Global brands poised to grab a bigger share of China's hot crossover market
Demand for crossovers in China remains robust despite the overall market's slowdown.
Chinese automakers have outsold their global rivals in the crossover segment but the foreigners are about to turn the tables.
With their well-respected brands and cutting-edge technology, foreign automakers are better positioned to exploit the sizzling demand for crossovers.
Chinese brands still sell far more crossovers than their foreign rivals. In the first two months, they delivered 763,000 crossovers and SUVs, while global automakers sold 507,800.
But the majority of Chinese-brand crossovers are compacts and subcompacts priced from 60,000 yuan to 100,000 yuan ($9,200 to $15,400).
It's hard for domestic automakers to reap much profit from smaller vehicles.
Great Wall Motor Co., China's largest maker of crossovers and SUVs, has tried to move upscale. In the past two years, it launched two SUVs, the Haval H8 and H9, each with a starting price of 200,000 yuan.
But due to low brand recognition, monthly sales of the two models have remained fewer than 1,500 vehicles apiece.
With competition heating up, Great Wall cut prices twice in 2015 to protect its market share. But the discounts hurt company profits. While sales revenue rose 21 percent last year, Great Wall's net profit edged up only 0.2 percent.
Great Wall was an early player in the crossover market, but foreign rivals began stepping up the pace of product launches in 2014.
In the past two years, General Motors introduced four new crossovers under the Buick, Chevrolet and Baojun marques. Crossovers and SUVs constituted 13 percent of GM's China sales last year, up from 5.6 percent in in 2014.
And crossover sales continue to surge. In February, GM's deliveries of crossovers and SUVs soared 115 percent from a year earlier.
Other global brands such as Ford, Honda and Mazda also enjoyed fast-growing sales after they introduced new models.
Foreign crossovers typically are priced from 950,000 yuan to 200,000 yuan. That ensures their profit margins are significantly higher than crossovers marketed under Chinese brands.
To tap into Chinese car shoppers' insatiable appetite for crossovers, global players will continue to launch new products at a fast pace.
Last week, GM announced that it will introduce more than 60 new and improved models over the next five years. Forty percent of those will be crossovers, SUVs and multipurpose vehicles.
This year, VW also disclosed a plan to introduce at least 10 crossovers and SUVs in the same period.
Mazda will introduce the CX-4 compact crossover at the Beijing auto show, which begins on April 24. Initially, the model will be produced and sold only in China.
One can rest assured that other foreign brands will also showcase new crossovers in Beijing. As foreign brands expand their model lineups, expect a pitched battle for market share.
With their well-respected brands and cutting-edge technology, foreign automakers are better positioned to exploit the sizzling demand for crossovers.
Chinese brands still sell far more crossovers than their foreign rivals. In the first two months, they delivered 763,000 crossovers and SUVs, while global automakers sold 507,800.
But the majority of Chinese-brand crossovers are compacts and subcompacts priced from 60,000 yuan to 100,000 yuan ($9,200 to $15,400).
It's hard for domestic automakers to reap much profit from smaller vehicles.
Great Wall Motor Co., China's largest maker of crossovers and SUVs, has tried to move upscale. In the past two years, it launched two SUVs, the Haval H8 and H9, each with a starting price of 200,000 yuan.
But due to low brand recognition, monthly sales of the two models have remained fewer than 1,500 vehicles apiece.
With competition heating up, Great Wall cut prices twice in 2015 to protect its market share. But the discounts hurt company profits. While sales revenue rose 21 percent last year, Great Wall's net profit edged up only 0.2 percent.
Great Wall was an early player in the crossover market, but foreign rivals began stepping up the pace of product launches in 2014.
In the past two years, General Motors introduced four new crossovers under the Buick, Chevrolet and Baojun marques. Crossovers and SUVs constituted 13 percent of GM's China sales last year, up from 5.6 percent in in 2014.
And crossover sales continue to surge. In February, GM's deliveries of crossovers and SUVs soared 115 percent from a year earlier.
Other global brands such as Ford, Honda and Mazda also enjoyed fast-growing sales after they introduced new models.
Foreign crossovers typically are priced from 950,000 yuan to 200,000 yuan. That ensures their profit margins are significantly higher than crossovers marketed under Chinese brands.
To tap into Chinese car shoppers' insatiable appetite for crossovers, global players will continue to launch new products at a fast pace.
Last week, GM announced that it will introduce more than 60 new and improved models over the next five years. Forty percent of those will be crossovers, SUVs and multipurpose vehicles.
This year, VW also disclosed a plan to introduce at least 10 crossovers and SUVs in the same period.
Mazda will introduce the CX-4 compact crossover at the Beijing auto show, which begins on April 24. Initially, the model will be produced and sold only in China.
One can rest assured that other foreign brands will also showcase new crossovers in Beijing. As foreign brands expand their model lineups, expect a pitched battle for market share.
