Roewe W5 – The First Loser in the SUV market

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The SUV segment is the most important growth point in Chinese car market last year. Against the background of dismal increasing rate 2% for the whole car market, SUV has increased by 19% in the first eleven months of 2011.

Few models have unsatisfactory sales in this booming market, but RoeweW5 is one of the losers.

Holding hands with MG, Roewe is one of the two local brands of Shanghai Automotive (SAIC), whose predecessor is the British brand Rover. W5 is neither a model from Rover nor a car developed independently. Its predecessor is the much maligned Ssangyong Kyron.

SAIC brought the Korean car manufacturer in 2005 to obtain thebody-on-frameSUV technology. Four years later, SAIC disinvested in 2009 because of Ssangyong’s huge loss. SAIC should have introduced Kyron-based SUV many years ago, but the unhappy relationship between SAIC and Ssangyong had prevented the introduction.

Eventually, Kyron-based W5 hit the market in August 2011, but we can hardly see a grin on SAIC guys’ faces. According to China Associate of Car Manufacturers, only around 800 W5s were sold every month, which only equals to 5% of Honda CR-V sales.

SAIC is an influential car maker in China, and they really have paid too much for the Ssangyong based SUV, the W5 has not succeeded if anything, the W5 has demonstrated that not every SUV is destined to be a successor in Chinese market.

The W5 has a  more than reasonable price, from 172,000 to 299,000 RMB (€21.1k-36.6k), which is similar to Volkswagen Tiguan, Honda CR-V and Toyota RAV-4. Considering the large dimension and a 3.2 liter V6 engine for top models, it is really a good bargain.

However, the large dimension is not always an advantage. Most SUV consumers have realized what they want is a car bigger, taller and roomier than a sedan, rather than a genuine off-road gas guzzler with body-on-frame structure. As to the consumers who really want an off-raod car, most of them chose Great Wall Hover with much lower price and reliable chassis, while more wealthier consumers will obviously flock to brands such as Land Rover, Toyota Land Cruiser or Mercedes G-Class to gain their luxury off road thrills

Moreover, Roewe and MG are famous in the flat lands of Eastern China, where SAIC is located, but most mountainous regions are in Western China. It is not difficult to imagine W5 will behardly as welcomed as its brothers in its most important market.

Fortunately, governmentmental purchasing may change the W5’s destiny. Most government financed cars should be meet two requirements in the future, less than 1.8 liter and less than 180,000 RMB (€21.9k). Additionally, local brands are trend of government purchase. As a result, the entry level of W5 1.8T will be welcomed by local and provincial governments that have been told to cut costs, but haven’t yet been told to kill the pomp, the W5 as a big vehicle does deliver a huge amount of ‘face’ for the government’s mandarins. However, overall the government is a limited market, to achieve stronger sales, Roewe and MG have to introduce smaller SUV to compete with Tiguan, CR-V and RAV4.