Chinese vehicles intensify assault on SA market
By: Irma Venter
Published: 29 Feb 08 - 9:22
We may set up a manufacturing plant in South Africa,” says Geely South Africa chairperson Jacqui van Heerden. “If we achieve sales of around 10 000 units a year, we’ll consider it. Markets such as the US and Europe may also offer lucrative export opportunities.”
Geely is only one in a series of Chinese vehicles which have entered the country over the last two years, all through entrepreneurs aiming to snatch market share in the largest economy in Africa.
Geely’s plans are indicative of a new phase in Chinese vehicle manufacturing. It’s no longer only about making and selling vehicles in China. It’s about making and selling vehicles in China, and everywhere else in the world. And not a Chinese-made Honda or Ford either, but a true Chinese brand.
Geely is one of the first movers in this regard. It can afford to do this as it has no bureaucratic ties.
Geely is privately owned, with no shareholding by the Chinese govern- ment – which erases the argument of unfair competition owing to State subsidies. (The only other privately owned Chinese vehicle manufacturer, Chery, will start exporting vehicles to South Africa later this year, with the distribution rights going to McCarthy.)
What this means for Geely South Africa is that the Chinese parent company holds a direct stake in the local company, as it considers South Africa an important part of its future export growth strategy.
Geely South Africa is, therefore, 40% owned by the Chinese parent company, and 60% by local company TJM Holdings.
Van Heerden says TJM Holdings looked at trends worldwide, and decided “that Chinese vehicles are going to be the next big thing”.
JAPAN, KOREA, CHINA?
These days, South African business says ‘China’ is preceded by the same audible gasp once reserved for South Korea or Malaysia, or any other so-called Asian tiger.
It even seems the economic threat of these other tigers has been tamed – or do their performances simply dim in comparison to an economy which last year recorded its fifth year of economic growth at more than 10%?
South Africa Inc can feel the competitive impact of Chinese goods on nearly every level of economic activity, including the local car and truck market.
The Chinese have proved that cheaper is always possible, and this is certainly also true for vehicles from the Asian country appearing in rapidly increasing numbers on South African roads.
Prices are low, specifications are high, but there remains persistent questions about the quality of some of the badges. Driving a Chinese vehicle sometimes feels like entering a time warp – as if one is stepping back into the 1980s and its signature boxy design and plastic-looking interior.
Industry commentators say it is only a matter of time before the Asian country gets it right, much as Japanese and Korean car makers had to battle for their place in the sun.
“Chinese vehicles are improving – no doubt about it – but whether this will happen at the rate customers demand, we don’t know,” says Toyota South Africa marketing and com- munications GM Brian Eades.
He notes that there is still more competition to come from the Koreans – Kia, Hyundai – before Chinese vehicles start playing a more prominent role in the South African market.
Eades adds that some of the lesser-known vehicle brands in South Africa have been suffering steeply declining sales over the last 12 months as consumers tightened their belts owing to rising interest rates.
This drop in numbers was most prominent in the sale of vehicles from that other aspirational vehicle manufacturing country, India.
“Once those sales are lost, it will be difficult to re-establish yourself,” Eades warns.
South African vehicle sales declined by 5,4% in 2007 compared with the record numbers achieved in 2006.
“When times are good, consumers take chances on new brands,” says Eades. “But when the economy tightens, they return to the well-known brands.”
Toyota is certainly a well-known brand. It’s like the Coca-Cola of vehicle manufacturers. Last year, it was once again the market leader, selling more than 25% (up from 23% in 2006) of all new vehicles driving off showroom floors in South Africa. It does not appear to be feeling the pinch from the rising Ka-ching dynasty – not yet, anyway.
With economists and market watchers expecting local passenger vehicle sales to decline further in 2008, the notion of returning to the familiar does not bode well for the wide range of Chinese vehicles which have entered South Africa in recent boom times.
By: Irma Venter
Published: 29 Feb 08 - 9:22
We may set up a manufacturing plant in South Africa,” says Geely South Africa chairperson Jacqui van Heerden. “If we achieve sales of around 10 000 units a year, we’ll consider it. Markets such as the US and Europe may also offer lucrative export opportunities.”
Geely is only one in a series of Chinese vehicles which have entered the country over the last two years, all through entrepreneurs aiming to snatch market share in the largest economy in Africa.
Geely’s plans are indicative of a new phase in Chinese vehicle manufacturing. It’s no longer only about making and selling vehicles in China. It’s about making and selling vehicles in China, and everywhere else in the world. And not a Chinese-made Honda or Ford either, but a true Chinese brand.
Geely is one of the first movers in this regard. It can afford to do this as it has no bureaucratic ties.
Geely is privately owned, with no shareholding by the Chinese govern- ment – which erases the argument of unfair competition owing to State subsidies. (The only other privately owned Chinese vehicle manufacturer, Chery, will start exporting vehicles to South Africa later this year, with the distribution rights going to McCarthy.)
What this means for Geely South Africa is that the Chinese parent company holds a direct stake in the local company, as it considers South Africa an important part of its future export growth strategy.
Geely South Africa is, therefore, 40% owned by the Chinese parent company, and 60% by local company TJM Holdings.
Van Heerden says TJM Holdings looked at trends worldwide, and decided “that Chinese vehicles are going to be the next big thing”.
JAPAN, KOREA, CHINA?
These days, South African business says ‘China’ is preceded by the same audible gasp once reserved for South Korea or Malaysia, or any other so-called Asian tiger.
It even seems the economic threat of these other tigers has been tamed – or do their performances simply dim in comparison to an economy which last year recorded its fifth year of economic growth at more than 10%?
South Africa Inc can feel the competitive impact of Chinese goods on nearly every level of economic activity, including the local car and truck market.
The Chinese have proved that cheaper is always possible, and this is certainly also true for vehicles from the Asian country appearing in rapidly increasing numbers on South African roads.
Prices are low, specifications are high, but there remains persistent questions about the quality of some of the badges. Driving a Chinese vehicle sometimes feels like entering a time warp – as if one is stepping back into the 1980s and its signature boxy design and plastic-looking interior.
Industry commentators say it is only a matter of time before the Asian country gets it right, much as Japanese and Korean car makers had to battle for their place in the sun.
“Chinese vehicles are improving – no doubt about it – but whether this will happen at the rate customers demand, we don’t know,” says Toyota South Africa marketing and com- munications GM Brian Eades.
He notes that there is still more competition to come from the Koreans – Kia, Hyundai – before Chinese vehicles start playing a more prominent role in the South African market.
Eades adds that some of the lesser-known vehicle brands in South Africa have been suffering steeply declining sales over the last 12 months as consumers tightened their belts owing to rising interest rates.
This drop in numbers was most prominent in the sale of vehicles from that other aspirational vehicle manufacturing country, India.
“Once those sales are lost, it will be difficult to re-establish yourself,” Eades warns.
South African vehicle sales declined by 5,4% in 2007 compared with the record numbers achieved in 2006.
“When times are good, consumers take chances on new brands,” says Eades. “But when the economy tightens, they return to the well-known brands.”
Toyota is certainly a well-known brand. It’s like the Coca-Cola of vehicle manufacturers. Last year, it was once again the market leader, selling more than 25% (up from 23% in 2006) of all new vehicles driving off showroom floors in South Africa. It does not appear to be feeling the pinch from the rising Ka-ching dynasty – not yet, anyway.
With economists and market watchers expecting local passenger vehicle sales to decline further in 2008, the notion of returning to the familiar does not bode well for the wide range of Chinese vehicles which have entered South Africa in recent boom times.