In 2017, the four-year streak of double digit growth of the Chinese domestic passenger car market ended as sales increased 2,6% to just over 24,2 million, down from +17,2% last year. This is the lowest growth rate in at least a decade and a halft, possibly longer (we don’t have exact data from before 2003). Still, it is a new annual record as sales have almost doubled since 2011 (12,3 million) and more than quadrupled since 2008 (5,6 million). Doomsayers have predicted a peak of the Chinese car market for years but has continued to defy gravity as growth in the big coastal cities indeed stalled but continued in the rural areas where car ownership is still behind and has plenty of room to grow. Despite that, sales are expected to be down slightly in the first few months of 2018 as the sales tax on vehicles with engines of 1,6 liters or smaller has been returned to its usual level of 10%, from 7,5% in 2017 and 5% from the second half of 2015. This subsidy had been put into place after sales dropped three consecutive months during uncertainty about a Chinese stock market crisis. It has mostly benefited domestic carmakers who have gained 4,5 percentage points of market share from 2015 to 2017. Chinese brands held a record 42,37% of the passenger market, up from 41,35% in 2016 and from 30,46% ten years ago, in 2007. Sales of domestic brand vehicles across all segments were up 5,2% in 2017, while sales of domestically produced cars from import brands increased by just 0,8%. Of those, the Japanese brands did the best at +12,6% to 4,27 million, compared to a gain of 3,6% for European brands to 5,49 million and +2,6% to 3.04 million for US brands. In contrast, South-Korean brands sold just 1,16 million cars, a whopping 630.000 fewer than in 2016, and a loss of 35% of their sales in a single year. The reason for their demise has been discussed here many times this year and will be explained again below. Out of the 76 brands that sold domestically produced passenger cars in 2017, 41 set a new annual sales record in China, including 18 out of 28 import brands and 23 out of 48 domestic brands.
Crossover sales were up 13% to just over 10 million, while sedan sales dipped 1,4% to nearly 12 million and MPV sales declined 13,4% to 2,25 million. Of these sales, New Energy vehicles were up 53% for the second consecutive year to 777.000 sales. EV passenger car sales soared 82% to 468.000, while PHEV passenger car sales were up 40% to 111.000 units, meaning New Energy vehicles took 2,4% of the total passenger car market. An additional 184.000 EV commercial vehicles (+21%) and 14.000 PHEV commercial vehicles (-26%) were sold in 2017. Also check our China 2017 car sales ranking by model.
Before we’ll discuss the brands ranking, let’s look at manufacturer sales (with one caveat: these sales are retail sales as reported by the manufacturers themselves, whereas the rest of this report is based on wholesale deliveries from the factory to dealers, as reported by the China Association of Automobile Manufacturers. Therefore the figures may not fully align). In 2017 VW Group reports sales of 4,18 million units across all of its brands, an increase of 5,1% on the year before. As a result, Volkswagen Group remains ahead of its rival General Motors, which reports sales of 4,04 million, an increase of 4,4% on 2016.
VW’s Audi brand had a dispute with its dealers in the beginning of the year when it revealed plans to start a second joint venture with SAIC Motor (also the production partner of Volkswagen and Skoda), which would include a second distribution channel for vehicles made by SAIC-Audi, which would then compete against the existing dealers of the FAW-Audi partnership. A handful dealers stopped ordering cars and eventually VW conceded, promising to hold off the second JV until sales of the Audi brand have significantly increased to a level that would sustain a second distribution network. After this announcement, Audi sales quickly recovered and the brand was able to fend off its rivals BMW and Mercedes-Benz for the luxury sales crown which Audi has held ever since it started producing vehicles in China in 1984. Audi sales in 2017 grew by 1,1% to 597.866 sales, including imports. This allowed it to narrowly outsell BMW Group, which reported an increase of sales of its BMW, Mini and Rolls Royce brands of 15% to 594.388 units, while Daimler AG closed in the gap with the two leaders as sales of its Mercedes-Benz and Smart brands soared 26% to 587.868. Ironically, Mercedes-Benz had been a distant third for years as it also had two separate distribution channels in China: one for its import models and one for the cars produced by its Beijing-Benz joint venture. This confused consumers and hurt dealer profitability, and when the company finally merged the two channels in 2012, the sales gap with Audi started to narrow quickly. In 2012, Mercedes-Benz sold 206.000 cars in China, of which just under 100.000 domestically produced. That was only half of Audi’s volume that year, as it sold over 406.000 cars in China, of which over 328.000 domestically produced.
