudi Arabia is one of several companies within the Hazar Group of companies that is dealing in Chinese vehicles. Hazar Motors was founded in 1993 to work in the automotive business, as one of the leading business groups in Saudi Arabia working in cooperation with Chinese vehicle manufacturers. Hazar Motors represents different automotive companies. Among them is JAC Light Trucks, which introduced its trucks in Saudi Arabia way back in 1997. It is one of the best Chinese light trucks suitable for commercial, agricultural and industrial use, according to a spokesman for the group. It has a distinct advantage over its Japanese and Korean counterparts in terms of price, and “even durability and availability of parts,” he added. Yangzi Pickup is another Chinese automobile giant that introduced its pickups in Saudi Arabia in 2000. It offers three types of Chinese vehicles. It is a double cabin pickup of Chinese make and built of Japanese technology. The pickup is built to work with high performance despite the Kingdom’s harsh climate. Based on a vision of customer value and customer satisfaction, the group has an area for automobile business that offers good service maintenance for vehicle sales, spare parts, maintenance workshop services and trained technicians.

For years, consumers in the MENA region have become used to buying small and low-tech made-in-China commodities. But now, they are showing increasing interest in trying something bigger — China’s homegrown sedans. Within a short span of time, cars with Chinese brands are quickly leaving their own marks on streets in the MENA region, from Jordan to Egypt, which had been traditionally dominated by cars from Europe, Japan and South Korea.

Like many other made-in-China goods, Chinese brand cars have a formidable edge over their competitors, which are priced low but boast high quality, said Mohamed Sulaiman, a member of the Jeddah Chamber of Commerce and Industry who bought a Chery sedan. “I chose the car because of its competitive price, soft installment payment and fuel economy.” In fact, Chery Automobile Co. Ltd., one of the biggest homegrown carmakers in China, began to sell its cars only a few years ago. Its sales volume is steadily increasing now. When the car was introduced, the local dealers found it difficult to convince consumers to buy it.

“But now, this and other Chinese cars are growing stronger and more competitive. People are willing to purchase these cars for their quality and prices,” one of them said, adding that these cars give consumers freedom of movement and choice in addition to specifications, which meet demands of low-income brackets. “We are optimistic that our sales figures will be more impressive in the years to come.”

Chery sales are also rising in Egypt where it has already set up its own factory, with an annual production capacity of 25,000 units, which can be expanded depending on demand. As the most populous country in the MENA region, Egypt has great potential in the sector of car consumption. The location of the factory in Egypt is considered strategic, as it links the Middle East to Africa. Besides Egypt and Jordan, Chery had also exported cars to Syria and it is expected to set up an assembly line in Iran.

For markets in the Maghreb states, namely Mauritania, Morocco, Algeria, Tunisia and Libya, about 3,048 Chinese-made cars were imported during the first half of 2007, three times more than that of the same period last year, according to statistics posted on the website of China’s Commerce Ministry.

Since November 2009, China remains the largest auto market in the world. Its automobile industry has been in rapid development and expansion since the early 1990s. In 2009, China produced 13.79 million units of automobile, of which eight million units were passenger cars (sedans, sport utility vehicles-SUV, multipurpose vehicles-MPV and crossovers), and 3.41 million units were commercial vehicles (buses, trucks and tractors). Of the automobiles produced, 44.3 percent are local brands (BYD, Lifan, Chang’an-Chana, Geely, Chery, Hafei, Jianghuai-JAC, Great Wall, Roewe, Martin Motors, etc.), the rest being produced by joint ventures with foreign carmakers such as Volkswagen, General Motors, Hyundai, Nissan, Honda, Toyota, etc. Most of the cars manufactured in China are sold within China, with only 369,600 cars exported in 2009.

China’s annual automobile production capacity first exceeded one million in 1992. By 2000, it was producing over two million vehicles. After China’s entry into the World Trade Organization in 2001, the development of the automobile market further accelerated. Between 2002 and 2007, China’s national automobile market grew by an average 21 percent, or one million vehicles year-on-year. In 2006, China’s vehicle production capacity successively exceeded six million, then seven million, and in 2007 the figure exceeded over eight million automobiles. In 2009, some 13.759 million motor vehicles were manufactured in China, surpassing Japan as the largest automobile maker in the world.

The number of registered cars, buses, vans, and trucks on the road in China reached 62 million in 2009, and is expected to exceed 200 million by 2020, according to the China Association of Automobile Manufacturers. The consultancy McKinsey & Company estimates that China’s car market will grow many folds by 2030.