China’s Chery has sent an intercontinental missile to pop the Brazilian market’s cherry. Though so for some glitch not available at the dealer in my city, the QQ is already on sale in São Paulo and Rio. To keep dealers well stocked (according to the Brazilian enthusiast site webcars.com.br), another shipment of one thousand cars is on the high seas, and on a fast vector towards the Brazilian coast.
For reasons our expert Bertel Schmitt can explain better than me, the more a car is seen on the streets, the more a car sells. So far, and in spite of JAC’s alleged success (have yet to see one), Chinese cars are virtually invisible on Brazilian streets. In declarations to the aforementioned website, Luiz Curi,President of Chery do Brasil, official importer of Chinese Chery, says that they are planning sales of one thousand cars a month. This number will push this car along in their hopes of achieving that virtuous cycle of sell and be seen, be seen so sell. The company will also bring some high visibility colors in order to stand out in the drab sea of grey, silver and black that the Brazilian market has become.
Now, what does this Chinese carlet have to seduce supposedly sophisticated Brazilian car buyers? First and foremost: A Chinese price! The strategy here is to emphasize price. For R$22.900 (or US$14.300 at US$1=R$1.6), it is the car with the lowest list price in Brazil. For allegedly new-rich Brazilians, this is supposedly not important (for wet-dreaming, foaming-at-the-mouth suits and pundits, that is). There are cases in the Brazilian market where price is not fundamental to success. To wit: Honda. its cars are overpriced and under-contented vis-à-vis the competition. Honda however has something no Chinese company has: a reputation.
In striking difference to JAC’s strategy, which is emphasizing quality and cost benefit (former, questionable, the latter, could well be), Chery is going after the price conscious buyer. The weak point in Chery’s strategy is that the dealer will hit the buyer with a destination charge. As I said before, the Brazilian buyer hates, despises, detests add-ons. Delivery fees are deemed so despicable in Brazil that traditional makers have long learned to work transportation fees into the price of their cars. (Which leads some consumers to believe that there are no destination charges in Brazil.) Chery will find out soon enough that Brazilians are just as good in spotting a bargain and a come-on as the Chinese.
If you ask me, I’m putting my money on Chery’s strategy and not JAC’s. Everybody who has tried to enter the Brazilian market through the top, except Toyonda and the German lux trio, has failed. The evidence: Renault, Citroën, Peugeot, heck!, even Subaru, Lexus, Nissan and Suzuki. Everybody who has entered at the bottom of the market has succeeded, even if in the case against this view (which everybody remembers, specially those special people mentioned previously), Lada, success was short-lived. People love to forget reasons number one and two. One – Fiat. It took them 25 years and lots and lots of learning to beat out their rivals, but they are now uncontested leaders. Two – Volkswagen. They, the former leaders, made their fame with the Beetle, not the Jetta, with the Gol, not the Passat.
So what does the petite Chinese car offer? For that puny price you get what you’d expect from a Chinese car, that is, A/C, power steering, windows, locks and mirrors, but you also get unexpected content like ABS, double frontal airbags, digital instrument cluster, CD player with USB port and fog lights (smart Chery, Brazilians love themselves their fog lights). Oh, the engine. It’s a little 1.0L unit good for 68 ponies. Right along the norm in the market. Unfortunately for them, it will be gasoline only. The flex fuel system is vaguely promised for some time next year. [Chinese are conservative. They drink alcohol. They don’t drive it. Ed] This could make for some unhappy early adopters as their cars, for being Chinese and lacking that important technology for the Brazilian market, will suffer very steep depreciation.
So, being a novelty, Chery will undoubtedly try to keep that price for now. However, they face competition. For that price, Ford sells their Ka (real, not list price). Fiat often sells their Mille (the old Uno) for under R$22.000. GM, weekend yes, weekend no, makes a special promotion and sells its Celta for 23K. Of course, all of the traditional makers’ offerings are strippo deals. Many will go and order some extra equipment. But the price draws the mass of consumers in. The QQ doesn’t ask for more. It delivers the goods for a low, low price, which could conceivably draw the masses in.
That is the question facing the Brazilian consumer. Will he or she take the bait and buy a Chinese car with zero reputation, uncertain after-sales support, untested sales network, troublesome (if previous experience with newbie makers in Brazil repeats itself) honoring of guarantee and provision of spare parts and, most likely, steep depreciation? Or will they go the traditional route and buy a time tested and honored car from makers they know, sometimes respect, sometimes despise and oftentimes love?
For me it’s too close to call. For 20.000 reais, I’d be more optimistic. Being that they will sell the car in the real price territory of the competition, and being that the car is somewhat smaller and doesn’t have a trunk, I guess it will be ruled out for family duty. It could sell well to students and singles, plus childless couples. Urban dwellers with a flair for something new and “against” the system. Don’t know if that’s enough. Then again, the market is growing. A thousand cars a month doesn’t sound too foreboding…I will firmly straddle the wall on this one.