After two years of growth, sales of limousines in Europe are back down again, by 6% to nearly 43.500 sales, or 0,3% of the overall market. The dominant segment leader Mercedes-Benz S-Class rebounds after three straight years of lost share to return to above 33% share with over 14.000 sales. This is still a long way from the nearly 43% share the model held in 2014 and 2015 but nonetheless a strong performance between rivals that are newer and fresher in a segment where innovation and product excellence are key. The recent updates of the S-Class have helped as the interior is now up-to-date again, but the changes in exterior design have been limited to prevent owners of the pre-facelift version from feeling like they’re being driven in an “ old” car. One sidenote we always need to make here is that S-Class sales include the Coupe and Convertible versions, which the others don’t offer for their limousines.
After a double digit gain in 2017, the premium large car segment in Europe saw its sales decline by 2% in 2018, but manages to stay above 400.000 sales for the second consecutive year and still holds 2,7% of the overall car market. In the top-3, only the BMW 5-series managed to improve its share, and only by the thinnest of margins. This doesn’t necessarily mean the German domination of this segment is under threat, because the losses of their volume sedans (and station wagons) were partially offset by increased sales of their niche models in this segment. While the top-3 models see their combined share thaw from 75% in 2017 to 71,8%, the share of the German 3 brands is stable at 78,9%. The class leader Mercedes-Benz E-Class lost 8% of its sales in 2018 and drops back below 30% share of the segment. The 5-Series is less than 10.000 sales behind thanks to a 1% decline in sales, while the Audi A6 loses ground quickly with a 10% decline as 2018 was a changeover year to the new generation A6.
The midsized premium car segment in Europe shrinks for the second consecutive year in 2019, and does so by 16% to fewer than 600.000 sales or 3,8% of the overall market. That is a comparable trend to the non-luxury midsized segment, which is down 17% for the year. All top-5 players lose sales volume by 15% or more, with just the segment leader doing less terrible than the average of the class. That means the Mercedes-Benz C-Class consolidates its top spot and now has a 25,9% share, while the Audi A4 falls below 20% share. The A4 was hit especially hard in the last four months of the year, after the WLTP fuel efficiency testing standards kicked in and the brand had to stop sales of a number of popular versions of the A4, among others. Until August, A4 sales were stable on 2017, but from September onwards, the model’s average monthly sales dropped to just 30% of the average in the eight months before. In those last four months, the A4 lost almost 30.000 sales on the year before, while the C-Class lost 5.000 sales in the same period and the BMW 3-series lost 7.000 sales. With a new 3-Series in showrooms this year and Audi’s continued struggles to get the A4 tested under the new rules, there’s a significant chance of a different podium in 2019.
After five years of domination, the Audi A3 is no longer the best selling compact car from a luxury brand in Europe. In 2018, the Mercedes-Benz A-Class topped the charts for the very first time, as the overall segment shrank for the second year in a row, to below 800.000 sales, 5,2% of the entire European car market. The A-Class, helped by the introduction of the fourth generation, gained 7% to set the nameplate’s highest annual sales figure since 2005 at over 150.000 sales. The A3 lost 13% of its sales while the BMW 1-series was down 7% and was stuck in third place. Just off the podium we find two MPV models, of which the BMW 2-series Active/Gran Tourer is still the best seller despite losing 20% of its sales, as the Mercedes-Benz B-Class is down just 6%. The Mercedes-Benz CLA is down 9% which means it maintains is share of the segment, despite slowly starting to age. [Read more…]
The large SUV segment is one of the smallest in Europe with fewer than 43.000 sales in 2018, down 20% on the year before. Compare that to the US where over 2 million of these vehicles were sold last year, up 3,4%.The entire top-3 loses share and the segment best seller barely managed to sell over 10.000 units last year. Unlike the midsized crossover segment, where some models are also available as 7-seaters, there are not a lot of new entrants to this segment in Europe, but brands are actually withdrawing their slow selling models, like Nissan which no longer sells the Murano and Pathfinder and Mazda which never really sold the CX-9 in significant quantities, as opposed to the US. The latest newcomer is the Ford Edge in 2016, but after storming to the top of the ranking in its first full year of sales, we have a change of leadership for the fourth consecutive year, as the Kia Sorento reclaims the top spot that the Ford Edge stole from the Hyundai Santa Fe just one year before.
