Own brands SUV declined from 70% to 20%

　　SUV market plummeted

　　With the volatility of oil price and the financial crisis broke out, large fuel vehicles such as SUV have been the first heavily damaged market segment in Chinese car market since 2008. In 2008 and 2009, the global SUV market respectively fell 8% and 13%, more than decline rate of the overall global car market for two consecutive years. Global sale of SUV in 2009 was 6.6 million units, down nearly 2 million units compared with the peak of more than 800 million units.

　　However, SUV market was different from other market segments. Despite SUV market was generally in gloomy situation of each brand differed sharply, performance of low-end Korean cars was strong thanks to low prices and the depreciation of won. Stimulated by hot sales of new model Soul, SUV of South Korea's Kia increased 66% in global market. Without support of the new models, sales of Hyundai SUV also withstood the financial crisis and were flat compared with 2008.

　　If strong performance of low-end SUV was a normal response to the financial crisis, hot SUV sales of luxury cars such as Audi, Volvo and Mercedes-Benz were unexpected. In 2009 sales of Audi SUV nearly doubled, sales of Volvo SUV increased by 50%, and sales of Mercedes-Benz SUV achieved an 8% increase.

　　Meteoric rise of Luxury SUV's thanks to low emissions development. Audi introduced the intermediate Luxury SUVQ5 in 2009 with main emission 2.0T. Q5 has been sold well after listing, and global sales nearly reached 95,000 units in 2009 which also helped it surpass old model BMW X3 as champion. Meanwhile, sale of new Volvo XC60 equipped with 2.4T engine also performed well after listing. In 2009, global sale of XC60 was nearly 60,000 units.

　　In addition to luxury SUV, displacement of Kia's Soul is also lowered to 1.6 liters. Seen from performance of all countries’ SUV market, low-emission SUV was popular with consumers. In Germany, SUV sales with a displacement of 2.0 liters and below surged to 61% in 2009 from 39% in 2007. In UK SUV sales with a displacement of 2.0 liters and below also jumped to 50% in 2009 from 33% in 2007. SUV sales with a displacement of 2.0 liters and below of Chinese market grew slowly, and by 2009 sales only jumped to 44% from 31% in 2007.

　　When international oil prices have been high and uncertainty of oil prices in the future increases, SUV's low-emission development has become a trend.

　　China's SUV market still has a great growth potential

　　In 2009, China's SUV market has maintained a blowout situation like the previous two years with an increase of 60%, and was flat compared with passenger cars as a whole. Although more than 90% of the SUVs in China’s SUV market belong to models with a displacement of more than 1.6 liters which are exclusive from preferential policies issued by Chinese government, growth of SUV market only slowed down in the first half of 2009. With recovery of China’s economy, SUV resumed an explosive growth in the second half of 2009. In 2010, passenger car sales slowed down due to policy weakens the growth. Sales growth of passenger cars declined to 26% year on year in the first quarter of 2010, while the SUV market was still in triumph with growth rate increased by 81% year on year in the first quarter of 2010.

　　Since blowout of SUV market in 2007, SUV has gone through rapid growth for three years. Moreover, this situation maybe will continue in short term. Even after so many years of rapid growth, SUV currently accounts for only 9% in domestic passenger car market, which is also lower than international average level of 12%. Moreover, there is more hilly terrain in China whose percentage is about 65% of China’s total terrain. SUV's market share in countries of this terrain is often higher than countries of plains such as Western Europe. In South Korea and Taiwan whose terrain is similar to China’s, SUV's market share reaches 15%.

　　SUV’s market share of China's various provinces also proves the above point. In plain areas such as Hebei and Shandong, SUV’s market share was only 6% in 2009. However, in provinces including Sichuan and Shanxi where have more mountains, SUV's market share can be 12%. In areas such as Inner Mongolia, Tibet and Yunnan-Guizhou Plateau, SUV's market share exceeds 15%. As the Midwest becomes main force of Chinese car market to achieve sustainable growth, potential of the domestic SUV market is still huge.

　　Own brands is urgent to grow and low-price space is still huge

　　Annual sales of the domestic SUV market jumped to more than 700,000 units in 2009 from about 210,000 units in 2005, more than 3 times in 5 years. Own brand SUV sales, however, just increased by 60% to 160,000 units in 2009 during recent five years. The same period, sales of the Japanese brand SUV jumped to more than 360,000 units in 2009 from more than 60,000 units of 2005, up nearly 6 times. Korean brands also performed well whose SUV sales climbed to more than 130,000 units in 2009 from more than 20,000 units ,up nearly 6 times also. B ZHONGGUO JINHUI JIA1 6DANYUAN 1502

　　In the process of growth of the domestic SUV market in recent years, the market share of own brand SUV declined to about 20% in 2009 from nearly 70% of 2002. Decline of own brand’s market share in the SUV market was caused by mainstream manufacturers’ neglect of the market. Prior to 2007, in China’s mainstream own brands only the Great Wall and Chery entered the SUV market. Other own brands SUV models were all made by inferior manufacturers. SUVs made by inferior manufacturers were mainly decked by pickup. Consequently, in the growing SUV market although they can temporarily survive, limited technical capacity coupled with fragmented business, brand image can not be formed.

　　Since 2007, Japan and South Korea’s brands have started aggressively into the SUV market brands, and market share of China’s own brands have been eroded so that missed the best time for occupying SUV market.

　　In fact, development of own brands SUV have many advantages including terrain and consumers. Most of Western European countries are located in the plains and there are less mature SUV models in Western European countries. Meanwhile, SUV models of the United States mostly are gas-guzzling, which is not suitable for a large number of sales in Chinese car market. Competitors for China’s own brands basically are Japan and South Korea.

　　Before 2005, development of China’s SUV market was not attractive and Japan and South Korea’s brands didn’t aggressively enter. With the development of China’s SUV market, South Korea’s brands began entering Chinese car market in 2005 such as Tucson, Santa Fe and SL. South Korea’s brands have become the strong competitors for China’s own brands. The Japanese brands SUV is striking, with the introduction of redesigned CR-V in 2007, localization of Toyota RAV4 and the Highlander in 2009, Japanese brands have already accounted for 50% share in the domestic SUV market.

　　The Japanese and Korean brands haven’t stopped to enter China’s SUV market. Hyundai ix35 has been listed and additionally a new Kia SUV will be listed in the second half of 2010 to compete for China’s SUV market. And with listing of 10 own brands SUVS including Chery Rely X5, Great Wall Hover H5, own brand finally saw the outbreak in 2010.

　　However, whether own brands SUVs are able to win turnaround or not, market positioning is particularly important. Midwest region’s demand for SUV is high, but considering that its spending power is rather weak, it favors low-priced SUVs. At present, market share of SUVs whose prices are below 150,000 only accounts for about 20% of the total SUV market. For own brands which occupy the market by price, Midwest region is providing own brands SUV enough space for development. (Translator: Qinghua Wade)

　　See original Chinese report Please click:

　　http://auto.sohu.com/20100429/n271823893.shtml