Chinese cars outselling premium brands

24 November 2012
, CarsGuide
Chinese cars outselling premium brands
“Chinese cars will be up to speed in less than half the time it took the Koreans,” says Crichton.

Badge snobs may be surprised to learn sales of Chinese cars are ahead of household names such as Land Rover, Lexus, Volvo, Peugeot and Renault.

Great Wall Motors – which sells Australia’s cheapest ute (from $17,990 drive-away) and compact SUV (from $21,990 drive-away) – is on track to deliver its 30,000th car locally either late this year or early next, hitting the milestone in less time than it took Korean juggernaut Hyundai.

It took Hyundai five years to sell more than 25,000 cars in Australia; Great Wall reached the same point in a little over three years. Great Wall sales are up 32 per cent this year and it is the 17th best-selling brand nationally.

Great Wall is handled in Australia by independent distributor Neville Crichton, a 50-year veteran of the car industry who introduced Japanese car maker Suzuki in the 1980s and little known Korean maker Kia in the 1990s, as well as several European marques.

“Chinese cars will be up to speed in less than half the time it took the Koreans,” says Crichton. “Many of them are using Australia as a test market for other countries. If they can be successful here the expectation is they can be successful in other markets.”

Not every Chinese car brand has been successful, though. Chery, also imported by Crichton, has had a slow start “until the right models come along”. Others have stalled.

Perth car retailer and entrepreneur John Hughes – the man who helped bring Hyundai to Australia with Alan Bond in 1986, and went on to become the world’s biggest Hyundai dealer from 1997 to 2003 – began importing Geely cars into West Australia last year with a view to expanding east this year. But it hasn’t happened yet because he’s had to modify the cars – after they’ve docked – to meet Australian regulations.

After several promises over the past 18 months, pick-up maker Foton last week released the Tunland ute in small numbers via an even smaller dealer network in just four states – not including NSW, Australia’s biggest market.

Foton priced its vehicles about $10,000 dearer than the Great Wall utes, putting them in direct competition with the established brands – a highly ambitious move.

Chinese brands are not only unproven, their resale values are hit hard until they become better known.Early feedback from the wholesale trade is that they might be cheap to buy but they also have among the weakest resale values of any brand.

"The resale values of Chinese cars are at or near the bottom of the segments they compete in," says Santo Amoddio, managing director of car valuers Glass's Guide.

"Their resale took another hit when the asbestos issue came out [but] that will strengthen again as newer models arrive. The quality and resale values of Hyundais were weak in their early years but now they're strong in both areas. The Chinese will get to that level in much less time."

An asbestos scare in August – almost 24,000 Great Wall and Chery cars were found to have gaskets that contained the banned material – put a dent on sales and customer enquiries. But the parts are being replaced even though the federal government did not demand a recall.

“It’s worth pointing out that this type of asbestos had been used on other cars until 2003, and those cars weren’t required to be recalled,” says Crichton. “But we’re doing it any way because it’s the right thing to do.” As for quality and reliability, Crichton says “they get better with every shipment”.

“People might be surprised, but the warranty claims on our Chinese vehicles are lower than the warranty claims on our European cars,” Crichton says. “If there is an urgent change required, we can get on the phone and have it fixed within a week. With the Europeans you’d still be arguing with them.”

Crash safety has improved, too. “We’ve worked with both Great Wall and Chery to get their crash test performance up to speed,” says Crichton. The first Great Wall vehicles tested in Australia scored two stars out of five for safety, but the latest SUV scored four stars. “They want to learn and they’re being very co-operative and supportive,” says Crichton.

Meanwhile, Crichton says he is “days away” from signing a contract with a major Chinese bus company, and he’s just secured a deal to import Chinese light trucks. “That’ll give me cars, utes, trucks and buses; there’s nothing else left.”

Crichton reckons he will sell 20,000 Chinese-made vehicles in Australia next year alone. “And China is on track to build 20 million cars. They’re not pioneers anymore, they’re the biggest car-making country in the world.”