Automakers in China are bracing themselves for strong competition, and will use the upcoming Shanghai Auto Show to appease the government with electric vehicles (EVs), as well as attract Chinese buyers with state-of-the-art sports utility vehicles (SUVs) and sedans.
IHS Automotive perspective | |
Significance | Two major trends are expected to be highlighted at the Shanghai Auto Show: the launch of EVs to appease the Chinese government, and the launch of family SUVs and sedans to appeal to the Chinese consumer. |
Implications | The Chinese light vehicle market is expected to continue to grow this year, with passenger cars – including SUVs according to our definition – seeing the lion's share of the growth volume. |
Outlook | Although the Chinese government aims to increase the number of electric and alternative fuel vehicles on its roads, a lack of infrastructure and consumer confidence has resulted in slow growth of the sector. However, Chinese consumers still want their own personal mobility vehicle and prefer SUVs as they are considered to be good family cars, resulting in SUVs continuing to see double-digit growth rates in the country. |
Automakers in China can generally be grouped into three types: local Chinese brands; international brands with local production ventures; and other international brands, which rely on imports for sales in China. Every automaker wants a slice of China's vehicle market. In the first quarter of 2013 it has shown promising signs of growth, with total sales of over 5.4 million units, up 13.2% year-on-year (y/y), and passenger vehicles accounting for the bulk of the sales. In the first-quarter period, a total of 4.4 million passenger vehicles were sold in the country, an annual increase of 17.2% y/y, according to data from the China Association of Automobile Manufacturers (CAAM).
Electric vehicle (EV) and new energy vehicle (NEV) launches
With the Chinese government keen to push the sale and production of EVs and plug-in hybrids (PHEVs), as well as "other" NEVs, automakers are likely to showcase a range of models at the upcoming Shanghai Auto Show, including top-end products and models for local production in China.
PSA Peugeot Citroën will launch its new petrol-electric hybrid car, the DSX crossover, at the Shanghai Auto Show, according to Auto Business News. The model is based on the same platform as the DS4 hatchback and is fitted with PSA's petrol-electric hybrid engine. The model will be imported and sold at dealerships by the end of 2013. However, it is unlikely to be a key player in sales for Citroën in China, rather, merely a method of raising the company's profile to appease the Chinese government, which is looking to encourage NEV sales. Citroën will begin production of the DS line at its new joint venture (JV) with Changan in China, with the DS5 to be launched in October 2013.
BMW is expected to launch the Zhi Nuo range, dubbed the "Promise" in China, which is expected to strongly feature EVs, according to information from the State Administration of Industry and Commerce. The brand will be built by BMW and partner Brilliance, with the first model under the line expected to be an NEV based on the BMW X1 model, contrary to previous reports from Xinhua that the first model was to be based on the BMW 3 series. The carmaker is also expected to launch the i3 electric car in China in the first half of 2014. IHS Automotive production analysts state that the first JV brand for China could be an EV.
Toyota and partner FAW have unveiled a new JV brand called Ranz (or "Lang Shi" in Chinese) in the country, the duo said in a press release sent to IHS Automotive. The first model will be a pure EV concept, which will be shown at the Shanghai Auto Show. Meanwhile, with its other JV partner in China, Guangzhou Automobile (GAC), Toyota is working to develop a new EV for China, reports local media. The model is expected to be launched in two years and will be announced at the Shanghai Auto Show. It will likely form part of Toyota's Yundong Shuangqing hybrid concept, which was announced at the Beijing Motor Show last year. The Yundong Shuangqing – which translates to "movement upon clouds" – is equipped with a hybrid system developed at the Toyota Motor Engineering and Manufacturing R&D Center in Changshu (China). President Akio Toyoda said, "We would like to put smiles on the faces of our Chinese customers with hybrid technology. I want the people of China to be able to experience the beauty of hybrid technology through a hybrid car born in China."
General Motors (GM) is likely to show new Cadillac models, such as the ATS small car and the plug-in hybrid ELR, at the Shanghai Auto Show. Local production of the Cadillac XTS has begun, with the ATS expected to follow. The ELR plug-in hybrid will begin production in the United States in late 2013, with sales beginning in 2014. GM aims to use the Cadillac brand to build up sales in the premium car segment in China, and is also keen to add a range of new models to its line-up. The ELR plug-in hybrid will begin global production this year. With Beijing keen to see strong sales of electric and plug-in vehicles, GM aims to offer new green models across every segment.
Kia's JV in China, Dongfeng Yueda Kia (DYK), will launch a plug-in car in 2013, the N30, under the Dianyue brand. DYK showcased the model – a concept version of the N30 electric car – at the Beijing International Motor Show in April 2012. An electric car based on Kia's Cerato sedan is also expected.
Several international automakers and their partners have announced plans for new JV brands, with many concentrating on EVs. Beijing Hyundai's new brand, Shouwang; BMW-Brilliance's Zhinuo; Dongfeng-Yueda Kia's Dianyue; and FAW-Volkswagen's Kaili are all examples of brands focusing on EVs. Meanwhile, GAC-Toyota is developing alternative powertrain vehicles, as are other automakers in China, and some Japanese automakers have also announced EV plans. Honda has said it will begin production of an EV and develop hybrid systems for the country, while Nissan has announced plans to produce an EV in China under its Venucia brand. Other international automakers are also expected to release details of EVs at the Shanghai Auto Show.