In terms of domestically produced cars, Volkswagen manages to increase its market share in China, with sales up 4,4% to a record 3,14 million units. Audi sales move with the market at +2,4% to just over 549.000 units, keeping a comfortable lead over surging Mercedes-Benz, up 36,4% to 445.700 sales, and BMW, up 24,1% to 384.850 sales. Among smaller luxury brands, Volvo improves 28,5% to 90.400 sales, Land Rover is up 8,8% to 61.700 sales of its two locally produced models, while sister brand Jaguar also expanded to two models in December and sold over 22.000 units in its first full year of local production, a figure that should easily double in 2018 with a full year of XEL sales added to the tally. In contrast, DS is down 63,8% to just 5.847 sales with 4 models and I’m afraid the brand is doomed as I don’t think the DS7 Crossback will be the savior the brand is counting on. It should’ve launched crossovers sooner and not have bothered with models that don’t appeal to Chinese buyers anyway, like the DS 4S and DS5 hatchbacks.
The French have completely lost touch with the market and have reacted too late to changing trends. With sales almost halved (-46,7%) Citroën lost another half percentage point of market share and is down to just 0,55% share. It held a 2% market share as recently as 2010 and was at almost 5% in 2003. Its 2017 sales volume was the lowest it has been since 2008. Peugeot lost 28,7% of its volume and is down to just over 1% market share. It was outsold by Skoda for the first time since 2012. Just 2 years ago, Peugeot was ahead of its Czech rival by 127.000 sales. And there’s a new rival starting to gain traction, as Renault only started local production in 2016 and has only launched 2 crossovers since. It sold 72.200 of those in its first full year as a local producer and is targeting 400.000 passenger car sales by 2022, more than all 3 PSA brands combined in 2017.
Fiat has ended production of its two unsuccessful models in 2017.
Buick sales are down 0,5% in 2017 and the brand dropped from #2 in the brands ranking to #4. It still sells over 5,5 times as many cars in China than it does in its home market US. Chevrolet rebounds from its horror year 2016 when it dipped to its lowest volume of this decade, with a 12% gain to back above 600.000 sales thanks to new model launches. That’s still below its 2015 figure and the second-lowest market share for the brand since 2003. Luxury sister brand Cadillac has another record year with sales up 55% to over 172.000 which means it sold more cars in China than in the US for the first time ever.
Ford had a difficult year and lost over half a percentage point of market share as it dips below its 2015 volume. It drops in the brands ranking to #10, passed by two local brands. Sales of its import models Explorer, Mustang, Focus RS and ST and the F-150 Raptor increased 4,6% to 18.322. Its luxury brand Lincoln only imports vehicles to China and is therefore much smaller than Cadillac as it faces a 25% import duty, but is growing quickly. Lincoln sets a new sales record at over 54.000 sales, up 66,2%.
Finally, Jeep improved 52,4% to over 200.000 sales as the brand expanded its line up of locally produced models to 3. That figure will expand to 4 in 2018 with the arrival of the Grand Commander, a China-only three-row SUV.
As written above, the Japanese brands have enjoyed a good year in China, with sales across all brands up 12% and only one brand out of the eight domestic producers losing volume while the other seven set new annual sales records. What’s more groundbreaking is that both Mazda and Mitsubishi for the first time ever sold more vehicles in China than in the United States. Mazda sales in China increased 18,2% to 318.500 units, while its US sales were down 2,8% to 289.500 units. Mitsubishi sales of locally produced models in China more than doubled (including imports, sales grew 56%) to 120.000 units, compared to a 7,7% improvement in the US, to 103.700 sales. But these performances pale in contrast with Honda‘s growth in China. Honda added over 220.000 sales, or 18,5% of its 2016 figure, to jump into 2nd place in the brands ranking. For Honda too China is about to become its biggest single market, as its 1,42 million sales are not far behind its 1,49 million sales in the US. Nissan closed in on Toyota for the #2 Japanese brand spot in terms of domestically produced models. Both brands leapfrogged Changan and Hyundai in the brands ranking, but in their turn were passed by Geely for a net increase of 1 position in the overall brands ranking, to #5 and #6. Toyota sales increased 6,9% to 1,14 million and Nissan sales increased 10,1% to 1,12 million.
Infiniti sales of its two domestically produced models edged up 6,5% to reach 27.800 units in its fourth year of local production, while Acura sales more than doubled on its first partial year to 14.250 sales. Both brands still trail Lexus, which is the only major luxury brand which still has no local production nor has announced plans to (Lincoln will start in 2019) and relies solely on imports from Japan, despite being the largest Japanese luxury brand in China. Lexus sold around 132.900 vehicles in China in 2017, an increase of 22%.
That leaves Suzuki as the big outlier, with sales down for the third consecutive year. With just 118.000 sales, the brand is back to its 2005 level, which at the time meant a market share of over 3,5% but in 2017 its share has shriveled to just 0,5%. Another brand that is losing out in China, but which we usually don’t report here because it has no local production is Subaru. In 2017, Subaru’s China sales were down 35% to 30.000 vehicles, in sharp contrast to the 648.000 it sold in the US, another record thanks to an increase of 5,3%.
