China’s automakers focus on SUVs
May 30, 2013 Category Automotive, Automotive Metals & Minerals
This is China’s Year of the SUV. Whatever their specialties used to be, automakers ranging from global brands to China’s ambitious rookies are scrambling to cash in on the explosive popularity of sport utility vehicles (SUVs). The SUV boom clashes with Beijing’s efforts to push automakers to develop electric cars and to sell smaller vehicles to help curb air pollution and demand for imported oil. But the SUV’s image of safety appeals to prosperous Chinese drivers who face chaotic city streets, while electrics from BYD and other producers struggle to attract buyers. The fatter profit margins for SUVs are a financial lifeline to a Chinese industry that is being squeezed as global brands make inroads into the market for smaller cars. “You’ve got almost everyone targeting SUVs,” said Analyst Namrita Chow of IHS Automotive. SUV sales in China rose 20% last year to 2.5 million vehicles, more than double the 8% growth of the overall auto market, according to LMC Automotive. SUVs made up 18% of all vehicles sold. That market share could rise to as high as 25% in coming years, according to Yale Zhang, Managing Director of Auto Foresight, a research firm in Shanghai. That would be double the size of SUVs’ 12.5% share of the U.S. market last year. General Motors expects annual SUV sales in China to reach 4 million by 2020, said Bob Socia, President of GM’s Chinese unit. Global automakers are redesigning SUVs for China with smaller engines in response to government taxes based on engine size. Ford Motor plans to manufacture two of its four SUVs, the EcoSport and the Kuga, in Chongqing. Its Edge SUV will be imported from Canada and the Explorer from the United States. Italy’s Fiat, a latecomer to China, is hoping an SUV will help it gain a foothold in a market where it set up its first joint venture just three years ago. The Freemont, based on the Dodge Journey, was unveiled at last month’s Shanghai auto show. Mercedes Benz, Nissan, Geely Holding Group and Great Wall Motors also showed new SUVs or SUV concept vehicles. “Chinese consumers love SUVs. They see them as safe family cars,” said Chow of IHS Automotive. “The idea is, if I buy the best I can afford, I am buying the safest.” Baoding-based Great Wall Motors said SUV sales in the first three months of the year rose 95% over a year earlier and accounted for half the 180,000 vehicles it sold, giving it the global auto industry’s fattest gross profit margin at 28%, according to Bernstein Research Analyst Max Warburton.
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