Leading Chinese automakers like Geely and Great Wall Motors have set their sights on the mid-range market, which used to be dominated by mainland joint ventures with international car brands.
China’s high-end car market is largely dominated by imported foreign cars. Domestic automakers control the low-end market while joint ventures between foreign and domestic players take the lion’s share of the mid-range market, meaning cars with a price tag of 200,000 to 300,000 yuan (US$30,300 to US$45,400).
Such a market structure has resulted from China’s auto policy. Chinese authorities have asked foreign carmakers to set up joint ventures with domestic players in a bid to bring their technology to the country. Mercedes-Benz, Honda, BMW, Toyota and Volkswagen have formed such joint ventures with Chinese partners.
Vehicles made by these joint ventures are typically considered to be of better quality than indigenous brands and the favorites of car owners when they want to upgrade from local brands.
But now domestic carmakers are actively seeking to win over these consumers with more upscale offerings.
Geely Auto Group recently rolled out the Lynk & Co. brand, while rival Great Wall Motors, China’s top seller of sport utility vehicles, launched a brand called Wey. Both brands have set a price tag of around 200,000 yuan for their units.
The Lynk & Co. 01 model shares most of its underlying technology with its Volvo cousins. The price tag goes from 160,000 to 220,000 yuan, more than 50 percent cheaper than a comparable Volvo car. Great Wall’s Wey units cost around 170,000 to 190,000 yuan per unit.
China has long realized that in order to sustain its economic growth, it can no longer rely on low-end, low-priced and low-value-added products. Geely and Great Wall’s bid to move upmarket is basically along that line of thinking.
The upgrade move will be a serious test for the two car companies’ quality control and brand building abilities. If they succeed, the chance for other industries to move up the ladder will look more promising and the odds for China to transform its economic structure and boost the income levels of its people will be enhanced.
This article appeared in the Hong Kong Economic Journal on Dec. 1
Translation by Julie Zhu
[Chinese version 中文版]
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