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Sluggish sales pose challenges for SAIC Motor independent brands’ growth

Sales of SAIC Motor’s independent passenger vehicle brands Roewe and MG in April totaled 16,336 units with an increase of 5.87 percent, 10 percentage points less than that of China’s overall passenger vehicle (passenger cars, SUVs and MPVs) market growth, according to data released by China Passenger Car Association (CPCA).

In the first four months, SAIC Motor sold 67,766 passenger vehicles under the two brands, up 1.37 percent.

MG brand sales in April dropped 16.17 percent to 5,338 units (see Table below). Its cumulative sales through to April were down by 14.27 percent to 19,819 units, of which nearly 60 percent were contributed by the MG3.

Sales of MG and Roewe brands in April 2014 (in units)

Model

Apr. 2014

% Change (YOY)

Jan.- Apr. 2014

% Change (cumulative)

MG3

3,244

-8.8

11,542

-22.2

MG5

944

37.6

3,322

34.9

MG6

1,147

2.4

4,936

-14.8

MG7

3

-25

19

58.3

MG Total

5,338

-16.17

19,819

-14.27

Roewe 350

8,491

25.06

36,692

20.05

Roewe 550

998

-52.32

4,546

-34.42

Roewe750

39

-73.2

702

11.4

Roewe 950

266

-46

851

-49.9

Roewe E50

-4

N/A

0

N/A

550 Hybrid

87

N/A

87

N/A

W5

1,121

15.9

5,069

29.6

Roewe Total

10,998

8.51

47,947

9.63

SAIC Motor Total

16,336 

5.87

67,766

1.37

The MG5 and MG7, in particular, have basically lost their market competitiveness. Monthly sales of the MG5 in the past two years rarely surpassed 1,000 units since it hit the market in March 2012. Its sales reached 9,188 units in 2012 and 9,058 units in 2013. The MG7 sales through April this year only reached 19 units, and its combined sales in the past two years were only 479 units.

Sales of the Roewe in April rose 8.51 percent to 10,998 units, while those in the first four months were 47,947 units, up 9.63 percent. Despite sales increase, the Roewe faces a serious imbalance in its model lineup structure, which is the biggest obstacle for the brand’s growth.

The Roewe 350 became the main contributor for the brand’s sales growth through April. Sales of the car rose 20.05 percent to 36,692 units, accounting for nearly 77 percent of total sales of the brand. But sales of the Roewe 750 and Roewe 950 only reached 702 and 851 units, respectively. The W5 SUV sales were 5,069 units, up 29.6 percent.

The Roewe 550 sales during the period dropped 34.42 percent to 4,546 units. Actually, annual sales of the car began to slide after the Roewe 350 hit the market in April 2010 (see Chart below).

 

Chart: Sales of Roewe 350 and Roewe 550 in 2010-2013 (in units)

 

For example, sales of the Roewe 550 in May 2010 dropped to 5,276 units from 10,286 units in January 2010, while those of the Roewe 350 rose to 4,310 units.

In the first four months of 2014, the Roewe 350 accounted for 54.15 percent of total SAIC Motor independent brand passenger vehicle sales, but the Roewe 550 was only 6.71 percent.

SAIC Motor launched the new Roewe 550 in May 2013 with a price range of ¥118,800-¥182,800 ($18,889-$29,065). Bu this kind of reluctant product upgrade strategy shows the weakness of SAIC Motor’s independent R&D capabilities.

Other than the brand power and price, the fiercer competition brought by new generation products from joint ventures in the last two years was the main reason for the Roewe’s sales decline.

SAIC Motor launched the Roewe 550S 1.8L DVVT MT and AT versions at the beginning of 2014. Prices of the two versions were down by ¥7,000 with less advanced equipment, but the Roewe 550 sales as a whole still dropped.

SAIC Motor in 2012 initiated its “A-Framework” strategy, which aimed to intensify and generalize its independent brand platform strategy. The strategy would take four years to develop and cost ¥1 billion. The first production car under the strategy in 2016 will be the all-new generation Roewe 550.

But a big challenge for SAIC Motor before 2016 is how to stop the Roewe 550 sales decline, which has become a hindrance for the future growth of SAIC Motor’s independent brands.

(Rewritten by Frank Shi based on author’s article on auto.sina.com.cn)  

 

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