The dispute over South Korea allowing the United States to station a missilie shield at the border with North Korea, which China claims has radars that can reach its territory. The following consumer backlash has not only affected South Korean carmakers and their domestic production joint venures with BAIC (Beijing-Hyundai) and Dongfeng (Dongfeng Yueda Kia), but all of the country’s businesses and brands in China. By the end of 2017, emotions seem to have started to cool down slightly, but then the brands were faced with another reality: market share had already started to fade before the crisis broke as a result of a line-up misaligned line with changed consumer preferences and increased competition from domestic rivals. Hyundai and Kia have relied for far too long on cheap sedans and have not invested in building a strong image in China. As a result, they’re facing competition from increased quality at domestic brands which still undercut the Koreans in price, as well as having missed the boat on the crossover boom. This is why Hyundai had dropped from #2 in the brands ranking between 2012 and 2015 to #5 in 2016 and out of the top-10 in 2017. It lost 30,2% of its sales
To reverse their misfortune in China, the two brands are planning to launch a number of crossovers in the coming years in order to regain market share. However, it will take some time to recover from a crisis like the Koreans faced this year. Just look at the Japanese brands which faced a similar situation in 2012 during a dispute between China and Japan over a couple of islands in the East China Sea. Dealerships and stores of Japanese companies and brands were attacked, cars were set on fire and sales of Japanese cars tanked. Five years later, the market shares of Nissan, Toyota, Mazda and especially Suzuki have still not recovered to their 2011 levels.
As written above, Chinese brands have taken a record market share of their home market. But not all brands have enjoyed similar great fortunes. There are still 48 different brands in China and new (sub)brands are being rolled out every month like it’s the 1990s again. All this fragmentation of small brands and manufacturers is confusing customers and diluting brand values. Some of these smaller manufacturers haven’t even got modern production lines but still rely on a lot of manual labor or on outdated decomissioned tooling they bought abroad (to be fair, those that also produce for foreign brands as well as some ambitious independents have state-of-the-art facilities). All this goes straight against the wishes of the central Beijing government which wants one or two, maybe three “global champions”, Chinese brands that have gained a large enough foothold at home and have become technologically strong enough to compete on merit (instead of just on price) in export markets on a global scale, including mature markets like Europe and the US. However, most of the domestic automakers rely comfortably on the profits flowing in from their production Joint Ventures with foreign automakers who are not allowed to produce in China without a local partner who takes at least a 50% share. As a result of these easy profits, most of these manufacturers are unwilling or too lazy to risk big on their own brands. This is a reason why Beijing is contemplating relaxing the 50% rule in the near future, hoping to force consolidation in their domestic industry and jumpstart investment in strong companies and brands while cutting away the weak players.
Among the potential winners Geely is the most obvious and perhaps most ambitious, becoming the first Chinese brand to sell more than 1,25 million cars in a calender year and to hold more than 5% market share at home, jumping from #10 to #3 in just one year thanks to a 60% surge in sales. This is a result of launching a slew of new or upgraded models in recent years, among which a lot of crossovers, with modern (“Western”) design, good quality and affordable prices. Geely is known worldwide for its ownership of the Volvo brand, but has also aqcuired the Lotus sports car brand and a stake in Malaysia’s Proton last year, and is currently busy to take a controlling stake in the stand-alone Volvo Trucks division. They also launched the Lynk & Co upscale brand in China this year, and are planning to expand this brand to the US and Europe within a few years. Geely is a privately owned company and has no ties to the Chinese government, nor does it have any production JVs other than of course with Volvo.
Another winner this year is Baojun, a brand co-owned by General Motors, its Chinese partner SAIC Motor (owned by the Shanghai government) and Wuling, a maker of low-cost minivans and minitrucks. Baojun has also quickly expanded its line-up in recent years, and has greatly benefited from a growing middle class in the huge Chinese hinterland, away from the large coastal cities. Read more on their succes in my recent article on how GM’s big bet on small cars in China has paid off. Baojun sales soared by more than a third, the brand added a full percentage point of share and jumped from 11th to 8th in the brands ranking and #3 Chinese brand, not far behind Changan, the former domestic leader.
Thirdly, GAC with its Trumpchi brand has enjoyed solid growth since the launch of its first passenger car just 7 years ago and has passed the half million sales milestone this year after a 37% gain in volume thanks to successful new models, mostly crossovers. GAC has now revealed plans to start sales in the United States within 2 years as you can read in my article on GAC’s plans to enter the US car market. GAC also produces vehicles for Toyota, Honda, Acura, Mitsubishi and Jeep and therefore has state-of-the-art production lines and the know-how to build good quality vehicles. Being from the entrepreneurial Guangzhou province (and owned by its government), the company has entrepreneurship and trade in its blood, one of the reasons why it’s among the first to try and get a foothold in a mature market.
