Auto Industry

Export drive

Failed in Europe, try India

Export drive

When Germany’s largest auto club, the ADAC, released the results of its safety test of a Brilliance BS4 Sedan last year, the results couldn’t have been worse for Brilliance Auto: zero stars out of a potential five. For a Chinese carmaker keen to make export inroads into the German market, it was a PR disaster.

In fact, sales of Brilliance cars in Europe were already low. Between 2007 and 2009, the company only managed to sell 502 units of the two models available for sale, according to research firm JATO Dynamics. That was some distance from the ambitious targets that Brilliance had set when it entered the European market in 2006 – 158,000 sedans sold in Europe within five years.

So in April, Brilliance decided to cut its losses and depart the market. Company executives speaking to Reuters at the time blamed the withdrawal on the lacklustre reception for its auto brands, as well as the need to keep up with constantly changing European regulations: “For now, we have no timetable for resuming the business.”

Brilliance may have failed to live up to its name in Europe, but other Chinese car firms with plans to export to developed countries, including Chery and Great Wall, have also been unable to make much of an impact.

That means that carmakers have been looking to fall back on markets where they feel more appreciated. They have already had some success in developing markets in Africa, the Middle East and South America. But the next target is India, where companies such as Chery, Geely and SAIC hope that competitively priced cars can become as popular as they are in China.

Beijing’s Foton Motor is also looking to take advantage of India’s automotive parts market with a $200 million investment to produce 100,000 cars annually, reports the Economic Observer.

Others are looking to do the same. “India’s mini-car market shows rapid growth and is very competitive, if [Chinese companies] directly export Chery cars to India, it is difficult for them to have a price advantage, therefore they must use a local production strategy,” reports a Chery field survey quoted in the Economic Observer article.

Others are less sure about direct investment, believing that exporting Chinese-made cars makes more sense. At the beginning of the year, Zotye Auto signed a deal to export 8,100 units to India. By February, 800 had been sold.

Another question is why the Chinese want to risk the distractions of expanding into other markets while domestically they are enjoying the world’s most buoyant car market. Why the need to go abroad?

In India’s case it might be the hope that demand will catch up with China’s own explosive growth, as Indians get as car crazy as China has become. If that happens, Chinese companies that get in early could benefit. And if they make it big in India, they probably won’t mind quite as much about their problems in Europe, where demand for Chinese brands looks likely to be relatively slow for some time to come.

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