Chevy Sways Car Buyers in China With Service, Marketing

SHANGHAI – General Motors Corp.’s Chevrolet brand is very much alive in China and growing fast, thanks not only to its model offerings but also to upscale dealerships that cater to fastidious Chinese car buyers.

The combined efforts seem to be working, as sales of Chevy-badged vehicles are up 43.5% year-to-date over 2005, and the forecast for 2006 exceeds 100,000 units, Steve Betz, Chevrolet brand director in China, says.

Chevrolet’s market share is up 1.4 points to 7.7%, Betz tells Ward’s. The brand also holds 6.7% of the intermediate segment, down 0.4 points from year-ago.

Chevrolet holds 6.7% of China’s overall passenger-car market, behind Toyota Motor Corp. (10.4%) and Ford Motor Co. (8.5%), Betz says, noting China is Chevrolet’s fourth-largest market.

Betz is highly optimistic the brand will continue its strong growth. Competition is heating up, he acknowledges, but so far Chevrolet has stayed on track with its plans and has not had to make competitive price adjustments.

“Everyone wants a piece of China, and now everyone is here,” Betz says. “In 2006, competing brands reduced prices three times across all product lines, with a cumulative price reduction ranging from 7%-12%.”

But Chevrolet has not adjusted pricing downward and sells strongly at a premium, he says.

Dealerships encourage customers to test-drive Chevy Lova.

Nevertheless, there is increasing pressure from local Chinese auto makers that do not have joint ventures with major global players. These companies now hold about 26% of the total car market and offer lower-priced vehicles, Betz says. Thus, Chevy is turning its attention to its dealerships.

Chevrolet’s sales network is growing robustly, with 152 dealers now located throughout the country, especially in the wealthy southeast region of Shanghai. This rapid expansion has been spectacular, Betz notes, given that the first Chevy dealership in China opened just two years ago.

“We are fortunate to leverage Buick’s established dealer network,” he says, noting a number of Chevrolet dealerships also carry Buick, Cadillac and Saab brands.

A case in point is the Yongu Group, a Shanghai region chain of 24 Chevy dealerships operated by entrepreneur Dean Zhang.

Director of Marketing Si Ping Pong says the dealerships have a combined annual turnover of 30,000 vehicles – mostly Chevrolets, but including Buick, Cadillac and Saab nameplates as well. The typical Yongu dealership, she says, has about 7,535 sq.-ft. (700 sq.-m) of showroom and 21,528 sq.-ft. (2,000 sq.-m) of service space.

To project the dramatic, bold image Chevrolet thinks will maximize customer appeal, the dealerships are built three stories high but encompass just two floors, allowing for majestic ceilings.

Betz says the buildings enhance the brand image with their “grandiose” scale.

Yongu pushes its dealerships hard not only to meet sales targets but also to train personnel in the culture of their customers and to deliver high-quality service with rapid backshop turnarounds.

In keeping with the upscale dealership theme, the backshops are designed as service showrooms where customers watch through a glass wall as technicians work on their cars.

Each waiting area is equipped with a bank of Internet computers, widescreen TVs, comfortable, upscale lounge chairs and couches. Refreshments are served.

Chinese customers are highly demanding, Betz says, expect instant turnaround and want to make sure their vehicle gets stellar service.

The average Chevy dealership now sells 80 units a month, but Betz firmly believes the potential is there to push this to 100 units per dealer per month, translating into monthly sales of 15,200 vehicles.

If that rate of sales were attained, Chevrolet could sell 212,400 units annually, he says.

Stretching to cash-in on Buick’s popularity in China, Chevrolet dealerships have large displays in their showrooms explaining how founder Louis Chevrolet was a Buick racecar driver in 1911, before founding his own car company.

This might not mean much in other markets, but in China history and family connections are very important, Betz says – even with cars.

Meanwhile, Betz has high hopes for the newly launched Lova “hero car,” which is being heavily marketed on the Internet to youthful prospects.

Released to the market in March, the Lova shares GM’s Global Compact Vehicle Architecture (Delta) with the Chevy Aveo. Both cars are built by GM Daewoo Auto & Technology Co. in South Korea.

Betz says encouraging customers to test drive the Chevy Lova (a new concept for China) also leads to interest in the upscale Epica or basic Sail.

The Lova starts at RMB100,000 ($12,707) compared with RMB130,000-RMB150,000 ($17,663) for the Epica and RMB68,000 ($8,641) for the Sail. The Sail is based on GM Europe’s Corsa as adapted by GM’s Brazil unit and then localized for the Chinese market.

“What you need to understand is in the U.S., you run a test-drive promotion and you get a few responses,” Betz says. “Here in China, thousands of young consumers storm the dealerships, waiting to give the cars a tryout.”