Sales of compact crossovers continue to surge in Europe, with a 15% gain in 2018 to over 1,7 million sales or 11,1% of the overall market, up from 9,6% in 2017 and 7,7% in 2016. Most of the growth comes from newly launched or very recent models. We’ve decided to separate the tables of the compact and midsized crossover segments but still feature them in one post and in one graph as the models in these classes are so close to each other in size and there are so many different opinions on which models belong in which of these segments. Combined, sales in these segments are up 15% to 13,7% of the total European car market, and VW Group and Renault-Nissan each control 22% and PSA another 17% of these segments combined, for a whopping 61% share by just three manufacturers. The Nissan Qashqai is still the best selling crossover in Europe, despite losing 7% on its record volume of 2017. Its closest rival is still the Volkswagen Tiguan, down 9% although its figures are estimates, as we don’t have official split figures from the 7-seater Tiguan Allspace and we estimate a 15% take rate for that version, which is featured in the midsized crossover segment. The Peugeot 3008 continues its impressive run and also crosses the 200.000 sales threshold thanks to a 20% increase on last year. When combining these segments, the 3008/5008 duo would be on top of the charts, just ahead of the Qashqai/X-Trail, with the Tiguan trailing at a distance. By any standard an impressive performance from the French brand, and we’re curious to see how the all-new Citroën C5 Aircross will perform once its deliveries start to show its true potential.
After briefly stabilizing in 2017, sales of small crossovers in Europe continued their booming growth curve with a 29% increase in 2018, to 1,94 million. As a result, this segment now accounts for 12,6% of the overall European car market, up almost three percentage points in a single year. Undoubtedly, over 2 million small crossovers will be sold in Europe in 2019, and it could very easily become the second largest segment after subcompact cars, but overtaking compact cars (the “Golf class”). It’s not only one of the biggest segments in terms of volume, but also in the number of players, with no less than 28 models by the end of 2018 and another handful of newcomers arriving in 2019. Meanwhile, the Renault Captur celebrates a fifth consecutive year on top of the ranking and remains the only nameplate in the segment to sell more than 200.000 copies per year, and it has done so for three years in a row without any rival coming close, even with a second generation coming out this year. In fact, the Captur’s closest rival in 2018 comes from its own ranks: the Dacia Duster sets a new annual sales record for the third straight year, improving an impressive 24% on last year’s record. Still, the Duster also loses share as that is less than the overall segment growth. The Peugeot 2008 sees stable sales, just like the Captur, but manages to stay on the podium despite losing almost 3 percentage points of share, again: just like the Captur.
Sales of large MPVs in Europe were down in each quarter of 2018 and the segment was down by 30% over the course of the year. As a result, European families and rental companies bought fewer than 100.000 large MPVs, or 0,6% of the total market, down from 0,8% in 2017 and 1% in 2016. This is the lowest segment volume in at least two decades and the future of the segment looks bleak as fewer brands see profitability at these volumes and 7-seat crossovers continue to cannibalize their MPV rivals, even though the latter are still way more space efficient and practical. All of the six remaining players in this segment show double digit losses and only three sell over 20.000 units. The Ford S-Max holds on to the segment lead but loses one third of its sales compared to 2017. Its less dynamic and more roomy sibling Ford Galaxy does slightly better with a loss of “just” 23% and an increase of share, but nonetheless this is the worst year for both Fords since 2015 when their current generations were just about to be launched.
The midsized MPV segment in Europe has declined for the third consecutive year and 2018 shows the biggest loss yet with a loss of 20% on the previous year to over 600.000 sales, the lowest annual sales since 1999, not long after the Renault Megane Scenic jumpstarted this segment in 1997. Sales of midsized MPVs peaked in 2006 and 2007 at nearly 1,5 million sales in Europe, but are now down 60% from that level and falling quickly, with a loss of 42% just in Q4 of 2018. The segment is down one percentage point to just 3,9% of the overall European car market. Like in all MPV segments, brands are replacing their MPVs by crossovers which are more popular. Only one nameplate in the top-10 managed to improve its sales, two others saw single digit declines while the remaining seven players suffered double digit declines on 2017. In this harsh environment, the Renault Scenic takes the annual lead for the first time since the launch of its fourth generation in 2016 and improves its share of the segment thanks to a decline of “just” 15%. 2016 and 2017 leader Volkswagen Touran stabilizes its share but is down into second place, just ahead of the best seller in 2015 and 2014 Citroën C4 Picasso (now baptized C4 Spacetourer). However, as both the Scenic and the C4 Spacetourer are available in 2 versions, a normal 5-seater and a three-row Grand version, we should also combine the Volkswagen Golf Sportsvan with the Touran for an honest comparison. And then VW is still in the lead, despite a 33% loss for the Sportsvan, which is unlikely to be continued for much longer after the regular Golf is renewed later this year.
