Serving the World's Largest Emerging Automobile Market
Home > News Analysis > Declining sales pose tough challenge for the Arrizo 7

Declining sales pose tough challenge for the Arrizo 7

The Arrizo 7 hit the market on July 26 with a price range of ¥78,900-¥126,900 ($12,860-$20,684).

This is the first platform model since Chery gave up multiple branding and decided to return to a “One Chery” strategy last year. Earlier in April the Wuhu-based company announced a new logo and the four product lineups under the “One Chery” strategy: the QQ (A00-class), the Fulwin (A0- to A-class), the Arrizo (A0- to B-class) and the Tiggo (SUV).

According to the strategy, Chery expects 5-10 percent in sales for the QQ, 20 percent for the Fulwin and 45-40 percent for the Arrizo. Tiggo will account for 25 percent.

 

Declining sales

The target of the new product lineups seemed to be more reasonable compared to the company’s multi-brand strategy adopted in 2009. Based on Chairman Yin Tongyue’s philosophy that “more kids help win street fights,” Chery added three new brands, Karry, Rely and Riich.

But the multi-brand strategy turned out to be a failure and company sales started to decline since 2010. Sales of passenger vehicles in the first six months of 2013 dropped 16.1 percent year-on-year to 222,800 units. Of the Top 10 Chinese brands, Chery was the only one that saw a negative growth in the period. Its ranking declined to No. 6 from last year’s No. 1, overtaken by Great Wall Motor, Geely, SAIC-GM-Wuling, BYD and Chang’an.

Chart 1: Sales of Chery in 2009-2013(in units)

 

Chery had a total of 19 passenger vehicle models (not including microvans) in the first half of this year (see Table 1). Only five models saw sales over 10,000 units. Eight models failed to reach 1,000 units.

Table 1: Sales of Chery’s PV models in H1 2013 (in units)

Segment

Model

Sales

% Change

A00

QQ

44,616

3.1

A

E5

33,456

42.7

SUV

Tiggo

22,579

12.9

A0

Fulwin 2 (HB)

18,246

3.6

A0

Cowin 2

13,400

-20.8

A00

Cowin 1

6,128

-29.9

A0

Fulwin 2

4,847

-11.5

SUV

X1

3,680

-60.6

A

A3 (SD)

1,737

-61.7

A

A3 (HB)

1,544

-57.9

A

G3

1,429

-80.8

SUV

X5

703

-68.1

B

G5

549

-45.4

A

Cowin 3

453

-90.9

A0

A1

344

-85.2

B

Eastar

278

70.6

B

G6

202

-22.3

A

Cowin 5

202

132.2

A0

M1 (HB)

108

-91.1

Combined sales of Chery’s A00-class cars including the QQ and Cowin 1 came to 50,744 units, accounting for nearly one-third of total sales during the period, according to CBU-Autostats.

Sales of QQ cars ranked No. 1 in the first six months to 44,616 units, but sales were up only 3.1 percent on a yearly basis, and the growth rate has been slowing down since February. According to data released by China Passenger Car Association (CPCA), China’s A00-class market share dropped 6.3 percentage points to 2.8 percent in May 2013 compared to that in 2005.

Sales of the Cowin 1 were 6,128 units, down nearly 30 percent. The model saw negative growth in the first half except January.

Sales of cars under the Fulwin and Arrizo lineups reached 76,795 units and took up only half of total sales in the first half of this year.

Sales of the Fulwin 2 were 18,246 units, up 3.6 percent, and Cowin 2 13,400 units, down 20.8 percent. Respective ranking of the Fulwin 2 and Cowin 2 was 6th and 11th among the 27 Chinese brand A0-class cars.

The A-class E5 was Chery’s second best-selling model after the QQ. Sales rose 42.7 percent year-on-year to 33,465 units. But it ranked No. 33 among A-class cars in China. The BYD Surui and the Chang’an Eado launched in 2012 had better sales. Chery’s three B-class cars, the G5, Eastar and G6, ranked 12th, 15th and 16th among 18 Chinese brand B-class cars.

The average monthly sales of the G6, described by the company as a “China’s first true B-class car,” were only 34 units.

Combined sales of Chery’s three SUVs under the Tiggo lineup totaled 27,175 units in the first six months of the year, accounting for 17.5 percent of the total sales. The Tiggo became Chery’s third best-selling model with sales of 22,579 units through June, up 12.9 percent year-on-year. But its ranking was 18th in China’s SUV segment. Sales of the X1 and X5 were only 1,450 and 703 units.

The pricing of Arrizo 7

Chery hopes to make a turnaround with the launch of the Arrizo 7 and the implementation of the “One Chery” strategy.

Such a goal has been confirmed by the published pricing range of the new car at ¥78,900-¥126,900. The pricing shows that its main competitors are high-end independent and low-end joint venture’s A-class cars (see Table 2).

Table 2: Price range of Arrizo 7’s competitors in China (in ¥)

Make

Models

¥ Manufacturer suggested price

¥ Dealer price

Great Wall

C50

78,000-94,800

71,000-95,800

BYD

Surui

65,900-99,900

59,000-99,900

Chang’an

Eado

73,900-94,900

65,700-99,500

Geely

EC7

69,800-113,800

61,800-113,600

Beijing-Hyundai

Elantra-Yuedong

99,800-146,800

70,000-158,000

Shanghai-GM

Excelle

96,900-118,900

69,900-119,200

Shanghai-VW

New Santana

89,800-99,800

75,800-102,900

FAW-VW

New Jetta

82,800-119,300

65,000-127,300

The Arrizo 7 has the highest price for both the MT and AT standard versions and the widest price range, compared with competing Chinese brands such as the Great Wall C50, BYD Surui, Chang’an Eado and Geely EC7.

Realizing the lack of brand recognition compared with JV models such as the FAW-Volkswagen Jetta and Shanghai-GM Excelle, the Arrizo 7 is priced lower in the starting prices. Chery’s pricing strategy sends out a clear signal that customers are able to find in Arrizo 7 a high-end Chinese model and a low-end JV model at competitive pricing.

The success or failure of the Arrizo 7 under the “One Chery” strategy remains to be seen in the next three months.

| | |

Leave a Reply