Are China’s cars finally going to make inroads in Western markets?
BEIJING: After a decade of development, often through buying or benchmarking foreign technology and know-how, Chinese automakers are looking with greater ambition at selling their cars in major Western markets.
Improvements in car design, technology and marketing at firms including Geely, GAC Motor and Great Wall Motor have brought them a bigger share in their home market, the world’s largest, and give them a better chance of survival in competitive markets in Europe and the US.
Once distant dreams of staking a claim in Western strongholds may now be edging nearer.
“We have in the Western world an outrageous arrogance. We think we’re ahead. It’s going to change,” says Alain Visser, senior vice president of Lynk & Co, a new brand set up by Geely.
“China is passing you at a speed that in our arrogance we don’t even see,” Visser told Reuters earlier this month.
Hangzhou-based Geely, which owns Volvo Cars and Lotus and makes London black cabs, has its sights set on selling cars in Europe in 2019 and the US a year later.
The Lynk & Co brand, set up in Sweden with Volvo, will spearhead its attack.
Geely plans only to sell ‘green’ cars – conventional hybrid, plugin hybrid and all- electric models – in those markets, and would primarily sell through directlyowned stores and online rather than through traditional dealer franchises.
It could also offer cars for rent via a subscription model similar to Netflix and Spotify.
GAC Motor, whose parent Guangzhou Automobile Group partners Honda Motor, Toyota Motor and Fiat Chrysler in China, may beat Geely to the US market, eyeing entry by end-2019.
But unlike Lynk & Co, GAC is more likely to sell through a traditional distribution network of franchised retail stores there.
It’s taken Chinese automakers years to get this far, and, to be sure, there will be significant road bumps.
“A key obstacle in markets like the United States is a consumer bias against Chinese-made goods,” said Jeff Cai, a Beijing-based senior director at JD Power & Associates.
“Our research found most US consumers think China is a thirdworld country that builds lowquality products.”
There’s also the thorny issue of China’s trade surplus with the United States - an imbalance high on US President Donald Trump’s radar.
Cars shipped in from China would likely increase that surplus. Geely’s Lynk & Co aims to open its own flagship store in Berlin in the second half of 2019, and a similar outlet in San Francisco in 2020.
In some US states, which don’t allow direct selling, Lynk & Co plans a subscription-based sales model, renting cars to consumers on contracts as short as a month.
Those deals will include insurance, warranty and other benefits.
Visser says Lynk wants to test this unconventional retail model because it reckons around a quarter of revenue is lost through the traditional distribution business in dealer margins and discounting.
He expects to recoup more than half those ‘losses’ by selling direct. — Reuters