JV Automakers to Compete in Low-end Market

The new Sail made its debut on January 11 and the sale price was announced. The prices of five models which were put into market at first ranged from 56,800 to 68,800 yuan. For the first time a small sedan produced by a joint venture pulls the sales price down to the range of 50,000 yuan. It is expected that several joint ventures will launch low-end models whose sale prices are about 60,000 yuan in the next two years. Now joint ventures are competing with independent brands which produce 50,000-70,000 yuan models.

In the domestic auto market, independent brands have occupied the low-end market in which the models are less than 80,000 yuan for a quite long time. While in the medium and high-end markets in which models are more than 100,000 yuan, independent brands have introduced several products. However, they got few achievements. But in recent years, Chery, Geely, BYD and other domestic automakers have launched some high-end or luxury models since the power of independent brands is increasing. While domestic automakers are joining in high-end market, joint ventures are busy developing low-end market. With the continuous introduction of models, joint ventures have finalized the layout in high-end market. They planned or began to launch models with the price of no more than 80,000 yuan.

In the past, joint ventures have not introduced low-end models due to several concerns. The cost is higher and manufacturers can't guarantee the quality of low-end models. In addition, joint ventures fear that cheaper cars may degrade the brand image. So why do joint ventures join in the low-end market now? Sohu Auto will offer several reasons to illustrate that issue.

First, with rapid and stable development of the domestic auto market, the domestic auto ancillary industry has also made great progress. Joint ventures are able to deliver some high-quality and low-price models. Second, with the energy crisis intensifying, Chinese government has begun to guide consumers to purchase small cars with the help of policies and other means. Third, the auto market in largest cities has gradually become mature and the growth is slower. However, in small cities and towns, there is a huge market space. The consumers in those markets care about the lower price, refined appearance and reliable technical quality. The sale price should range from 50,000 to 80,000 yuan. Among the above three factors, the third one is the core reason. The capacity of low-end markets is the major temptation.

The release of the new Sail is merely a beginning. Joint ventures have begun to introduce several models in the low-end market. Nissan March, Suzuki Splash, Volkswagen New Gol and other low-end models will be introduced into the market soon.

Suzuki introduced the new Alto in 2009 and will launch Splash in 2010. The new generation of Swift is also expected to be released by the end of 2010 or in the early 2011. Splash will be produced by Changhe Suzuki in China in this year. Splash is the fourth product under Suzuki's global strategy, following Swift, Grand Vitara and SX4. Splash has a European-style appearance and the target consumers are families. Therefore the position of Splash is similar to that of Swift. The wheelbase, length, width and height of Splash are respectively 2360mm, 3740mm, 1590mm and 1680mm. Those of Swift are 2390mm, 3695 mm, 1690 mm and 1510mm. Splash is bigger than Swift. Swift is a typical two-door small sedan, while Splash has some elements of MPV. The latter one seems more dynamic and is more in line with the Chinese people's aesthetic point of view. Splash is expected to be quipped with 1.0L and 1.3L gasoline engines after it is produced in China. From the engine we can tell that the level of Splash is lower than Swift but higher than Alto with a sale price of 50,000 to 70,000 yuan.

Nissan will launch a strategic plan named “V-platform model”. V-platform model is the strategic model that Nissan will introduce into the market. During the process of introduction of V-platform models, Chinese auto market plays a very important role. Dongfeng Nissan has planned to launch some cars with smaller engines. This is the new generation of March. March is positioned as a micro car in urban area. As to the sale price, March is slightly lower than Livina. March will be equipped with 1.4L and 1.6L engines and the price is expected to be 60,000 to 80,000 yuan.

Shanghai Volkswagen will launch the new Gol whose price is expected to be 70,000 to 90,000 yuan. The new Gol is based on Volkswagen PQ24 platform. The length, width, height and wheelbase of Gol are respectively 3839mm, 1656mm, 1460mm and 2465mm. Those of Polo are 3916mm, 1650mm, 1465mm, and 2460mm. As to the power system Shanghai Volkswagen is very likely to use 1.4-liter or 1.6-liter engine with which Polo has been equipped. In Brazil, the new Gol is equipped with 1.0-liter and 1.6-liter engines.

As early as 2008, there were some rumors in auto market that Honda would introduce a small car named TIF to China in order to win shares in the low-end market. In the recently-opened New Delhi auto show, Honda unveiled a small car named New Small Concept. Currently the New Small Concept is still in the concept stage. It may be the prototype model of some low-cost small cars which will be introduced into China and India in the future.

Recently, it is reported that Dongfeng Peugeot Citroen Automobile will introduce a small-vehicle platform and produce some low-end models which are designed for Chinese market. In addition, Toyota, Hyundai and joint ventures have some plans to introduce some cars which sell around 60,000 yuan in China.(Translator:Qinghua/Hanxin)

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