Live Issue... Mainland car makers search for brand strategy

One outcome of the financial crisis is that China, due to calamitous declines in the US, Europe and Japan, has suddenly become the world’s largest car market. There have been plenty of stories about Western car companies boosting their presence in the mainland. And as competition in China grows, local companies are having to raise their game in terms of branding.

Last year, the market share of passenger cars made by domestic companies (excluding joint ventures) fell, dipping below 30 per cent of the 5.7 million units sold. In fact, only two domestic brands, fourth-ranked Chery and tenth-ranked Geely, were listed among the top 10, according to Automotive Resources Asia and JD Power & Associates.

According to Ben Cavendar, senior analyst, China Market Research (CMR) Group, these brands are purely about value. “If someone purchases a Chery, it is because they need transportation and that is what they can afford,” he says. “There is still a consumer perception that foreign brands are safer and have better technology. A foreign brand offers a level of prestige, even if it is a basic Ford.”

Chery and Geely benefit from being priced near the bottom of their segments (minis and subcompacts, respectively). These sectors have expanded due to tax cuts as part of a stimulus package. Neither company is much more than a decade old. They are the vanguard of China’s ‘second wave’ of car makers, but their relative youth brings plenty of negatives. The common perception is that second wave car makers are lacking in technological knowhow.

Klaus Paur, regional director automotive North Asia at TNS China, confirms that branding is the second wave’s “biggest deficit”. “It won’t happen overnight,” he says. “Chinese brand cars are very much challenged and seen as lower than Western brands. Chinese know the Western brands have been around for 100 years. Not just the car, but the brand too, and that is a real differentiator.”

Several Chinese joint venture manufacturers have chosen to ‘leapfrog’ brand development by purchasing Western brands outright. In 2005, Nanjing Auto Corp. purchased the MG brand and British production facilities of MG Rover Group, and has since built a MG factory in Nanjing. Rival Shanghai Automotive Industry Corp (SAIC) bought rights to the Rover 25 and 75, and relaunched the latter as Roewe 750. Chery and Geely are experimenting with a multi-brand strategies. Chery now has several other marques: Rely for SUVs, Riich for business SUVs and Karry for commercial vehicles. Chery has 32 models, and Geely has 22 under sub-brands Geely, Emgrand, Gleagle and Shanghai Englon.

All were on display at the recent Shanghai Auto 2009, but one in particular earned more criticism than praise - the Geely GE, which looks remarkably similar to a Rolls Royce Phantom. “Look at Geely,” says Shaun Rein, MD of CMR. “It has come out with a car that looks like a Rolls Royce. It is spending too much engineering resources on producing a US$100,000 car. No one is going to buy that.”

Rein argues that it “doesn’t make sense” to offer cars in multiple price and luxury ranges because it only confuses consumers and “dilutes the brand.” If a company offers a $10,000 car and a $100,000 car, potential buyers don’t know what they are getting for their money.

Paur argues that building a leading car brand out of the 100-plus vehicle makers in China “is of strategic importance to the Government, which wants at least one international player within a decade.”

There is still a long way to go to reach that goal.

Got a view?
Email [email protected]