Shanghai Auto Show: Foreigners Create Pseudo Chinese Brands
When you have a larger joint venture with a Chinese automaker, at some point it will be strongly suggested to you to create a Chinese brand. At least this is how The Financial Times understands it: “Foreign carmakers wishing to build new plants or add capacity in China’s burgeoning car market are being told by the government that if they wish to expand, they must develop a low-cost local car brand.”
Early fruits of these suggestions can be seen at the Shanghai Auto Show.
First to listen to the government (or maybe two governments) was GM. GM started the BaoJun brand last year at their SAIC-GM-Wuling joint venture.
GM has their BaoJun 630 at the show. In Red …
And in silver grey. The car sits on a Buick Excelle platform, but the body looks more like SAIC’s Roewe 350.
Under the hood, things look familiar. This is a 1.5 Liter GM Ecotec, also from the Roewe 350. The car is supposed to cost anywhere between $7,700 and $10,700. The car will go on sales shortly after the show.
The Honda/GAC joint venture is at the show with its Everus brand. The Everus S1 is pretty much a long-in-the-tooth Honda City.
The 2450mm wheelbase and the 1.3L/1.5L engine options will look familiar to the Honda connoisseur.
As far as budget cars go, the Everus is pricey. It will set you back between $10,700 and $15,300.
The Nissan-Dongfeng joint venture has its Venucia brand at the Shanghai show.
The blue car is a concept. In the first half of 2012, a real car will go to market, followed by a second model later in the year. Provenance and prices remain undisclosed.
The party line on these “Chinese” brands is that they make the car affordable to the working masses. As the Chevy Sail and the Volkswagen Jetta attest, a car does not need to be rebadged to become affordable. Actually, a new brand with separate sales and service operations adds to the price.
There is another calculation involved. A joint venture car is a car built under license. The license is held by the foreign joint venture partner. If brand and car are developed by the joint venture, then both are owned by the joint venture. The foreign partner will get its cut from the JV profits, but no income from license fees.
Even more importantly, the doors to export of the allegedly “Chinese” cars are wide open. The Chinese government is getting more and more disappointed by the low export numbers of Chinese cars and is seeking foreign assistance. The BaoJun is set to be exported to India. The license for a joint venture car usually comes with a contract that precludes exportation beyond China. If brand and car are developed by the joint venture, no such license contract.
Asked whether the Venucia brand will fit into Nissan’s emerging market strategy as a low-cost export to other lands, Akihiro Nakanishi, spokesman of the Dongfeng-Nissan joint venture, said that “currently, there are no such plans.”
A foreign maker may not even want to wave its own flag. Truly low cost, Made-in-China cars can be exported to other markets without dilution of a higher positioned brand. Renault has shown this quite successfully in Europe with the reconstituted Dacia brand. Nicolae Ceausescu’s former private car company made a name for itself in Europe as a source of low-cost quality cars, and that without trampling on Renault’s turf too much.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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What an opportunity the above would have been for GMC to foist upon China all that was "Vega" back in "the day."
"Nicolae Ceausescu’s former private car company made a name for itself in Europe as a source of low-cost quality cars, and that without trampling on Renault’s turf too much." Really? From WSJ: In 2010, more than a quarter of Renault's sales were no-frills "entry" models that cost less than two-thirds the price of an equivalent standard car. Sales of Renault's low-cost models totaled 684,882 in 2010, with about half coming from its Dacia brand—sold mainly in Europe—and the other half coming from low-end Renault-brand models in emerging markets. That's not how Renault had expected things to turn out. Dacia "was aimed at developing economies," said Tim Urquhart, an analyst at IHS Global Insight. "Western Europe was an afterthought, but [became] much more successful than expected." Soon after production of Dacia's low-priced Logan model began in Romania, where Dacia is based, independent importers began to buy the cars and sell them in Western Europe. A year later, Renault itself sold the car there, offering only fixed prices and no special deals in order to maintain margins. Still, while lower prices mean less profit from each car, Gerard Detourbet, head of Renault's entry-vehicle program, says his products' margins are good "as a percentage."