Guangzhou Auto Corp, also known as GAC, is not your father’s typical State-Owned-Enterprise (SOE).
When you think of China’s auto sector and State-Owned-Enterprises (SOEs), what descriptions typically come to mind? Dynamic, innovative, fast-growth? Perhaps not.
Think again, because at least one such enterprise, Guangzhou Auto (aka GAC), is breaking the stereotypes. GAC would appear to be “that kind of company”; meaning dynamic, innovative, and definitely fast-growth – – especially, when compared to other “peer” SOEs.
GAC ranked 46th in terms of revenues growth, on The Forbes Growth Champions List 2018 Ranking which listed the fastest growing publicly traded companies around the world.
To help put GAC’s standing into perspective, the table below provides examples of other companies and their respective rankings:
The only domestic competitor above GAC was Geely, the number one domestic OEM in China. GAC’s revenues have been growing at a faster clip than both BAIC and BYD. BAIC, also a State Owned Enterprise, is the only other auto SOE that made the list.
Within China’s massive market, its electric vehicle sub-market is growing fastest. Also known as the New Energy Vehicle/NEV market, this segment grew by 62 percent year-on-year with 1.25 million NEVs sold during 2018. As noted in a China Daily article here, 2019 sales are expected to reach 1.6 million.
Although none of GAC’s NEV models were among the Top Twenty Selling NEVs in China; GAC has had at least some success in the market with its SUV PHEV, the GAC Trumpchi GS4, pictured below:
Over 10,900 GS4 PHEVs were sold during 2018, and momentum behind such sales grew on a quarterly basis:
The GS4 PHEV was first launched in June of 2017. During its first six months on the market, 1,863 vehicles were sold. Nearly as many (1,781) were sold in December 2018 alone.
The “after subsidies” price of a GAC GS4 PHEV in China is about 185,800 RMB ($27450). When running purely on its 12kWh battery, the SUV has a maximum range of 58 km. (36 miles). The GS4 has a top speed of 180/kmh (112 mph), and a range of about 240 km. at 60 kmh constant speed. In terms of price and many of the specs. highlighted above, the GS4 PHEV is similar to BYD’s Qin PHEV. The Qin PHEV was recently reviewed in the blog titled BYD Leads China’s EV Market. Although we don’t know for sure whether Chinese car buyers were viewing these two models as natural competitors, we do know from sales volume data that for every one GAC GS4 PHEV sold, BYD sold four Quin PHEVs.
GAC and its Joint Venture Partners: Imitation is the sincerest form of flattery
One development that is particularly interesting about GAC’s SUV PHEV is that a number of GAC’s joint venture (JV) partners have begun selling the same model, or an EV variant, using their own respective badges. Examples include the Toyota ix4 and the Mitsubishi Eupheme. Both Honda and Fiat-Chrysler (FCA) are following this approach with their own respective versions of the GAC GS4.
So why is it that four major international OEMs are copying GAC with the same car, same model, but using their own respective badges? As explained in the Bloomberg article The Car That Will Help Big Automakers Game China’s New Rules, this unusual strategy is driven by a number of factors:
- Government regulations require manufacturers to meet higher fuel economy standards,
- Beginning this year, OEMs are subject to new policies and regulations designed to address air pollution, carbon emissions, and global warming through the promotion of NEVs. Each OEM that produces more than 30,000 cars per year will have to earn carbon-credits through the production of NEVs, or alternatively; purchase credits from competitors that have surplus credits to sell.
- Many OEMs need additional time before their own NEV product offerings are ready for the market. Partnering with GAC, and selling GS4 variants, effectively buys additional time.
GAC in the USA?
GAC has the ambition to break into the American market. In an excellent Automotive News China article by Yang Jian, (What has emboldened GAC to enter the U.S.?) Yang explains the historical and cultural context underlying GAC’s confidence, and the companies entrepreneurial spirit. The company’s headquarters is Guangzhou, a port city, with a long history of foreign trade and a strong culture that supports entrepreneurship. Since GAC’s founding in 1997, the company’s confidence is grounded in actual past achievements which required some risk-taking, a behavior not normally associated with China’s auto-state-owned -enterprises. That risk-taking has paid off. During its early more humble years, GAC’s main business was producing and selling motorcycles and small buses. It wasn’t until 2010 that GAC started producing its first passenger vehicles. That’s right – – you’ve read that right – – the company that now has major joint ventures with Toyota, Honda, Mitsubishi, and FCA – – as well as its own successful and growing domestic brand (Trumpchi) – – has been producing passenger vehicles for less than a decade. Pretty impressive.