Among the medium sized domestic brands, Soueast is a winner with a 50% gain in 2017 thanks to the addition of its second crossover model, Dongfeng-Nissan’s Venucia brand is finally starting to catch up with a 27% improvement and SAIC, China’s largest manufacturer thanks to its partnerships with GM and VW Group, enjoys booming sales of its three brands Roewe (#21, +60,2%), MG (#36, +67,7%) and Maxus (#60, +71,4%). Hawtai, a brand that started of by selling rebranded Hyundai vehicles in 2004 that it produced for the South-Korean manufacturer, was perceived to be doomed when that partnership ended in 2010, but the company has just continued to sell vehicles based on those platforms. However, when the New Shengdafei (a Chinese version of the Santa Fe name) was launched, sales started to pick up again and really came into growth mode in 2017 with two new EVs, of which one an electric version of the New Shengdafei, were launched, leading to a 77% boost in sales to over 129.000 vehicles, its first-ever six-figure year and #38 in the brands ranking. Also passing the 100k for the first time is Leopaard, the former Changfeng Liebao brand with sales up 36% thanks to its second modern crossover next to its version of the second generation (1991-1998) Mitsubishi Pajero that it also still sells. Among smaller brands, Zhi Dou stands out with sales more than doubling to over 42.000 units of its small and cheap EVs. One small brand that I’d like to point out is Denza, which is a brand of Daimler and BYD and which makes one model: a relatively expensive EV. In its first 3 years, it never sold more than 3.000 units annually and has been loss-making. In 2017, sales doubled to 4.600 of which more than 1.000 just in December. Probably still not enough for profitability, but nonetheless hopegiving for the brand.
Brands that enjoyed their first full year of sales in 2017 like SWM, Hanteng, Bisu and Borgward, obviously improved on their introduction year as they expanded their line-ups, but growth at Borgward seems to have stalled after the BX5 was launched as the brand has seen declining sales ever since its first anniversary in July. This year we’ve welcomed three all-new domestic brands to the ranking, all upscale (or even premium) brands from existing manufacturers: Wey (owned by Great Wall) has been the most successful so far, selling over 20.000 vehicles a month in November and December. Lynk & Co as mentioned above arrived in December and has set ambitious goals, and finally Arcfox (owned by BAIC) also launched in December and will sell only EVs.
Where there are winners, there are losers, and some brands are hit harder than others. Among the big brands, we’ve already mentioned Changan down from most popular local brand to #3 (overall #7) with sales down 8% as competition for its cheap crossovers intensified. The once-promising Haval, Great Wall’s SUV brand that it had planned to become the world’s largest SUV maker ahead of Jeep and Land Rover, has hit a roadblock with sales down almost 10%. Haval has a confusing line-up of 8 crossovers of which some have as many as 4 “sub”versions, like the H6 and H6 Coupe (which is not really a coupe), both in sporty Red Label and non-sporty Blue Label versions, and of which some are also priced to compete internally. For the year, Great Wall sales are relatively stable thanks to the additional volume of Wey, but in December Haval lost more than Wey could compensate. They need to get their act together and make clear what the brand stands for and put some consistency in their product line-up.
BAIC lost 17,8% and Dongfeng 6,1%, both on a confusing line-up of brands and sub-brands, some of which sold by competing dealerships. Not a good strategy to create strong brands. BAIC did become China’s biggest seller of electric cars thanks to the misfortune of BYD (-18,3%). Wuling lost 19% of its sales of the Hongguang, still China’s best selling model (even though it’s now become a family of versions) amid a slowdown in MPV sales and increased competition in that shrinking segment. Chery was down 9,8%, the company consolidated its wide range of subbrands just a few years ago, saw its sales surge as a result but now seems to have reversed that decision: Cowin was launched as a (sub)brand, Karry was supposed to be the commercial vehicle division but now also launched an MPV, it has presented plans for an Xceed premium brand that aspires exports to Europe and is launching the Jetour brand in January 2018. Deja-vu all over again….
One of the biggest losers among the domestics is JAC, down 40% or a loss of almost 150.000 vehicles as the company has bet big on EVs but then forgot to also update its existing range. At least its EV investment has paid off in the form of a partnership with VW to build electric cars for that company’s yet-to-launch EV brand for China. Other big losers among medium-sized domestics are Haima (#35, -35,5%), Brilliance (#43, -37,5%, but up with double digits in December thanks to its newest crossover V6), and Landwind (#57, -46,8%). In relative terms, the biggest loser is Luxgen, down 56% to less than 18.000 sales despite having launched 2 new models in as many years, leading to the question if this brand has any future at all.
China brands ranking 2017
Please note these figures are for locally produced models only (unless stated otherwise), they exclude imported cars, which make up only a small portion of sales in China.
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