Beijing Motor Show 2012: SUVs Take Centre Stage

Automakers in China are vying for double-digit growth in a market that is seeing slowing growth rates. To maximise any chance for strong growth, automakers are strengthening their presence in the SUV segment with an array of models being launched at the 2012 Beijing Motor Show. US automakers Ford and GM are playing catch-up with Volkswagen and Japanese SUV-makers Honda and Toyota for larger slices of the mainstream SUV market, while luxury players Audi and Mercedes look to strengthen their market share in the up-market Chinese SUV segment.

Ford

US automaker Ford is determined to see growth in China and is ramping up its line to include SUVs. Ford has showcased the EcoSport, Kuga, Edge and Explorer SUVs, all of which will eventually be built in China, according to IHS Automotive production analysts. The company has launched the production version of the Ford EcoSport SUV, which will be built in China, as well as in India, Thailand and South America, according to the company; production is slated for later this year, our analysts say. It is fitted with a 1.0-litre EcoBoost engine and will be produced at Ford's joint-venture (JV) plant in Chongqing in China, as well as in Camacari (Brazil), Rayong (Thailand) and Chennai (India). Reinforcing Ford's commitment to offer a full portfolio of vehicles in China, the all-new Ford EcoSport will be the second of 15 new vehicles that Ford plans to introduce in the country by 2015. This is part of a bigger plan to bring more than 50 new vehicles and powertrains to the Asia-Pacific and Africa region by mid-decade. "The all-new EcoSport is designed and engineered specifically for customers in global growth markets, using Ford's global SUV engineering expertise and reflecting our commitments for quality, leading fuel economy, safety and smart technology," said Raj Nair, the group vice-president for global product development. "We're delivering innovative products like this to drive our global growth."

Meanwhile, the Ford Kuga SUV is also expected to begin production this year in Chongqing, to be sold locally. The all-new Kuga is the latest in a series of 15 global vehicles that Ford has promised to introduce to China by mid-decade. It will be one of 10 built on the same global C-segment platform as the all-new Ford Focus. The model will be offered with two EcoBoost engine options: the 1.6 litre and the 2.0 litre. "We're able to bring this popular compact SUV to China—and to assemble it here—because of the One Ford strategy, which allows for resources and expertise to be shared across regions," said Dave Schoch, chairman and chief executive officer (CEO) of Ford Motor China. "The all-new Ford Kuga opens a new chapter in the world of SUVs, especially in China where its blend of capability, technology and fuel efficiency will ring true for the customers."

The Ford Edge SUV is currently imported, but is likely to begin production in 2014, while the Ford Explorer will be built at the commercial vehicle production partnership between Ford and Jiangling Motors (JMC), according to IHS Automotive.

General Motors

American automaker GM has been slow to penetrate the SUV segment, mainly relying on sedan sales in China, but GM is now planning a steady introduction of SUVs to be produced in China between now and 2015. GM showcased the Buick Envision concept SUV at the show, which it says shows the "future development plans for the brand's SUV lineup". The Envision SUV is based on the Excellle GT platform and will be produced in China from the fourth quarter of 2014. Meanwhile, the small, compact Buick Encore SUV, which is based on the Aveo platform, will begin production in China later this year. GM's Captiva SUV will also begin production at its plant in Shenyang (China) this year.

Audi

German premium carmaker Audi has presented two concepts based on the Q3 SUV. The Q3 will be launched in China this year, according to the automaker. The Jinlong Yufeng, which translates to "Golden Dragon in the Wind", emphasises the sporty aspect of the Q3 SUV, aiming to attract young, sporty Chinese customers, while the RS Q3 concept shows a more up-market, mature aspect of the SUV. The Q3 will be built at the Volkswagen–FAW JV plant in Changchun later this year and will be the second SUV built by Audi in China, following on from the larger Q5 SUV currently being produced.

Mercedes

German luxury carmaker Mercedes began production in China of its GLK SUV late last year and the company is now launching upgraded versions. A series of new features has been added to the three new Grand Edition models: the GLK 300 4MATIC Dynamic Grand Edition, the GLK 300 4MATIC Style Grand Edition and the GLK 300 4MATIC Luxury Grand Edition.

The automaker now intends to further penetrate this segment with a stronger SUV line-up in China, showcasing its prowess in the off-road segment. The imported ML 63 AMG will begin sales in China and comes with an AMG 5.5-litre V8 twin-turbo engine. Also making an appearance at Auto China 2012 are the R 350 and the GL 450 Grand Edition.

Other automakers unveiling SUV plans include SAIC Motor with its MG brand, showcasing an SUV concept (see China: 18 April 2012: Beijing Motor Show 2012: SAIC to Show First MG SUV Concept). Luxury imported SUVS are also seeing a burgeoning line-up in China, with the likes of Maserati and Porsche strengthening their China ranges.

Outlook and Implications

The SUV segment remains a strong growth segment in China and automakers are now pulling out all the stops to penetrate the segment. In the first quarter of 2012, the SUV segment saw sales of 441,600 domestically produced units as per data from the Chinese Association of Automobile Manufacturers (CAAM), rising 18.05% year-on-year (y/y) despite the overall market dropping by 3.4% in the first quarter. Locally built SUVs remain under the domain of players such as Volkswagen, as well as Japanese automakers Toyota and Honda.

In the first three months of this year, IHS Automotive data show that the top volume sellers in the SUV segment were VW with its Tiguan SUV, which saw sales soar by 45.48% y/y in the quarter to 49,395 units sold in China. This was followed by Chinese automaker Great Wall Motors' Hover, which saw sales up 25.93% y/y to 43,275 units. The Honda CRV sold 36,658 units in the quarter while the Nissan Qashqai saw sales of 34,104 and Toyota's RAV 4 sold 28,978 units, making it the fifth-largest volume seller in the segment.

Meanwhile high-end luxury SUV makers with production bases in China, such as Mercedes, BMW and Audi, are also pushing for strong sales in China in the segment. For example, Audi's Q5, which is locally built in China, sold 21,202 units in the quarter, according to IHS data, rising from 8,662 units sold in the same period last year. BMW recently started production of its X1 SUV in China (see China: 5 March 2012: BMW Launches Locally Built X1 SUV). To raise brand awareness, these high-end brands are expanding both their locally produced and imported SUV line-ups. Others in the high-end segment are following suit, with a range of luxury imported SUVs making their debut at the Beijing Motor Show this year.

However, IHS Automotive's light vehicle production manager, Boni Sa, says the current speedy growth of the segment will cool down in the future. "Regarding the SUV segment, it will continue to see fast growth in the short term, but from our forecast the growth rate will not be that high after 2015," says Sa. Automakers are therefore pushing launches and debuts of their SUVs now in order to make the most of the current growth trend, but with the overall market seeing slow growth, the segment is going to see intense competition along with strong price wars.