2011 is the year of the rabbit, but in actual fact it’s the year of the Treasured Horse, or the morning star, or the Everus. These strange sounding names are not the 12 animals of the Chinese star system, what they are in fact are the self-developed brands from GM, Nissan and Honda.
At the end of 2009 we saw a clash of worlds, the Chinese automakers could not draw large profits from small micro cars which were sold on wafer thin margins and discount prices, there was a race to the bottom from 2008 to the end of 2009 to see who could make the cheapest car. BYD came in with its super cheap BYD F0, Geely with its Panda, Chery with its Riich M1 and of course QQ series of car all of which start in the 20,000rmb range which is a mere 3,000USD and rising. Of course these models are sold to inflate sales figures for the parent company, BYD sells more than 10,000 F0’s per month, Chery has a similar figure for its QQ series, the only problem is that these cars don’t generate high revenue but they do keep factories busy. The majority of home grown brands, again using BYD, Chery and Geely decided the only way to go forth was to up their branding and make higher priced cars that were capable of taking on the joint venture brands in the 80,000rmb to 120,000rmb range.
If several years ago you mentioned the name Geely to any soon to be car owner, they would have laughed in your face. Mention Geely in 2011 and you will get a nod of admiration, Geely have embraced capitalism with a fervor and have moved a long way from being a small time motorbike maker, they now own Volvo and DSI Transmission. Geely created several sub brands in a bid to move away from the cheap and cheerful image that they have created with Geely, now they own Emgrand, Global Eagle and Englon – whilst these names do not make much sense in English, they have already developed a strong market for themselves in China, the Emgrand brand has developed very well since the launch of the EC7 and EC8 series of cars, ultimately the Geely name has been dumped and is now just the name of the holding group much in the same way the GM controls its brands, it’s obvious Geely is thinking big here. Regional rival in neighboring Anhui province did not want to be left behind in the multiple brand department and set up its own sub brands – Riich, Reely, and Karry, but instead of dumping the Chery brand they plan to continue using that as well, so four brands to Geely’s three. Riich will be Chery’s high end sedan range, Reely will take on MPV’s and SUV’s whilst Karry is a low cost no-nonsense light truck (and soon to be heavy truck) range. BYD decided that it would not split its brand down the middle but instead work on a different naming system, the F series was its first sedan range and also its first big hit, the G series came later as did the L series, in fact BYD is setting up four distribution networks within China which will target different buyers, after all there is no point in putting its high end sedan range in a rural or suburban area where cheaper cars are required for economic reasons. Other companies such as Brilliance managed to bridge the gap between cheap and expensive cars by first launching a high end sedan – the BS6, and then expanding out from expensive to cheap, making their cars viable to all. Brilliance’ own major stumbling block is a poor marketing campaign and a major loss of talent due to a highly political back stage. Great Wall are another company that manages to quickly gravitate to what consumers require, pre-2008 it was a major SUV maker, in 2008 with the onset of a poorer economy they moved onto small car manufacturing which really boosted their brand from that point onwards. For 2010 they have expanded their Hover series of SUV’s which started off as one popular SUV has sprouted 5 different variants of the same car but with a different grill.
On top of the self-developed brands you have the major state owned manufacturers – SAIC in the east, FAW in the north east, BAIC in the north, GAC in the South, Dongfeng in the central lands, and Chang’an in the West. These companies were set up as off shoots of arms companies in a Mao-era China who decided that as well as producing guns, these companies should also produce trucks, tanks and anything with wheels that could be used in the Cold War effort. After Deng Xiao Ping’s reign as premier, these state owned giants moved onto car production and quickly signed up foreign partners. SAIC got GM and VW, FAW got VW (and Audi by default) and Mazda, BAIC tempted Hyundai and Mercedes, GAC got the Japanese giants of Toyota and Honda and then Fiat but Chrysler is now coming along for the ride too, Dongfeng received the lion’s share of Peugeot, Honda, Citroen, and Nissan whilst Chang’an mopped up the rest with Ford, Volvo and now also PSA too.
As well as their joint ventures with foreign partners, these state owned automotive giants have their own sub brands, FAW pushed out Hong Qi (Red Flag) in the 60’s, SAIC gave birth to Roewe in 2006 after the 2005 takeover of the family heirlooms from the bankrupt MG-Rover. FAW also has the poorly named Besturn, Chang’an has its own brand which is aptly named Chang’an, Dongfeng has several sub brands – Dongfeng Liuzhou and Dongfeng, GAC has just produced the Trumpchi which whilst oddly named seems to be quite the bargain of a car.
Now these state owned giants are pushing out their own sub-brands with their joint venture partners, first came Bao Jun, then came Nissan’s Venucia (Qi Chen in Chinese, meaning morning star) appeared, now Honda threw its hat into the ring with the recently launched Everus brand (Li Nian in Chinese). The mantra from these brands is quite simple: Re-heat the left overs and reserve them to economy buyers. Bao Jun’s first car is based on a Korean designed Chevrolet Sail platform, Venucia’s first sedan is Tiida based with a new handsome looking skin, whilst Honda doesn’t seem to have put much effort into reskinning the ex-Honda City for the Everus market. The major aim of these vehicles and sub-brands is to further the use of old technology to rural and suburban car buyers – remember that China has a GDP per capita of just over $3700USD in 2009, so not everyone has the ability to buy the headline grabbing luxury models that are so often reported about, the real car market is at 50,000rmb ($7,800USD) or less in China and this is where the self-developed brands and the joint venture sub brands are going to have their biggest clash of all in 2011. The major plus point that joint venture sub brands will have is there slick marketing machine and the ability to put marketing tidbits such as ‘Chevrolet platform’ ‘Nissan engine’ ‘Honda Technology’ etc which will make them desirable to rural buyers who aspire to own a fully-fledged foreign brand in the future.
So now the question remains – how will these sub brands affect the Chinese market, and how will the government take to them? For several years the government has been pushing for consolidation of the automotive market, now these joint venture companies are pushing for yet more brands to add to China’s 90+ automotive brands, and these brands will be pushing into the self-developed automotive segment. The government is also pushing for a higher ratio of Chinese car brands on local roads, meaning more support for Chinese brands. VW are rumored to be readying their own brands for the Chinese market, Ford and Chang’an were talking up a similar storm a few months ago, how 2011 will play out is anyone’s guess at this stage, but it is not going to be pretty and will ultimately end with some strong government intervention that will not fall in the joint venture companies favor.
