Recent Interest By Chinese Automakers In Established Brands Like Volvo, Saab Show Their Global Ambitions; But Will Western Consumers Choose To “Drive Chinese”?
With well-known auto brands like Sweden’s Volvo and Saab up for sale, Chinese brands Geely, Beijing Automotive and FAW – relative unknowns in the global car market — have been in the news as possible suitors. It is no secret that Chinese automakers have their sights set on the export market, and want to see their vehicles gain popularity on lucrative markets like North America. Here, though, is the largest opportunity as well as the most significant challenge faced by Chinese car brands, a bit of a catch-22: while China is the world’s largest auto market — owing, naturally, to its vast population — Chinese car companies need to develop their luxury fleets and export more in order to turn a substantial profit, but for higher-priced vehicles, Chinese consumers virtually always choose foreign-made automobiles, and Chinese brands are almost completely unknown by luxury car buyers abroad.
At the same time, Chinese carmakers must come up against biases about the perceived quality of their products — fostered, perhaps in a large proportion, by the fact that Chinese brands have absolutely no brand equity abroad, since:
1.) most of these companies are only a few years old, and
2.) reports about Chinese-made vehicles tend to be on the sensationalist side and focus on a quality gap or on perceived “counterfeiting” of car models. While many of the problems faced by Chinese carmakers abroad boil down to sloppy or simply “bad” PR, it is, in some ways, understandable that non-Chinese car buyers know little about Chinese car companies — because many Chinese car buyers don’t know much about them either. Quite simply, they need to work harder to differentiate themselves, pin down strong brand messaging, and really push hard to ensure they conform to all safety and emissions standards — or exceed them.
Much like the difficulties faced in previous decades by Japanese and Korean automakers — who faced strong foreign resistance and bias towards their brands from the 1970s-1990s, Chinese automakers have to understand their target consumers and take a more long-term strategy that gives these consumers time to get comfortable with the idea of driving a Chinese car. This may come organically, as in the case of Hyundai and Kia in America, which have only recently gained a measurable amount of popularity, or can come as a result of some sort of exogenous shift — as was the case with Japanese cars, which gained massive popularity amid the oil crisis of the 1970s, when fuel efficiency became more desirable than styling.
Climate change and the “green” movement may be a possible pathway for more rapid acceptance of Chinese car companies in markets like North America. Highly-publicized moves like Warren Buffett’s $230 million investment in Shenzhen-based BYD — which sees America as the target for its electric and hybrid vehicles — have given a handful of Chinese car companies some measure of legitimacy. Perhaps the electric- and hybrid market may be the pathway into America for Chinese car companies, but of course this will by no means be an easy route. Japan’s hybrid supremacy in the US market will be difficult to supplant, and Chinese automakers like Geely want to be accepted as “luxury” brands rather than inexpensive “Japan-lite” brands, so simply bursting into America and promoting based on low price alone won’t be enough.
As such, Chinese car companies are in a bit of a bind — the opportunity is there, they are well-capitalized, they’ve got the backing of foreign business leaders like Buffett, and they’re ambitious. The only problem? No one knows anything about their products, people are holding back on purchasing new cars, there is a trust issue to overcome among foreign consumers, and they must contend with monolithic and deeply-entrenched Asian brands from neighboring Japan and Korea, not to mention European luxury automakers. It will be interesting to see how China’s car companies ultimately navigate the road to successful exports, and whether other emerging auto-exporting countries like India (which actually exported more cars than China last year) provide the challenge as well as the impetus for Chinese automakers to intensify their efforts at cracking the world car market.