Other launches
Qoros will launch its first model at the Shanghai Auto Show following its preview at the Geneva Auto Show. The first model is a compact sedan, followed by a hatchback and an SUV. Qoros will also launch hybrid and pure electric cars, the automaker has said, though it is uncertain whether these will happen all at once at the Shanghai Auto Show. Models will initially be sold in China, followed by international markets. "We are a new company without any legacy or previous history, which gives us a great advantage because we are starting from scratch with a clean sheet of paper," said Volker Steinwascher, Qoros' vice-chairman. The company's plant in Changshu in China's eastern Jiangsu province will have an initial capacity to build 150,000 units when production begins next year. However, the plant could be expanded to 450,000 units in the future, according to the report. Qoros was developed by the JV between Chery and Israel Corp's Quantum LLC. The sedan, codenamed C11, is expected to launch sales in the fourth quarter of 2013.
MG, now owned by SAIC Motor, will launch its new SUV. The brand has not yet launched an SUV, although sister brand Roewe, also owned by SAIC, launched the W5 SUV last year. MG is also expected to show the MG3 small car for Europe.
Mazda will launch its locally built CX-5 SUV, which is forecast to begin production in China in June 2013. The CX-5 will rival other SUVs produced in China, such as Honda's CR-V and the VW Tiguan. IHS Automotive sales forecast data for China show that once the CX-5 is localised, sales for the model will rise significantly in the country. Our data shows that in 2012 a total of 6,851 CX-5 models were sold in China, while in 2013 sales are expected to rise to 17,626 units and to over 38,000 in 2015. Overall, Mazda will benefit from the stronger JV with Changan; its sales in 2015 are expected to rise to 319,000 units in China.
Audi will unveil its A3 small sedan at the Shanghai Auto Show, with deliveries to begin in 2014. The model will be offered with both gasoline and diesel engine options, with a hybrid variant planned for the future. Audi is strengthening its penetration of China with a raft of dealerships as competitors BMW and Mercedes also raise their game in the country. Audi's dealership network covers 133 cities in China. The carmaker has opened 48 dealerships since September 2012 in China and has said it will bring in a range of 10 new models in 2013 to attract more Chinese customers. The new models for 2013 in China include the Q3 SUV, the A3, a facelift of the Q5, the RS5 Cabrio, the S6, the S7, the A6 Hybrid, the A6 All Road, the A8 Hybrid, and the SQ5. The Q3 SUV recently began production under the FAW-VW JV in China.
Chery Automobile has showcased its latest styling on a concept shown at the Geneva Motor Show. The TX SUV is the first concept car designed completely by Chery, the automaker's spokesperson, Huang Hauqiong, said in a company press release. The concept will almost certainly take centre stage at Chery's booth at the Shanghai Auto Show. Chery's TX concept is likely to be a production model in the near future since Chery is expected to launch a new version of the Tiggo SUV this year, itself a very popular model both in China and overseas – in 2012 the automaker exported 53,449 units. Chery is also expected to show the Chery A4 family sedan.
Suzuki will premier the new C segment sedan concept, called Authentics, at the show, the automaker confirmed in a news release. It is targeted at the C segment sedan market – the largest market in China – and is likely to begin production in China in 2014. So far, Suzuki has seen limited sales in the country for a host of reasons, including a limited product lineup. The C segment sedan market is the largest volume-selling market in China, in which the major players, such as VW, ramp up volume sales. The segment saw sales of 6,049,005 units in 2012, an annual increase of 11.1% from the 5.4 million units sold in 2011.
Outlook and implications
The passenger vehicle market in China continues to see growth, with stronger growth rates than the overall market, which is dampened by lower growth in the commercial vehicle segment (see China: 12 April 2013: Chinese vehicle sales and production rise to over 2 mil. units in March, Q1 sales up 13.2% y/y – CAAM). Growth in the passenger vehicle market stems from two main subsets within China: the growth of the SUV segment, and demand for family sedans, which continues to propel the sedan segment, with a general trend toward larger-size sedans.
In the first two months of the year, SUV growth was over 50% y/y, which was strengthened by new models entering the segment, and increasing brand awareness and penetration within different regions of China (see China: 14 March 2013: China's SUV segment sees surge in new players, sales rise 50.2% y/y in January–February). Indeed, the different regions of China can be viewed as independent markets, which together make up the larger dynamic market (see China: 2 April 2013: The multiple markets for passenger vehicles within China 2020). Automakers such as VW and GM are gearing up to strengthen penetration in segments beyond the strong coastal area of China, while almost every international brand present in China is ramping up dealerships in the western region to raise penetration of the different regional markets. IHS Automotive continues to hold to its forecast of around 11% annual growth for China's passenger car market, as per our definition of that segment (see China: 23 January 2013: Chinese passenger-car sales increase 7.6% y/y in 2012, more growth expected in 2013).
The Shanghai Auto Show will continue along the EV theme that was also strong at the Beijing and Guangzhou Auto Shows (see China: 24 April 2012: Beijing Motor Show 2012: Automakers in China Unveil EV Concepts and 23 November 2012: Guangzhou Motor Show 2012: Expo displays 950 models, debuts for 34). However, with automakers fighting tooth and nail for market share in China, new models with fancy attributes and packages will aim to dazzle Chinese consumers at the Shanghai Auto Show. GM, for instance, has announced it will show 50 models at the show, which will also include light truck models built under the FAW-GM JV in China.