The company is expanding its entrepreneurial spirit in numerous directions. These include efforts to enter the US market, as well as efforts to expand its New Energy Vehicle business in general.
GAC’s ambition to establish itself in the American market is not new. As far back as 2013, GAC made its first debut at the Detroit Auto show, as highlighted in an article here. More recently, the company attended the 2019 show and displayed its EV concept car, the Entranze, as pictured below:
Perhaps more importantly, in an effort to engage with dealers, GAC recently attended the North American Dealers Association (NADA) conference in Las Vegas, where meetings were held with 80 dealers and partners. Although GAC had planned to enter the US market this year, that timing has recently been adjusted to mid-2020, as noted here. Trade tensions and tariffs between the US and China have contributed to the delays.
Back home in China, GAC is aggressively pursuing its ambitions to expand its NEV business. Last year, during the first 10 months alone, GAC sold 13,928 NEVs under the Trumpchi brand, according to an article here. While that’s not a large number when compared with other peer competitors like BYD or BAIC, it does, nonetheless, represent a more than doubling of sales from the 5,246 NEV units sold by GAC in 2017. In general, GAC’s new energy sales volume has been on a steady rise upwards over the last three years, as seen in the graph below:
During 2018 GAC’s Trumpchi conventional cars (i.e. cars powered by Internal Combustion Engines) still represented the overwhelming percentage (97%) of vehicles sold under the Trumpchi brand. Accordingly, new energy vehicles with a Trumpchi badge represented only 3%. By 2020, GAC hopes to raise that figure to 10%.
A number of investments, partnerships, and innovative projects are designed to move GAC closer to that goal. One innovative project involves the establishment of a “New Smart Energy” Automobile Industry Park, located in the Guangdong-Hong Kong-Macao Greater Bay Area. GAC and partners have invested 4.5 billion RMB ($670 million), and the total “planning capacity” of the plant is 400,000 vehicles per year. At this facility, solar energy will be used in the manufacturing of new energy vehicles. According to a December 2018 article here, “the first model (Aion S) will be put into mass production in next May, (i.e. May 2019), and it will become the world’s first pure electric vehicle based on solar energy technology.” The park will be partly powered by 52,000 solar (PV) panels. When running at full capacity, the solar energy represents 15% of the plant’s energy needs.
GAC recently released a press release regarding the Aion S, and like so many other newcomers and challengers to Tesla, the language from the challenger was direct and pointed, with the headline reading “GAC NE’s New EV Sedan Travels Further Than Tesla Model 3.”
According to the GAC press release, “the Model 3 Long-range version delivers 310 miles (499 km). However, GAC NE’s Aion S can run up to 392 miles (630 km) on a single charge, making it the best performing EV sedan so far.”
Not everyone is convinced that GAC’s claims of a longer range are valid, due to a lack of specificity regarding the “test cycle” used when making the claim, as noted in an article here.
Other recent developments should support GAC’s efforts to break into the American market or to become a more serious contender in the NEV space. These include:
Establishing a new regional headquarters in California. The focus will be on branding, marketing, product planning, and also design and R&D operations in the state.
Establishing a 50,000 sq. foot R&D facility in Farmington Hills Michigan, near Detroit. Engineers from both the Michigan facility and the California facility will collaborate on new product development.
Creating two joint venture partnerships with Contemporary Amperex (CATL), China’s large battery manufacturer. The purpose is to ensure GAC’s battery supply, both for its domestic brand, as well as for its joint ventures with international OEMs. The value or registered capital of one of these ventures is 1 billion RMB ($148 million), while the value of the other is not known. For more details about both, click on the Automotive News China article here.
Investing 650.1 million RMB ($96 million) in a New Energy Vehicle Project known as “A20”.
Although little is known about the A20 project, it seems safe to suggest that it is R&D related and that its intent is to contribute to GAC’s future competitiveness in the NEV market.
GAC’s presence in California and Michigan is very recent. As such, it is too early to tell what types of impacts these investments might eventually have.
From a nearer term perspective, GAC’s Aion S is scheduled for launch in May of 2019, and industry observers (including this one) will undoubtedly be looking for signs of traction and market acceptance, during the 2nd and 3rd quarters of this year. Stay tuned.
As emphasized earlier in this piece, GAC truly is a unique and atypical state-owned-enterprise in China’s auto sector. Its track record of fast-growth, entrepreneurial spirit, and innovative culture, clearly makes it a company worth following during 2019, and well beyond.
For a complete list of sources and references used in this article; click here.
Full disclosure: I currently do not own shares in GAC or any other company mentioned in this article.