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September 2, 2015

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Auto underdogs growl for bigger bite of industry

Being different is always a daring wild card to play in the auto industry.

Two underdogs in the Chinese market are banking on success as iconoclasts.

Here’s how they see it.

Qoros, in a loud “declaration of independence” earlier this month, boasted of its pride as a Chinese-originated car brand and a market trailblazer.

“By daring to be different, we will overcome our challenges,” Phil Murtaugh, CEO of Qoros, told media, dealers and fans during the brand’s open day last week. “We are very young and very small, but from day one, we have been the Chinese brand with the spirit of independence.”

The boldness was a break from the past, when Qoros was coy about its entry in the market. The car is “made in China” but designed by a European-led team and run by a joint venture between Chinese domestic carmaker Chery and Israel Corp.

Qoros once tried to gloss over those facts, hoping to shed any image of “China cheap” and climb up the value ladder.

At this stage, the car seems to be wedged in an awkward middle ground. It’s priced higher than most domestic auto brands, and, at the same time, it lacks the established name familiarity of foreign brands in its price category.

Sales have been on the dreary side. The three Qoros models sold only about 7,000 units in the first seven months of this year, making a bit of a mockery of its motto: “our product speaks for itself.”

After keeping its head in the clouds for two years since its first product release, the company has finally decided to take a more down-to-earth approach in marketing. It has joined the current round of industry-wide discounts amid a downturn in overall vehicle sales.

With the rollout of new base models for its sedan and hatchback, Qoros has dropped its entry-level prices into the range of 100,000 yuan (US$16,129) to 110,000 yuan, a highly competitive spectrum where it was previously absent. That’s a psychologically important benchmark realm for car consumers considering the purchase of domestic car brands.

Putting pride aside, Qoros has started to quote the names of its international suppliers to raise the image of its vehicles. That’s long been a ploy of domestic brands seeking to bolster their profile.

From day one, Qoros has been dogged by the fundamental question: Why does the world need another auto brand making traditional internal combustion engine cars?

The company is still holding onto its vision of creating a niche market for its products, based on quality and original design. Its pursuit of advanced engineering techniques does outpace its domestic competitors.

Maybe it’s better late than never to accept the real world of making and selling cars in China and accept its due place in the market.

By lowering its market positioning a bit, the company has a better chance of boosting sales volumes.

And by admitting its present status, it can draw on public admiration for the determined underdog.

“Independence does not mean rebellion or individualism, it means independent thinking, an impetus to express and cling to it,” said Sun Xiaodong, marketing and sales head of Qoros.

The spirit of independence doesn’t have to create a misfit.

If Qoros can’t connect with the passionate pride of automotive fans who prize independent thinking, it can always fall back on national patriotism as a selling point.

The Tesla story

With the launch of its own new showroom in the bustling Xintiandi commercial complex in Shanghai earlier this month, US electric car manufacturer Tesla has again drawn attention to the single-mindedness of its operation.

The showroom rests on the direct sales strategy that Tesla believes will keep it in close touch with consumers. The company has eschewed the traditional franchise method of marketing and to date has revealed no marketing budget.

The opening of self-run showrooms in high-traffic downturn areas is the focus of Tesla’s plans in the second half of this year.

The company is embarking on a new journey in China, insisted Robin Ren, vice president of Tesla, Asia Pacific.

It is about enhancing consumer exposure as the company gears up to pursue volume sales in China ahead of the release of its new model X SUV later this year and possible local production in three years.

Current sales performance hardly justifies an economy of scale for manufacturing. In the first half of this year, Tesla sold 2,147 units in China, accounting for 10 percent of its global sales.

On the other hand, volume is by nature a challenge for Tesla to keep making cars its own way.

The industry practice is to churn out cars marked by a model year and not change car design for at least one year, except for recalls. But Tesla follows a pattern more akin to consumer electronics. It constantly changes with the times through upgrades to both hardware and software.

“New auto parts arrive at our factories every week, and we make changes all the time,” said Ren.

This quick-to-adjust gene is deeply embedded in Tesla’s origins as a Silicon Valley Internet start-up and also in its minority brand status. Budget consciousness rises along with production scale. Tesla has yet to turn profits, and that’s the dilemma. Tesla’s manufacturing philosophy is that what’s on offer should be the latest, explained Ren.

Some upgrades can be achieved through activating dormant modules embedded in the car, while others are available only to new buyers. It is a rather unconventional, if not unfair treatment that Tesla owners seem to accept without much of a grudge.

It was Tesla owners, and their personal stories with the brand, that took center stage at the launch ceremonies for the new showroom. “My friends thought I was out of my mind to buy a car like this — so different, with so many uncertainties over technologies and after-sales services,” goes one of the stories peddled at the event. “But I said, ‘Whatever! I am a fool.’”

It turns out that most of the aficionados are entrepreneurs, especially from the IT industry, who harbor crazy notions of innovation, who want to be the first to try new things and who want to be part of a bigger picture.

And, most importantly, Tesla buyers don’t mind a little splurge for fun. A car costs a cool 1 million yuan.

Such a carefree spirit has always been a luxury for a selected few. How to extend that sense of abandon to a larger audience is something Tesla needs to ponder when it considers the idea of rolling out a more affordable car.




 

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