China: Familiar, But With A Longer Wheelbase
By Paul Seredynski April 24, 2011
First time visitors to China and the Shanghai Auto Show such as myself have a lot to drink in. You think you know a lot about cars until you walk into an exhibition hall filled with shiny new metal and you can't identify a single brand, never mind recognize a model name. Everything seems auto-show familiar, but with a Chinese twist. As a pop star with the most haunting voice you've never heard (Karen Mok) croons about Route 66 over at the Cadillac stand, a parade of costumed pandas strolls the aisles. Safely on the Audi stand, you think you've regained your automotive footing until you realize the adjacent A4 with the freakishly wide rear door is a long-wheelbase version. Welcome to China and its massive and evolving auto market.
I’m not the only one adjusting to a market where there are “many Detroits,” and Buick is a young person’s brand. “I go to a lot of focus groups,” says Susan Docherty, who became VP of Sales, Marketing and Aftersales of GM’s International Operations last May, and says the market holds many unique quirks.
Vehicle registrations are limited in the largest cities to only 8,000 a month, and you have to bid for them, easily shelling out $7,000 for a (non-vanity?!) plate. Each region has its own registration, and you need to apply for a windshield-sticker permit if you want to travel in another area, or even to the airport. "I am amazed at the Chinese consumers' tolerance for this system," Docherty explained, illustrating why cars are kept “in the family so long, so they don't have to go through it again.”
Putting the donated-organ DMV fees aside, figure another $8K for an entry level compact. This is large money for a Chinese family, but almost 90 percent pay with cash. Financing is available (mostly through local banks), but the finance take rate is climbing less than 2 percent a year. Most will shop a B- or C-Class domestically built model. Like Americans, the Chinese also love big cars, but import duties are steep (25%), anything over 2.0-liters is taxed (at 45% once over 4.0-liters), and if it’s a V8, add another 17%.
This makes the imported Cadillac Escalade a $215,000 proposition, and explains why less than 1 percent of Cadillacs sold in China arrive from offshore. Motivated by the tariffs, you can now buy a Chinese-built, long-wheelbase (natch) version of the Cadillac STS called the SLS -- with a 2.0-liter turbocharged engine. According to China Cadillac Director Kevin Chen, since that engine became available last December, Caddy sales are up 137 percent. And the long wheelbase thing? Even mid-level managers in China will often have a driver, making a spacious back seat one of the most important features.
If you’re wondering whatever happened to GM’s minivan’s, they’ve been revamped, gussied up and live on in China as “business class” vehicles. The new GL8 (right) from Buick (pronounced locally as “Buke”) ably serves as China’s new Lincoln Town Car, making hotel entrances look like a scene out of Get Shorty. The real big seller in China? The Wuling Sunshine, far and away the most popular model produced by the SAIC-GM-Wuling (SGMW) partnership -- 700,000 sales in 2010. The Sunshine and its Wuling stablemates are so popular, Australian Kevin Wale, GM China President, spoke of a single Wuling dealer in Hunan that sold 90,000 cars one year (more than Saab, Jaguar and Land Rover's combined U.S. sales last year).
Of course, that kind of success can breed imitation, if not outright duplication. Some folk in Redmond might sympathize when they learn -- according to SGMW Vice President Matt Tsien -- that Chinese competitors bearing an “amazing, remarkable resemblance...” to the Sunshine have cropped up.
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