A total of 647,256 SUVs sold in China in the month of May, according to China Passenger Car Association statistics compiled by Gasgoo.com (Chinese). That figure represents continued strong year-on-year growth of 37.4%.
Only three domestic own brand models made the top ten SUV sales chart for the month of May, led by the Great Wall Haval H6, whose sales totaled 37,435 units. Foreign brand SUV models made up the rest of the top ten, with all of them aside from the Tiguan posting year-on-year sales growth rates in the double digits. Due to lack recent redesigns, the Tiguan has suffered negative sales growth, being surpassed by the Buick Envision (pictured below).
Sales of the Honda XR-V (pictured below) were also very commendable, growing 73.8% year-on-year. Also performing strongly was the Beijing Hyundai New Tucson, whose sales totaled 14,528 units. The New Tucson was the only Korean SUV model to make the top ten sales chart for May.
Many of the previously best-selling own brand models, including the Great Wall Haval H2, Changan CS35, Changan CS75 and JAC Refine S3, finished just outside of the top ten. With overproduction and increased market competition, many companies have taken to introducing drastic price cuts for their models. An example of this are the Sino-Korean joint ventures Dongfeng Yueda Kia and Beijing Hyundai, who have drastically reduced the prices of the Sportage, Sportage-R and ix35 in an attempt to compete with models from rival own brand companies.
As a result of these strategies, own brand models have had to deal with the lack of a significant price advantages over foreign brand models, which in turn have led consumers to compare vehicles based primarily on their performance and build quality. It is here that consumers have to deal with the fact that own brand SUVs generally use suspensions directly made by foreign brands (particularly Japanese and Korean makes) and engines which are primarily reengineered versions of those found on foreign brand models. Why are these parts on own brand vehicles so similar or even identical to Japanese or Korean models? The reason is that these parts are very easy to replicate. Furthermore, lack of technologically competent auto part makers means that parts often come from multinational companies anyway. Therefore, there isn’t much more margin left for own brands to further slash their prices from what they are now.
Unfortunately, own brands’ attempts to break into the premium SUV segment have also failed, as shown by the cases of the Great Wall Haval H8 and H9. Studies comparing R&D capabilities show that own brands lack the R&D budgets of their foreign rivals. This issue has also been compounded by the management and R&D structure of own brands companies, as well as their relatively low rate of automation. Without these obstacle being addressed, it will be difficult for own brands to make further significant strides in the market.
While own brand manufacturers have made some very impressive achievements in terms of sales over the past few years, with their disadvantages when it comes to technology, R&D and brand image, it will be a uphill struggle for them to compete with models from well-established foreign brands. Only by undertaking long-reaching technological innovations and undergoing sustainable growth can own brands break out of their current bottleneck and move on to compete with foreign brands on a more level playing ground.
