Chinese SUV brands in hot pursuit of international competitors

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  • Chinese SUV brands in the semi-premium segment making quick headway in the market with WEY going from no sales to 200,000 units in only two years.
  • Brand Finance original research shows prejudice against Chinese brands is waning with WEY considered more “Stylish” and “Cool” than Land Rover by a new generation of consumers.
  • Brand value of the top 5 Chinese brands has risen 92% from 2017 to 2018, largely thanks to local demand. In comparison, the value of brands from other countries has risen only 9%.
  • The gap between international and Chinese SUV brands is closing. Chinese brands offer products that have greater value for money and can better cater to the needs of young Chinese customers.
  • Chinese SUV brands have significant potential for growth with WEY a brand worth-watching.

The gap between international and Chinese SUV brands is closing with improved technology raising prices of Chinese models and a significant increase in competition prompting discounts by Joint Venture firms, according to a new industry report by Brand Finance – the world’s leading independent value-based brand strategy consultancy.

Although most Chinese brands are still in the middle to low-end market, some Chinese brands – such as WEY (owned by Great Wall) and Lynk & Co (owned by Geely) – are targeting a slightly higher income segment by using better technology and more differentiated, premium marketing. In fact, in August 2018, in the 150-200 CNY price segment, WEY commands a 7% market share while Lynk & Co – 4%, with WEY going from no sales to 200,000 units in two years.

Brand Finance’s original market research shows that Chinese customers – particularly the young – are increasingly aware of the technical quality of Chinese brands and so, where aspirational Chinese customers would in the past consider trading up to a more expensive Western model, an increasing number are considering these Chinese brands.

Alex Haigh, Auto Industry Director at Brand Finance, commented:

“Chinese brands have struggled to extend overseas largely because – at their price point – they have been seen as less safe and less desirable alternatives to Western brands. Especially WEY – which has a specific objective to expand overseas – appears to be breaking this mould. We may therefore start to see their models become as much a staple of not only Chinese but also European and American motorways as Toyotas and Volkswagens are today.”

Nevertheless, international brands still score better among customers on comfort, prestige, and technology and it will be some time before Chinese brands are able to position themselves realistically as luxury alternatives. However, in some instances, desirability for Chinese brands is surpassing that of international ones. Brand Finance’s original market research shows that there is clearly no instinctive barrier to demand against Chinese brands as country of origin is among the least important drivers of preference.

With the right combination of models, service, communication, distribution and a more established position in the market, it seems likely that demand could expand considering the advantages bestowed on domestic manufacturers. Our research show that more people consider WEY’s model to have a “Stylish Design” than Land Rover (41.1% v 38.1%) as well as to have a “Cool Brand” (28.2% v 26.7%). During the 2018 World Cup, WEY signed Cristiano Ronaldo as a brand ambassador; these sort of marketing activities are likely to lead to further improvement in perceptions and performance in the near future.

Alex Haigh, Auto Industry Director at Brand Finance, commented:

“The key to breaking through into more premium segments is improving brand perceptions to move away from a competition on price. In the SUV segment, customers are mainly looking for spacious, reliable and high-tech brands. Whether a product is made overseas or made in China is actually the least important consideration for customers.”

Time is on Chinese brands’ side

Brand Finance’s original research shows that there is a reasonably low familiarity and understanding of the Chinese brands’ offer – WEY for example has only 60.3% familiarity versus 86.2% for Honda. This is largely because it takes time to raise brand awareness and familiarity. Honda has been in the Chinese market for 20 years whereas WEY has been established for only two years.

Despite this, 60.3% of the market is familiar with WEY and those who are aware are so far positive. The brand, as with Lynk & Co, can be considered a blank canvas on to which the right messaging and product quality will paint positive perceptions.

WEY is actually considered more technologically advanced than Jeep, Honda, and Kia – among those who know them. It is also considered more stylish than all three as well as Land Rover and the most closely linked to electrification. It is clearly poised to take advantage of one of the most important trends in car manufacturing – useful in a market that now contributes almost half of all electric car sales.

Alex Haigh, Auto Industry Director at Brand Finance, commented:

“As Korean and Japanese brands before them have shown, there is no instinctive or structural reason why brands from outside the US or Europe could not compete with their Western equivalents. With enough breathing space available to develop offerings and invest in effective communications, Chinese brands will be taking a greater share not just of the domestic but also the international stage.

Looking at social media sentiment, Trumpchi, WEY and Lynk & Co are all within the top four brands for positive performance online over the last month – continuing a year-long trend of positive performance. Trumpchi, which has performed best in this measure, has invested considerably in promotion. WEY and Lynk & Co have yet to follow suit with similar investment but considering strongly positive online responses to their brands a small investment is likely to go a long way.

See the full Brand Finance Chinese Automobiles 2018 report here

Brand value of the top 5 Chinese SUV brands has risen 92% from 2017 to 2018