The Chinese auto market may be booming, but it looks as though drastic changes are on the way. Just as U.S. car buyers are shifting from large, inefficient vehicles to smaller fuel-efficient models in the face of rising energy costs, Chinese car buyers are starting to make similar changes.
Most of the success by the world’s automakers in the Chinese market has been in the mid to premium vehicle segments — vehicles that retail from $20,000 and up. Chinese consumers grew found of these types of vehicles because they were seen as status symbols and automakers were happy to supply such vehicles because they promised the largest profit margins. But as fuel prices continue to rise and a new class of drivers emerge, Chinese buyers are looking for smaller, less expensive and more fuel efficient vehicles. The push toward more efficient cars would also help China with its growing pollution problems.
In order to meet this new demand, several automakers are planning to bring some of their fuel-efficients to China or already have all-new models under development for the Chinese market. Toyota will show its Yaris sub-compact at the Beijing Motor Show this week — which will hit the Chinese market this fall — and General Motors is strongly considering a new China-spec car that would retail for about $4,000.
“Most of the growth (in China) will occur in the mini to lower-medium segment,” Nick Reilly, General Motors’ group vice president and head of its Asia Pacific operations, told Automotive News. Despite aiming for a lower segment, Reilly says that GM is not planning to produce a direct rival for Tata’s $2,500 Nano microcar.
GM is currently developing its Beat city car for sale in China, but it is believed that the Beat will retail for more than $4,000.
But just as foreign automakers are just now trying to break into the small car segment, Chinese automakers are trying to break into the premium segment. According to J.D. Powers, China’s top three automakers with no foreign affiliation (Chery, Geely and Great Wall) only account for 28 percent of the market — a statistic largely due to the fact that these automakers don’t offer vehicles in the $20,000 and up segments. The premium vehicle segment makes up about 33 percent of the total market in China.
Wang Fengying, an executive at Great Wall, admits that Chinese cars have a lot of ground to make up if they ever want to compete with the likes of Mercedes and BMW . Fengying cites poor quality and derivative styling as the biggest hurdles.
“These are the biggest challenges facing us now,” she said. “Many Chinese car makers, especially those with their own brands, are determined to go international. The coming years will be crucial for our growth and expansion.”
