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.
2018 Sales of small MPVs in Europe are falling at accelerating pace with a 48% decline to fewer than 135.000 sales, which means the segment now accounts for less than 1% of total European volume. And this result would have been much worse if we hadn’t decided to include the Honda Jazz into this segment now as well, after frequent comments from our readers. The Jazz is also classified a subcompact hatchback, but we agree there’s validity in the reasoning why it should also be compared to the small MPVs. Without the Jazz, the segment would be down 57% as it’s now one of just 2 models to improve their sales in this segment, whil all others lose 20% or more. The Fiat 500L holds on to its segment lead and increases its share of the segment as it has done every year since its launch. But that’s less a result of its own strength than of the segment’s weakness as sales off the big Fiat have declined for 4 years in a row now, just by less than the overall segment as competitors have been killed. The Jazz now moves into second place of the segment, by far the highest of any Honda model in any segment in Europe. [Read more…]
Sales of midsized cars in Europe have declined by double digits in 2018 for the second consecutive year, after a sharp rebound in 2015 and stable sales in 2016. The segment which sold nearly 1 million units as recently as 10 years ago is now down to its lowest volume ever at less than half that volume. At just 450.000 sales, mainstream midsized cars now account for less than 3% of the European market, down from 3,5% in 2017 and from 6,9% in 2007. Only one nameplate in the segment has been able to add volume last year and only two saw single digit declines with the remaining players in double digit decline. Segment leader Volkswagen Passat did only slightly better than the rest of the segment at -16% to increase its share to 34,2% of the segment. Its platform sibling Skoda Superb holds on to 2nd place which means that a VW-Skoda duo finishes on top of the annual ranking in both the compact and midsized segments for the second consecutive year, and that VW Group now sells more than one of every two midsized cars sold in Europe, with these two models. The Opel/Vauxhall Insignia is the only model to even come close to the dominant players, and it was just 3.000 sales behind the Superb at the end of August, with sales up 25%. But then came the new WLTP fuel efficiency testing standards, and sales of the Insignia collapsed as in Q4 the model sold just half of what it sold in the same period of 2017, and it ended 2018 with a 7% loss. At least that means it improved its share of the segment to 15%. [Read more…]
Sales of compact cars in Europe declined 9% in 2018 to just over 2,13 million units, as Europe’s second largest segment now accounts for 13,8% of the total market, down from 15,1% in 2017. That means it is under threat from both the small crossover segment (up 29% to 12,6% share of the market) and the compact crossover segment (up 17% to 11,3% of the market). That also explains the main reason for the decline of the compact car segment: customers deflecting to crossovers. Segment leader Volkswagen Golf slightly improves its share of the segment despite an 8% loss of sales, translating to almost 37.000 lost sales which is about as much as the Mazda3 sold last year. In second place we find the Skoda Octavia for the second straight year with sales down 5%, but it still sells less than half the number of cars of its sibling. Despite being replaced at the very end of the year and thus being in run-out mode with the outgoing model, the Ford Focus manages to reclaim a podium position after spending 2 years in fourth place. That is a result of the Opel/Vauxhall Astra losing 27% of its sales in 2018 after already losing 14% in 2017. The Astra was #2 of the segment in 2016, #3 in 2017 and is now down one more spot, and only 5.000 units ahead of 5th place.
The subcompact car segment in Europe was stable at nearly 2,79 million sales in 2018, with sales up by just 800 cars. Europe’s largest segment by volume still accounts for 18% of the total market. The top-3 positions remain the same as they were for the last two years and the top-5 rankings are unchanged from last year. That means the Renault Clio celebrates three years on top of the segment, while it’s due for a redesign in 2019 and its closest two rivals have already been updated last year. As a result, the Volkswagen Polo and Ford Fiesta are closing in in the top spot, but have been unable to knock the French model off its throne. The Clio is one of only two models in the top-10 that’s available as a station wagon (together with the Fabia), but that version is expected to be cut for the next generation, so we will see how that influences the fight for the top spot. The Peugeot 208 consolidates its 4th place despite a 5% loss as its closest rival Opel/Vauxhall Corsa is down 7%.
Sales of minicars in Europe decline again by 1% in 2018 to 1,24 million units, which means their share of the total European car market is slightly down from 8,1% in 2017 to 8,0%, which is not a bad performance considering there haven’t been any major updates to any of the models in this segment in 2018. Despite the lack of investment by manufacturers due to the slim margins on this kind of vehicle, the segment is expected to stabilize at this level sales until 2020. Fiat’s dominance in this segment shrinks to a share of 28,7% with its two models, as the aging Panda lost 10% of its volume while the 500 maintains stable despite being just about as old. The decline of the Italian market and the Panda’s dependence on its home market are the biggest reason for that model’s troubles, as Italy is responsible for more than the Panda’s lost volume, meaning sales outside Italy actually increased and the share of its home market is down from 78% to 73,9%. The 500 also loses 14.000 sales in Italy but wins them back in other markets, as now just 21,2% of its European registrations happen in its home market, down from 28,5% in 2017. The Volkswagen Up! is down 3% to just below 100.000 sales but manages to hold on to its podium place that it has held ever since its first full year of sales 2012. [Read more…]
After looking at 2018 European car sales by manufacturer and brand, let’s take a deeper look into how individual models sold last year. It shouldn’t come as a surprise that the Volkswagen Golf is still the dominant leader in Europe, for the 11th consecutive year. However, the Golf was the biggest loser in the top-18 with a loss of 7,6%, which translates to roughly 37.000 fewer sales. [Read more…]