The message from the upstarts is: "We're different now. We've changed. We've developed," said Namrita Chow, who is principal analyst at IHS Markit in London.
Chinese automakers such as Great Wall, Chery and MG already have a limited presence in Europe and Russia, mostly selling small cars and pickups. This time, however, they are aiming at Europe's fast-growing SUV segments, which are predicted to account for one-third of the European market by 2020, up from a quarter now.
Drawing on experience in their fast-paced domestic market, Great Wall and Chery possess a newfound confidence about their ability to compete with European brands both in China and on their home turf, analysts said. "The Chinese automakers were in a very nascent state [10 years ago]. They were just learning how to build cars," Chow said. Since then they have improved their products and steadily taken market share from foreign joint-venture brands in China.
In the last decade, Chinese brands have also focused on improving quality by partnering with Tier 1 suppliers such as Robert Bosch, Dana and Valeo, names that figured prominently during their presentations in Frankfurt. In addition, they have developed efficient 1.5- to 2.0-liter turbocharged gasoline engines and hybrid drivetrains in anticipation of the tough China VI emissions standard, coming in 2020, which won't require much modification to be certified in Europe, said Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight.
To be closer to the market, they have established European engineering and styling studios, and hired away top designers including Byton's Benoit Jacob, who was responsible for the styling of the BMW i8 and i3 electric models, and James Hope, who moved to Chery after working for General Motors and Ford Motor.
High-level executives have come from German premium brands, including Jens Steingraeber, the CEO of Wey, who was product manager for the Audi Q3 crossover; Byton's co-founder, Carsten Breitfeld, who worked at BMW's i subbrand; and Borgward CEO Ulrich Walker, who led Daimler's Chinese operations. Taken together, Chow said, these steps are meant to show that Chinese brands "are not inferior to any automaker in the developed markets."
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Great Wall and Chery have won market share in China by offering equal or better features than foreign brands at a lower price, and they are likely going to stick to that strategy in Europe. They have also taken lessons from South Korean brands Hyundai and KIA, which established themselves in Europe and North America with long warranties and strong after sales service as they built a competitive product lineup.
Zhang pointed to the Chinese marketing position for Wey, which is aimed at "entry-premium" buyers at prices starting at about 25,000 euros. "Here in China, they charge half or two-thirds the price of the foreign products but they offer more features in their cars."
Analysts said that Great Wall and Lynk & CO, which shares platforms with its minority shareholder, Volvo, have the best chance of succeeding in Europe. "Lynk is targeting young professionals by combining promising innovation approaches across electric vehicle powertrains, connectivity and mobility service features," said Peter Hage, founding partner at Districom Group, an automotive consultancy.
Chow said Lynk & CO's edge is its connection to Volvo, both of which are part of Zhejiang Geely Holding. "They are probably in the best place simply because they have kept the development of Lynk & CO very structured and still linked to Volvo."
Except for Borgward, Chinese brands did not show models that can be launched in Europe today, analysts noted. "We didn’t see products that are ready for the market," Chow said.
Chery says its Exeed models will be coming to Europe "within a few years," while Great Wall has not given a timetable.
Once they commit to Europe, there will still be considerable hurdles. "Europe is a highly competitive market with different customer expectations in terms of vehicle design, quality and performance," Hagesaid. "Building brand awareness and acceptance for a Chinese brand will be a tough undertaking."
Another hurdle will be building sales and aftersales networks. "It's probably the biggest challenge other than product or brand image,” Zhang said. "Even in China it's not easy for a lot of weaker brands. No investor wants to be their dealer because they know they will lose money.” Mindful of that, Byton says it will take production orders, as Tesla did for the Model 3, and sell directly to consumers through retail partners. Lynk is proposing a similar sales model. Lorenz Glaab, head of marketing at Chery, said a decision on how to sell the Exeed brand was still being made, "but it is fair to say that we will be somewhere in the middle between a modern/disruptive approach and a more established one.” Print Reprints Respond
European automakers, too, will be watching closely and ready to strike back. "The existing brands aren’t going to just sit and watch them come in and take their market share,” IHS’s Chow said. If Great Wall or Chery can gain ground in Europe, it will pay dividends back home in brand recognition. About 28 million vehicles were sold in China last year, roughly twice as many as in Europe, and the growth potential is considerably greater there and elsewhere. "Their main focus continues to be the domestic market and emerging markets such as Iran,” Chow said.
Europe is seen as a proving ground for technology and product viability, and as a crucial stepping stone in building an international brand and distribution network. "We are the No. 1 exporter in China and have been so for many years,” Chery’s Glaab said. "It is part of our long-term strategy to take our brand truly global and to cater to very sophisticated and demanding customers.” Seen in that light, success in Europe may not be measured in market share, but simply in staying power, analysts said. "If they can compete directly with the European car makers in their hometowns, that alone is a success for them,” Zhang said. "They want to see if they can meet the European level.”