By on April 10, 2011

 

 

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.

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22 Comments on “Chery’s QQ Tries To Pop Brazilian’s Cherry...”


  • avatar
    Athos Nobile

    Hi Marcelo
     
    The Chery is certainly cute. They made the mistake of pricing it near the Spark in your northern neighbor. However, it came with everything, A/C, airbags, front AND rear (don’t laugh) foglamps, alloy wheels and a lot of colorful pastel shades. Engine was 1.1lt, it was decently finished and 2-3 years after the last one sold, they were still rolling and not falling apart (imports are closed since 2007).
     
    In Chavezland, the Matiz sold like hotcakes and the Spark continues to do well. The QQ sold well for being a Chinese car.
     
    Last I remember, Chery was setting up a site in Uruguay to assemble the Tiggo, which is a 2nd gen RAV4, so if they are successful they may add the model there.
     
    I think the chances of this one are better than those of JAC. And hopefully they’ll add some color to your streets. You know, I still don’t get why in tropical countries manufacturers sell silver, gray, black (think their customers are turkeys perhaps?), white and very little yellow, red, electric blue, apple green (or perico green) and so on.
     
     

    • 0 avatar

      Chery definitely has more moxie than JAC.
       
      And wait until Brazil gets the Hello Kittie models!

    • 0 avatar

      Hola Athos!

      Chevy also talks of launching spark here, but stupidly they will price it over Agile. In Argentina they’ve already done just that. IMHO they should just scratch that whole Agile mess and start again. Using Spark and Cruze and maybe even Sonic could do well here. But Agile…the more I hear of it the worst it gets. its amazing! If you remember my post on GM do Brasil Prez Denise Johnson…

      • 0 avatar
        Athos Nobile

        Even Aveo would do well there. Although not a fan, the Aveo is very comfortable inside. My compadre has one and has beat the hell out of the thing and its fine.
         
        And you can see them going at 120 mph in the highways without much problem.
         
        The Cruze looks fine, just avid using 14″ wheels. 16-17″ is the way to go.
         
        @ Bertel. No way there’s a Hello Kitty version. Wait, I googled it… *laughs*

      • 0 avatar

        A QQ at 100 km/h is quite an experience. At least in China where they are much cheaper …
        Shake, rattle and roll!

    • 0 avatar

      Yes Athos. I do believe Tiggo is assembled in Uruguay from CKD parts. But Brazil doesn’t allow that very much in Brazil. As the story goes, Chery has bought and is landscaping a site in São Paulo state (Jaguariúna, I believe) for a factory that should start rolling in 2013. They say it will have capacity for 150 000 cars. So Chery is not exactly modest. It’s up in the air for now. Especially with the dollar so low. This week it reached 1,53! At these levels, imports from China are actually making a lot of money. But government is doing all it can to spruce up the dollar. That could become a problem for Chinese operations in future

      • 0 avatar

        Forget the dollar. It is going to the toilet.
        You need to look at the Real / Yuan cross rate. How many Yuan does Chery get for one Real made in Brazil? in January, they got 3.93 Yuan. In April so far  4.07 Yuan.
        These cross rates are little advertised, but become increasingly important.

      • 0 avatar

        Wow! More than an Euro. The Chinese are laughing all the way to the bank in Brazil. BTW, our Presidenta is in Brazil. According to our Foreign Ministry talks will center around Brazil’s pretension to a permanent UN seat, Human Rights and Commerce. Look for Brazilian economic concessions if the Chinese are convinced to even pay lip service for a Brazilian seat.

        Now, Human Rights. Brazil and China. Talking about the sex of the angels…

    • 0 avatar
      SVX pearlie

      Chery should do quite well with the QQ – it’s a good car for the market, distinctive-looking, priced well and popular.

  • avatar
    eldard

    Here in the Philippines Chery has been a spectacular flop. As are other Chinese makers. Though the local Coca-cola is currently their biggest customer.

    • 0 avatar

      Chery is de facto selling about a thousand cars a month here. Their line up is from bottom up – QQ, Face, Cielo and Tiggo. Face is doing relatively well. Cielo besides the one I photographed in the garage, I saw the first one last week. Tiggo is becoming pretty common place. And with an advantage for Chery, as that generation CR-V and RAV4 sold very poorly in Brazil it looks like an unique design.

      Agreed, I see JAC on TV. But I actually see Cheries on streets. Let’s give it some time, but the QQ could become a moderate hit.

  • avatar
    Type57SC

    1 year/20k km warranty.  Interesting strategy when quality will be one of the main concerns about a new chinese brand.

    • 0 avatar

      Really? Just that? Too bad. Will not inspire confidence. Most brands nowadays in Brazil offer 1 year limited mileage, and competition is forcing them to up the ante and offer 2 yrs, unlimited mileage. Renault offers 3.
      Hyundai offers 5 and that is proving complicated. JAC is advertising 6 years and oddly enough that could be a turn off for some consumers as Brazilians do not have the habit of ever maintaining their cars at dealers when warranty expires. And a lot of Brazilians believe thay have a trusted mechanic that they believe maintain their cars cheaper and more efficiently than dealers. They worry about the costs of dealers. Labor at dealers goes for 3 times more than at indies. So too long a warranty could actually be a turn offto a considerable numbers of Brazilians

  • avatar
    siuol11.2

    My God is that ugly! And here I thought non-American nations had some semblance of taste.

  • avatar
    mazder3

    Are the parts from the Daewoo Matiz/Chevy Spark still interchangeable and has Chery made it less of a deathtrap?

  • avatar
    Autobraz

    Marcelo,
    This week I watched the new Senna documentary and that made me think the reason Honda has been able to charge more for less and still do quite well in Brazil may be due to an “aura” they still carry from that time.
     
    All baby boomers, all gen x and some gen y were glued to their screens on Sunday mornings watching Senna in his unforgettable Marlboro McLaren-Honda. The baby boomers are the ones most likely to have the cash to buy a Honda.


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  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Matthias Gasnier, Australia
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Faisal Ali Khan, India