Northern exposure

As more Chinese auto brands stream into the country, do they really deserve a spot in your consideration set?

LARGELY BECAUSE of its dominance in electric vehicle (EV) production, China overtook Japan as the world’s biggest exporter of automobiles. Last year, it sent almost five million vehicles across its borders. It is no surprise then that we have seen a steady stream of Chinese brands entering our market. In fact, 21 out of the 29 automobile brands found in the recently concluded Manila International Auto Show (MIAS) trace their roots from China.

No other country has experienced as massive a scale in industrial and economic growth in a short span of time. From an automotive standpoint, we started seeing Japanese cars grow to prominence in the 1970s. Prior to this, most cars were either American or European. Korean car brands entered the picture even later, in the late 1990s to early 2000s. Chinese passenger cars started making waves around five years ago, yet their presence in our market cannot be missed.

I am in a unique position to discuss this topic as I was once the sales director of one of the first Chinese passenger car brands to enter the Philippine market with significant volumes (that brand is MG — Kap). I am now associated with another Chinese brand, BAIC, which is also keen on making its presence felt in the Philippines.

The number of Chinese brands entering our market is a manifestation of how robust automobile manufacturing is in China. While most countries have at most three to four mainstream car brands, China has around a hundred domestic and joint-venture car brands serving their domestic market. With the central government’s mandate to have a dominant presence in the global marketplace, it is only natural for these car brands to go abroad and develop international markets. The Philippines’ proximity to China, favorable taxation policies for vehicle imports, and left-hand-drive regulations make us a prime market for its car brands.

So, what does this mean for the average Filipino motorist? Are Chinese brands going to be mainstays on our roads?

WHAT MADE IN CHINA MEANS TODAYOn the oft-debated subject of product quality — having also previously worked with American and European brands — I can objectively state that modern Chinese car offerings are at least at par with brands from other countries in terms of quality and durability. This is not a claim I would have been comfortable making 10 years ago, but given the advancements in Chinese manufacturing, one cannot refute how far vehicle quality has come in just one decade. Of course, there are variations in quality from brand to brand, and some product issues may still be found, as they are likewise found in most other brands regardless of source plant. But Chinese brands have two clear benefits which give them an advantage in this regard.

Most Chinese brands partner with Japanese, Korean, American, or European car companies, or purchase outright another car brand and its technological know-how. This allows them to skip over the typical birthing pains and learning curves that others had to go through by simply taking advantage of the manufacturing experience and expertise of their joint-venture partners.

Some examples of partnerships are GAC with Toyota and Honda, SAIC with Volkswagen and General Motors, and BAIC with Mercedes-Benz and Hyundai. Geely, on the other hand, simply acquired Sweden’s Volvo Cars and Malaysia’s Proton to jump-start its manufacturing operations and get an instant technological advantage.

Secondly, Chinese brands have the benefit of being able to get extensive product development insights from the domestic customer base before venturing abroad to a more discerning export market. Long before any Chinese car departs from the country, it has already undergone intense testing and multiple improvements — possibly through several model generations. Chinese brands are able to use their domestic market as a test laboratory to fine-tune their products and remove any quirks before the vehicles set sail for other countries. Many Chinese car brands see their success abroad as a source of national pride, and would not allow this to be compromised. This is why it only took a few years for Chinese automobiles to get to their current level of quality, compared to other countries which took decades.

ARE CHINESE CARS STILL CHEAP?But being “just as good” as cars from other countries would not be enough for China-sourced vehicles to find success in our highly competitive car market. Indeed, Chinese brands have always positioned themselves as affordable and promising value for money — a proposition that was able to successfully convince many Filipino car buyers to try a Chinese brand as this allowed them access to crossover and SUV selections, where budgetary constraints would have limited their options to a small sedan or hatchback of other (non-Chinese) brands. Though this strategy has been effective so far, this may not be the case for long.

Alongside the growth of the Chinese economy, the tastes and demands of the Chinese domestic market for high-end and generously equipped vehicles have also evolved. Once upon a time, Chinese cars were powered by legacy (meaning old) powertrains and only had the bare minimum electronic features. This allowed them to be priced lower than competitors, and buyers of these vehicles were fully aware that they were paying less for a product that may not have the same bells and whistles as a Japanese or Korean model.

These days, you will be hard-pressed to find a Chinese car model that is not fully equipped with features previously found only in luxury European cars. Sunroofs, touch screens, automatic this and electronic that — most cars from China have more bells and whistles than vehicles made anywhere else in the world. What this means though is that the next generation of Chinese cars may no longer be that affordable. We are already starting to see some of these higher-end models introduced at the most recent Manila International Auto Show. Many of these crossovers now have a starting price that breaches P1 million, which was once the upper price limit for Chinese cars. This would be a challenge for Chinese brands as they would now need to sell propositions other than price.

One key area that most Chinese brands are keenly focused on is improving the customer experience and after-sales service, including parts availability. Several concerns of this nature have crept up on social media over the past few months, and all players are aware that they cannot afford negative publicity this early. This is good news for consumers though, as it means we can expect even better levels of customer service from Chinese car brands in the coming days.

DRIVING NATIONALISMWe cannot discuss Chinese cars without touching on political sensitivities surrounding the relationship between China and the Philippines. On this front, I have just a few thoughts to share.

Let the customers ultimately decide if they would like to purchase a car from China. We are, after all, an open market economy, and more choices benefit the consumers and increase competition among industry players. Even top players like Toyota needed to dig deep in their product portfolio and introduce models from their Daihatsu line in order to compete with the rise of more affordable options from China.

If this means more Filipinos will have access to safe and reliable transportation, then I do not see a problem. At the end of the day, purchasing a vehicle is a very personal decision, and if political concerns are a significant consideration in, then it should be evident — not on social media comments, but in actual sales figures. So far, it hasn’t.

After World War II, there were many sentiments against both German and Japanese vehicles, because of the two nations’ involvement in the war. This clearly did not last long, as both countries now enjoy a robust automobile manufacturing industry and brands from both countries top the list in desirable automotive marques. Whether or not Chinese brands will share a similar trajectory in the Philippines is completely up to Filipino consumers.

The author is the BAIC Philippines brand head and general manager.