Compact cars account for about 60 percent of passenger vehicle sales in China, the world’s largest auto market.
With the top four best-selling compact sedans of the year, automaker Volkswagen AG has proven that competitive pricing is now the way to Chinese buyers’ hearts.
Boosted by Volkswagen’s impressive numbers, Germany now holds 24 percent of China’s passenger car market, and to put things into perspective further—they’ve sold almost as many vehicles as China’s twenty-five local brands combined.
While foreign brands from Korea, Japan, and the US all posted less than stellar sales January through July, Volkswagen has managed to stay on top of the market by price matching their local competitors.
Volkswagen’s staggering numbers are due in part to a government crackdown among civil servants. Chinese officials are pushing for more economical options as opposed to once popular luxury vehicles, giving the affordable brand an upper hand.
In the first seven months of the year, the brand sold 667,688 New Lavida, New Santana, and Sagitar sedans (not to mention that sales of the New Santana more than doubled). Meanwhile, Chinese automotive brands Geely, Great Wall, and BYD, sold only a collective 147,651 of their top three models, and their sales fell an average of 30 to 40 percent.
Research has also found that Chinese prefer to buy foreign cars as they are deemed as higher quality compared to domestic brands. In fact, China Daily reports that J.D. Power found only 16 percent of Chinese car buyers would prefer to buy from local companies, a significant drop from the 27 percent that was reported only a year earlier.
Dong Yang, secretary general of the China Association of Automobile Manufacturers, says that if Chinese carmakers are to make it out of Volkswagen’s shadow, they will have to learn to work together. “Chinese brands are cannibalizing each other. They need more cooperation and consolidation.”
Benjamin Lo, an analyst with Nomura International, says that for now, local companies will have to rely on strong management in order to stay afloat.
image credit: volkswagen