Carmakers eye Chinese love for SUVs to fuel sales in slowdown
Print Edition
CHINA’S special fondness with sport-utility vehicles is helping to cushion the slump in the rest of its auto market, as foreign and domestic carmakers faced off at the Auto China 2016 show in Beijing.
Major automakers are set to launch nearly 40 models in this segment.
Carmakers from Germany’s Volkswagen AG to domestic companies such as Shanghai Automotive Industry Corp are coming up with strategies to sell more SUVs in the world’s largest auto market, as SUV sales soared 51.5 percent year on year in the first quarter of 2016, from a 6.8 percent overall growth in the same period, according to data from the China Association of Automobile Manufactures.
Jochem Heizmann, China chief of Volkswagen, said the company will invest 4 billion euros (US$4.5 billion) with its joint venture partners in China this year to expand its share of the SUV market.
“There is an SUV offensive on the way,” Heizmann said, adding that the company’s strategy is to sell a small version of the SUV in 2016, and plans to launch 10 locally made SUV models in the coming three to four years.
The SUV segment traditionally is not a specialty segment for German automakers as their home market tends to value wagons for the space and versatility promised by SUVs.
Though most of SUVs sold in China today are for city travel, their history is more about conquering off-road challengers. Jeep, a specialist SUV maker, tries to carve out a bigger market share with its Chinese-made compact SUV Renegade, which began pre-order at the auto show, which started yesterday, as the only SUV costing under 200,000 yuan (US$30,811).
While mass-market SUVs face stiff price competition, the premium SUV segment still seems to have much room to grow further as it boasts product differentiation, said Richard Shore, acting president of Jaguar Land Rover China. The company, whose sales grew 19 percent year on year in the first quarter, draws much of its momentum from Land Rover-branded SUVs. The cabriolet version of its Range Rover Evoque was introduced at the auto show as an extended choice of this popular SUV model known for its slant-back roof.
Meanwhile, the SUV’s reputation as a gas guzzler is now being redeemed by Tesla Model X, the first SUV from the US-based electric car pioneer that just made its China premiere. Its purely electric power train leads to a unique engineering layout that lowers the car’s center of gravity, and subsequently reduces the risks of toppling over by 50 percent compared with other SUVs.
However, the Model X has had its launch schedule postponed several times due to difficulties of mass-producing components. Its price starts from around 1 million yuan in China.
Domestic automakers, meanwhile, are working on futuristic technologies to be incorporated in SUVs including shared vehicles called by smartphone and Internet-linked onboard services. The new model Roewe RX5 showcased by SAIC yesterday is the first-of-its-kind mass-produced “Internet Car,” part of a 1 billion yuan project between Alibaba Group and SAIC, to attract young customers born in the last three decades. The car will go on sale in the second half of 2016.
Analysts from IHS Automotive estimate that the overall sales growth of the auto market is likely to fall further this year to 6 percent amid a slowing economy, though the total volume might reach 25 million vehicles.
“Annual SUV production in China will reach some 7.2 million units this year, with possible sales reaching 7.7 million, nearly 30.8 percent of the overall sales,” Narita Chow, an IHS analyst, wrote in a report.
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