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Shanghai Motor Show 2017: Ford, Lincoln, Chevrolet, Infiniti target Chinese growth with SUVs and "white space" positioning




Automakers are looking for new growth segments and niches within China's new-car market and the ongoing Shanghai Motor Show highlights a number of vehicle concepts aimed at local consumer tastes in the country.

IHS Markit Perspective:

  • Signficance: China's new-car buyers continue to push automakers to bring in newer models, with international automakers now showcasing concepts for China.
  • Implications: With the opening up of the country's one-child policy and the already strong demand for SUVs, the growth in demand for larger D segment SUVs continues in China and automakers are now tweaking models to cater for this segment, while also looking for other growth opportunities.
  • Outlook: IHS Markit light-vehicle forecasts show that, by 2020, over 12 million SUVs per annum will be sold in China, accounting for 40% of the light-vehicle market.

Automakers are increasingly building and tweaking models in China for the country's vast consumer base with the lure of volume sales expected to reach 30 million units per annum as soon as 2020. This is despite an overall market growth rate that may be slowing in China, while, for some, sales have already begun to decline following the changes in government policies that mean incentive are no longer quite as favourable as they were for small-engine models.

Ford's sales have declined in the first quarter by 21% year on year (y/y), but at the ongoing Shanghai Motor Show, the automaker was positive that change was on its way. With the expiry of the 50% cut in the new-car purchase tax for small-engine models at the end of 2016, the pull-forward effect lifted fourth-quarter sales significantly and sales in January and February of this year represented y/y declines due to a pay-back effect, said David L Schoch, CEO of Ford China, speaking to IHS Markit today (19 April). Ford's strategy is to bring in models to 'white space segments'. White space segments are relatively untapped market opportunities and are now part of the company's growth strategy, in addition to the strengthening of sport utility vehicle (SUV) options in terms of more models and powertrain offerings.

The pick-up truck segment is one segment Ford is now targeting under its Tough Ford strategy. The imported Ford F-150 Raptor is already part of the line-up of models sold in China, and in 2018 Ford will also bring in the Ford Ranger for customers in China. The pick-up segment client is looking for a premium experience, Schoch states. He said, "We see opportunity to satisfy unmet need in China – for world-class, stylish, and refined pick-ups in this emerging segment."

Ford is also now looking at the seven-seater market, with the easing of the Chinese government's one-child policy, the trend for bigger vehicles is gaining traction, giving the automaker the possibility of tapping into that growth segment in the form of a multi-purpose vehicle (MPV). "So we're thinking about that with China," Schoch said.

Lincoln, the premium brand of Ford, aims to further gain growth in China from the SUV trend. At the Shanghai Motor Show, the premium brand unveiled the new Lincoln Navigator concept, of which a production variant will be shown later this year. The brand also launched the MKZ Hybrid in China with a price of between CNY329,800 (USD47,850) and CNY408,800.


IHS Markit spoke to Lincoln CEO Kumar Galhotra regarding localisation of the brand's production in China. The first SUV will be built in China in 2019, Galhotra confirmed, adding that the production location would be Chongqing. However, he declined to comment on whether the new Lincoln Navigator Concept is planned for production localisation in China.

General Motors (GM) is also pushing more SUVs and pick-ups, as well as refreshing existing models in its range. The automaker revealed the new Chevrolet FNR-X Concept at the show. IHS Markit spoke to Alan Beaty, global head of Chevrolet, about the brand's plans for growth in China and whether the FNR-X Concept SUV shown is destined for local production in China. Beaty stated that Chevrolet has shown the new FNR-X Concept to get feedback from potential consumers in China. However, he declined to state when a production variant for China would arrive. The FNR-X is a plug-in hybrid electric vehicle (PHEV) offering two driving modes: V (Versatility) and S (Sport). The FNR-X can modify its suspension and handling profile thanks to an adaptive suspension that adjusts ground clearance on demand.

GM also launched a refreshed new generation of the Buick Regal sedan, as well as the Buick Velite 5 extended-range electric vehicle, at the show. The Velite 5 offers up to 768 kilometres of range in extended-range mode. Its prioritised pure electric driving mode provides 116 kilometres of range, the automaker states. This model is now the second Buick model that is a new energy vehicle (NEV). The Lacrosse hybrid EV was launched in 2016.

Infiniti, the premium brand of Nissan, showed the QX50 Concept at the show. IHS Markit spoke to Roland Krueger, president of Infiniti Motor Company, at the Shanghai Motor Show about the QX50 Concept and the company's plans for greater growth in China. He said, "We had a record year in 2016 and we intend, of course, to grow globally; the most important growth market, though, is here in China." Krueger added, "And we just showed our latest concept vehicle which gives an outlook on the future SUV line up and gives an outlook on the future QX50." Other questions in our interview with Krueger are below.

IHS Markit: When will you introduce a production variant of this car?
Krueger: "We will introduce this car next year in the market, on a global scale, market by market. And we will have specific announcements about this by the end of the year."

IHS Markit: So how will this model be tweaked for China?
Krueger: "First, as a global brand, we have a global car offering, but specifically here in China we are looking forward to a vehicle like this which taps into the biggest growth segment, the SUV segment, and, second, new engine technology, which is the VC Turbo, which will be offered, for the first time in the car industry, with variable compression which can give the driver the power and the fuel efficiency. So, this is revolutionary in terms of internal combustion engines and we are very proud of this."

IHS Markit: So how big is the engine?
Krueger: "It is a 2-litre, 4-cylinder engine."

IHS Markit: And what about local production here in China?
Krueger: "We have the Q50 at the moment in China. You need to give us time to establish the car first and then we can go into the next steps."


Outlook and implications

The Shanghai Motor Show is highlighting the continued trend of demand for SUVs in China. Within the overall large SUV segment, automakers are beginning to concentrate on larger SUVs as the government's one-child policy has been relaxed, leading also to automakers looking at the MPV segment with new interest. Volkswagen (VW) has long-wheel-base (LWB) models of both the Tiguan SUV and the Touran MPV on display at the Shanghai show. Meanwhile, Ford is also looking into the MPV segment and is also pushing 'white space' positioning of products in the market, especially the pick-up truck segment. David Schoch, Ford China CEO, told IHS Markit about local production of the automaker's pick-ups following the launch of the Everest large SUV last year with partner Jiangling Motors Corp (JMC). Schoch said the automaker first had to "get some sales under our belt" with regards to the pick-up trucks, but confirmed that the platform the Everest is built on could be used for production of pick-ups in China.

IHS Markit forecasts show that, in 2020, China's market is expected to witness total sales of around 30 million units, of which 40% is expected to stem from continued demand for SUVs, while segments such as the van and MPV segment are also expected to grow. The market in China continues to be dynamic and, with changing policies, the trends continue to develop and shift.

About this article

The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.

About The Author

Ms. Namrita Chow is Principal Analyst at IHS Markit for the China automotive market.

With over a decade in China, she has firsthand knowledge of the market, the players and the many nuances. Her expertise has helped in forecasting trends, whether within the domestic Chinese automotive market or linked to Chinese vehicle exports in other markets. She has authored special reports as well as daily news analysis, focusing on the intricacies of the vehicle market in China and is available to speak on subjects relating to the Chinese vehicle market. Ms. Chow’s education includes a Post Graduate Certificate in Economics and Math and a Master of Science degree in Advanced Macroeconomics and Mathematics from the University of London, U.K., as well as two years of intensive Mandarin at Shanghai Jiao Tong University, Shanghai, China.​