There has been much speculation as to how the arrival of low cost Chinese cars will impact the EU market ¨C yet estimated sales amounted to less than 2,000 units in 2007, a figure well below automakers¡¯ ambitious projections. Michael Gartside, a PwC Automotive Institute analyst ([email protected]) considers how real the threat to competitors posed by Chinese brands within the EU market is, in the light of China¡¯s eleventh and most recent five year plan which encourages the development of light vehicle exports.

 

To date, says Gartside¡¯s PwC Automotive Institute Analyst Note of 3rd March, the majority of sales initiatives in the EU have come from local entrepreneurs who have seen an opportunity, though negligible sales in 2007 call that opportunity into question.

 

He notes that a host of internal and external factors have aided Asian brand growth in the EU over the past three decades, most notably the demise of British Leyland/MG Rover and weaknesses among Fiat, Ford and GM at the start of this decade.

 

These factors, combined with the launch of competitive diesel engines, crucial in a diesel-centric market, along with products in strong growth segments such as midsize SUVs, accelerated market share growth. Additionally, arguably higher levels of quality and equipment for a lower price, heavy investment in localising design, product development, and assembly in Europe also contributed.

 

None of these elements apply to the Chinese products at present ¨C if anything, generally the opposite is the perception. Chinese manufacturers have launched substandard and inappropriate products in a market currently characterised by strengthening local players and increasing competition.

 

In a market intensely focused on safety and the environment, poor crash test ratings and high CO2 emissions will represent just two of the many hurdles on the path to market prominence. Brand image and recognition are also likely obstacles that may prove difficult to overcome in the near-term.

 

Presently, the value oriented status of the current wave of Chinese products represents their core unique selling proposition. However, cost-of-ownership analysis suggests Chinese products can be more expensive than competitors. Additionally, the nearly new car market will further undermine their value proposition in the overall vehicle market.

 

However, Gartside says Chinese OEMs will undoubtedly close the competitive gap in the future as they mature and begin to utilise established global suppliers. However, although Chinese sales will likely increase, significant gains may be harder fought than in the past.

 

(www.pwc.com/auto/institute)

From: auto industry.uk/news