Late Entry Brands Scramble to Gain Traction in China

BEIJING – As the Chinese auto market grows larger by the minute, many late-entry second-tier international brands are scrambling to get into the race. But would there be any room left for the latecomers?

Take Jeep for example. Its CEO Mike Manley is on a mission in searching for a Chinese partner to localize their products. One potential partner is Guangzhou Automotive Industry Group Corp. (GAC) which has a joint venture with Jeep’s parent company Fiat. Manley believes if successfully localized, their production and sales volume would be much higher than today.

Jeep is regarded as a luxury brand and all products are solely imports at the moment. This means there are still great potentials for Jeep in the Chinese market. With a little help from Fiat, negotiations should go smoothly and localized products will be off the line within 18 to 24 months after receiving government approval, according to Manley.

Unlike Jeep which is well-known in China, SEAT is new to the average Chinese consumers. As the last Volkswagen-owned brand to enter the Chinese market, SEAT’s breakthrough effort has the full support from its parent company. Volkswagen Vice President Christian Klingler said at the Frankfurt motor show that SEAT will be imported into China in 2012.

He also claimed that they have already found many potential dealers in China. President and CEO of Volkswagen China Karl-Thomas Neumann stresses that SEAT will take part in the Guangzhou International Automobile Exhibition.

Through marketing research, he believes SEAT will be well received in southern China. The only question in hand is how to gain brand recognition rapidly.

While Fiat and Volkswagen had shown support for their sub-brands, General Motors has shown no favors towards Opel’s China endeavors.

Bloomberg Germany reported a few days ago that Karl-Friedrich Stracke, the president of Opel, said Opel will start a factory in China which will have an annual output capacity of 30,000 to 40,000 units in the near future. But GM headquarters denied the news and called it “unrealistic.”

Subaru’s plan to build cars in China by 2013 delayed by government regulations.

Insiders said exclusive agreements such as “Opel may not establish factories in China once GM introduced Opel technology into the Chinese market” were in the contract between GM and SAIC.

As the centerpiece of the strategic shift for Shanghai-GM, the new Regal was developed based on the Opel Epsilon II platform, and so were the new LaCrosse and Excelle.

Most Shanghai-GM Buick models are currently Opels under Buick badges. Opel’s strong presence in China will definitely hamper Shanghai-GM Buick’s sales. This may be the reason why Shanghai-GM has never lent any resources to sell imported Opels.

Fuji Heavy Industries, better known as Subaru, does not have a parent company to help or restrain its China endeavors. But its efforts in China seem more a struggle.

Its JV with Chery Automobile has been put on hold due to obstruction from the National Development and Reform Commission. NDRC claims that because Toyota is the largest shareholder of Subaru and has used up the two quotas for JVs, hence Subaru cannot establish a new JV since it is considered as part of Toyota.

Insiders suggest regulation violation might be an excuse to give Chery more leverage to negotiate a better deal with Subaru. Because unlike Fiat and Jeep or Volkswagen and SEAT, Toyota only holds 16.5% of Subaru’s share.

Although this makes Toyota the largest shareholder of Subaru, it does not mean ownership status. Whether Toyota and Subaru should be considered as one party under the regulation is an ambiguous thing.

For whatever reason, Subaru’s plan of manufacturing cars in China by 2013 will be delayed. And this goes to show the uphill battle many latecomers are facing. The fact of the matter is China does not necessarily need another brand like Subaru, but brands like Subaru desperately need China, or else they will be wiped off the map.

– China Automotive Review