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Why China-made cars will eventually overtake other global brands

Why China-made cars will eventually overtake other global brands

Mikko David

Made in China. For a time this label meant anything but good news in the local automotive market. A little over 15 years ago, Chinese-made cars started to come in and offer Filipinos new vehicle choices to pour their hard-earned money into.

Car buyers, especially those on a budget, were initially entranced by the affordable, read as cheap, pricing. But it did not take long for them to become disillusioned with the substandard build quality, lackluster performance and lack of parts and warranty support that plagued Chinese car brands.

It did not help that most of the early distributors of China built cars were mere “mom and pop” operations. They would not know the necessity of automotive marketing, sales support or even customer satisfaction even if they got hit by them in the face. These distributors were only after the quick buck as they themselves were enamored by cheap mainland pricing that could mean higher margins when sold in bulk. Neither did the reputation of China-made products’ absence of quality control and their penchant to deteriorate and break down sooner than other similar commodities built in Japan, the United States or Europe help with their reputation.

And thus the negative stigma of “Made in China” was born. Granted this was in the mid-2000s just when Chinese car companies were exploring businesses outside of its borders. Today however, the story is starting to change.

The recent influx of China-built vehicles, whether branded as a global nameplate like Kia, Hyundai, Jeep, or Volkswagen, or as homegrown Chinese marques such as Geely, Foton, Chery, Changan, GAC, Great Wall, Dong Feng or BYD, all point to the reality that there is now growing acceptance in the Philippine market for cars made in China.

The Chinese automotive industry holds on to the global lead in domestic market sales, having overtaken the US in becoming the world’s most prolific car maker back as early as 2008. It has also turned its sights to the rest of the world. Just last year, the China Association of Automobile Manufacturers recorded 1.6 million China-made cars exported in just the first 10 months of 2021. And a total of 26.28 million vehicles were sold in China last year.

As of 2019, cars imported from China in the Philippines account for about $182 million (P9.3 billion). According to the website OEC, this is the fourth largest source of imported cars in the country, just behind Japan, Thailand and Indonesia. The website also claims that from 2018 to 2019, China is the second fastest growing import market for cars in the Philippines, just behind Indonesia. If the trend continues, it is clear that China-made cars will eventually overtake other global brands in various markets in a few years’ time. And this could be an inevitability in markets such as the Philippines where price is a key deciding factor for any car purchase.

Here are some of the reasons why vehicles from China will eventually be at par, or even better, in sales with the popular Japanese and Korean brands within the next five to 10 years.

Lower price

Cars coming from China are priced relatively cheaper than other brands within their respective categories. This stems from the fact that they are built at a lower price point in the mainland. Cheap labor coupled with government subsidies and volume production have all combined to lower the market pricing of China-built cars.

The existing 5 percent import duty levied on China-made cars with displacements below 1.5-liters is another reason why prices are lower compared to Japanese and Korean brands. This is also why most cars and crossovers from China come with a 1.5-liter turbocharged engine.

The significant profit margin derived from the lower unit cost of cars made in China has allowed distributors to make a solid business case. And this has also translated to down to the dealerships as more units sold equate to better profits down the line.

Improved design and build quality

It is safe to say that cars built and China have outgrown their checkered past. Panels are now more tightly fitted. Gaps are more consistent. There is no more signature petroleum plastic smell that characterized most Chinese cars built from a decade and a half ago.

China brands have also moved on from copying and rebadging popular Japanese and European designs. SAIC Motor, Dongfeng, FAW and Chang’an, Chery, Great Wall and BYD have invested in hiring European and Japanese designers to spearhead their product transformations.

Geely has even taken an extra step by buying into the globally renowned Volvo brand and using its technology and design expertise to create practical and affordable quality vehicles.

World-class quality combined with low pricing are making Chinese cars more compelling purchases for the budget-conscious Filipino.

Advanced technology and feature set

In an apparent attempt to leapfrog the more established global car makes, Chinese brands have made technology and convenience a cornerstone of their product lineups. Touchscreens, 360-degree cameras, distance sensors, lane-keeping assist and even autonomous driving are becoming commonplace in many cars made in China.

It helps that most of these technologies are manufactured in China as well, and are even supplied as original equipment in many Japanese and European cars. Once again, this lowers the cost of development for cars from the mainland.

Today, China is leading the world in electric vehicle sales. It also has a hold on battery engineering and manufacturing, a key component in every EV. The industry’s wide portfolio of budget EVs to luxury models is already catching global automotive manufacturing by storm. Even Toyota, once against the wholesale adoption of EV technology, has been forced to introduce a whole new EV lineup to keep up with the Chinese EV onslaught.

Improved distribution

There was a time when small businesses were the only ones brave enough to venture into importing cars made in China. These “mom and pop” distributors lacked the expertise to address the essentials of the business such as ample parts supply, and honoring warranty coverage. Moreover, they could not be bothered to invest in proper customer care and retention.

Having learned from the lessons of the past, both the Chinese principals and the locally appointed distributors have raised their operational standards to be able to address the needs of the customers.

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MG Philippines which is now under the The Covenant Car Company Inc., was one of the first to come in big with their massive marketing investment as they re-launched the brand in 2018. TCCCI’s experience with Chevrolet and Volvo, as well the key personnel who handled these brands, were all crucial to set a higher standard for the Shanghai-based brand.

Meanwhile, Geely is now under the Sojitz Corp. whose ties with Mitsubishi Motor Philippines Corp. has given it the skills and foresight to handle the emerging brand locally.

Chery is also making a strong comeback under the United Asia Automotive Group, Inc., which has also been importing Foton commercial vehicles from China since 2006.

These are just some examples of distributorship done right. Especially as China-made cars are facing continued threat from socio-political forces that may affect businesses in the short term, it is crucial to have a solid business backbone to ensure continuity and the achievement of long-term business goals.

Up-to-date product portfolio

Today’s China-built cars are some of the most modern and stylish you will see on the road. Chinese car companies are now in touch with the wants, needs and demands of their target markets around the world to the point that they have a huge selection of vehicles customers can choose from.

The quick turnaround the Chinese car industry can achieve in designing, manufacturing and selling cars around the world is its advantage. And as a manufacturing hub for many global lifestyle companies, it is indeed in the forefront of cutting-edge design and engineering at this point in time.

There was a time when Japanese cars were ridiculed in America for their dinkiness and size. South Korean cars also underwent the same challenges during their globalization phase in the late 1990s up to the 2000s. And look where they are now.

Now, after almost two decades of growth and maturity, China is poised to take over from its Asian neighbors and lead the way in global automotive manufacturing and sales.

It is only a matter of time until our streets are dominated by cars made in China. Maybe it is high time we accorded these cars some respect, if not a significant bite of our cash. Now we can start enjoying quality, ride, performance and modern technology from a car made in China.

Isn’t that what we have always yearned for when buying a brand new car?