March/April 2011

Carmakers try brands just for China

GM, Honda, and Nissan Motor are creating brands targeted specially for China, the world's biggest car market. The goal is to boost sales in China's interior, where incomes rose almost 11% last year, according to Bloomberg Businessweek. The cheaper brands will help them compete on price against local manufacturers without diluting the cachet their core brands enjoy in more affluent regions of China, said John Zeng, an industry analyst at J.D. Power & Associates in Shanghai. "It's a win-win situation," he said. "Consumers pay a lower price for foreign-brand technology, and the foreign makers benefit from an increase in sales volume without hurting their brand image."

These made-for-China brands will use older model platforms and have few extra features, said Leah Jiang, an analyst with Macquarie Research in Shanghai. Automatic transmissions, antilock brakes, auto-climate control, and reclining seats may be left out to keep prices as low as 50,000 yuan ($7,600), said Koji Endo, an auto analyst at Advanced Research Japan.

The market for low-cost cars in China is currently dominated by domestic automakers BYD, Geely Automobile Holdings, and Chery Automobile.

Vehicle sales in China grew more than 32% in 2010. Sales are expected to increase about 15% this year, with two-thirds of buyers coming from cities where the average annual income is less than $5,000, according to J.D. Power. "If these brands are successful, they are going to have a much higher growth rate," said Bill Russo, a Beijing-based senior adviser at Booz & Co. "The number of people that can shop at that price point is much larger."

GM, the largest foreign automaker in China, will start selling the four-door Baojun 630 compact sedan this spring through its SAIC-GM-Wuling Automotive joint venture. The car will be available at more than 100 dealers, the company said.