ED Pie in the sky
New strategy needed in selling eco-friendly cars in China
China's eco-friendly car market is growing rapidly on the back of a proactive policy of its automotive industry going green. The Middle Kingdom has already emerged as the world's largest market for eco-friendly vehicles which include electric cars, hybrids, plug-in hybrids and hydrogen fuel cell vehicles.
Yet the lucrative Chinese market with great potential is pie in the sky for Korean carmakers. In other words, domestic carmakers have failed to compete with their Chinese and international rivals. So industrial analysts recommend Hyundai Motor and other local carmakers take a new strategy to make inroads into China to sell more eco-friendly vehicles there.
According to international consultant LMC Automotive, Japanese makers showed a successful performance in China with their popular hybrid models. Their strength lies in not only quality, but also price competitiveness.
For example, Toyota took the second-biggest share of 11 percent in the country's eco-friendly car market in the first half of this year. Of course, Chinese carmaker BYD was the top leader with 15.8 percent.
The Japanese company sold 157,077 units of its Toyota Corolla hybrid model there. The model is sold at between 140,000 yuan and 176,000 yuan, similar to the firm's Corolla internal combustion engine model which is priced at 108,000 yuan to 160,000 yuan.
An analyst at the Korea Automobile Manufacturers Association (KAMA) said that Toyota's success can be attributed to the automaker's efforts to achieve the economy of scale and its local production of motors and power control units in China. By doing so, the company has managed to gain a price-competitive edge over its Chinese and other rivals.
The KAMA analyst added that the Chinese government's moves to reduce state subsidies and increase fuel efficiency for clean cars have also helped Toyota and other Japanese models increase their sales in China.
However, Korean carmakers represented a meager presence in the Chinese market. Beijing Hyundai Motor, a joint-venture between Korea's Hyundai Motor and China's BAIC Motor, sold only 1,621 eco-friendly cars there in the first eight months of the year. The company sold less than 1,000 Elantra electric cars, while marketing 591 Sonata plug-in hybrids.
Korean companies' poor performance in China was apparently due to their strategy of targeting Europe and America with relatively high-priced eco-friendly cars. Trade tensions between Korea and China over the deployment of the U.S. Terminal High Altitude Area Defense (THAAD) system on Korean soil in 2017 also had an adverse effect on the sales of Korean cars there.
Domestic carmakers cannot make a big success without actively foraying into the Chinese market which is expected to see the number of eco-friendly car sales increase from 2 million this year to 11 million in 2026. Thus they need to take a new strategy to develop new technology and improve price competitiveness of clean car models before it is too late.