Exports: A Possible Solution
Chinese brands struggled at home in 2011, losing market share to foreign brands. The outlook is rather bleak, so the answer to some is to expand outward. They have been slowly making inroads into new markets everywhere in the world. It goes without saying that the most important foreign market would be the United States. But arguably the next one in line is Brazil.
China and the U.S. are the two largest car markets in the world, by a wide margin. The third one is Japan, which is notoriously closed to imports. Hyundai and Kia, which expanded rapidly around the globe in recent years pulled out of Japan in 2009 after eight sluggish years. Last year, the share of foreign brands rose to the highest in recorded history: 7.7%. Combined with an aging and shrinking population, it’s probably not worth the effort.
Why Brazil?
Brazil is the world’s fourth largest market, having recently just surpassed Germany. More than 3.4 million cars and light commercial vehicles were sold in the South American country last year. A growing population, rising economy and a relatively low motorization rate (333 cars per 1000 inhabitants) make theirs a very promising market. Analysts predict Brazil will overtake Japan in 2016 and become the third largest market.
Size is not the only factor. Car prices in Brazil are notoriously high. Take the world’s most popular car, the ubiquitous Toyota Corolla. In Brazil, it is sold from 64,000 to 90,000 Brazilian reals, which are equivalent $37,230 to $52,360 USD. The Corolla’s MSRP in the US is $16,130 (base). Not to mention 6 airbags, ABS+EBD, ESC, cruise control are all standard in the US version. Some of these are missing even from the $52k Brazilian version.
The Chinese are still competing on price, but that’s easier to pull off when prices are sky-high. So they too, are selling cars at more than twice their suggested retail price in China. Here’s a price comparison between with prices of the four most popular Chinese models sold in Brazil:
| Car | MSRP in China, CNY | MSRP in China, USD | MSRP in Brazil, BRL | MSRP in Brazil, USD | Difference, % |
|---|---|---|---|---|---|
| JAC Tongyue RS/J3 | ¥ 57,800 | $ 9,173 | R$ 37,900 | $ 22,046 | 240.3% |
| Chery QQ | ¥ 41,800 | $ 6,634 | R$ 23,990 | $ 13,955 | 210.4% |
| JAC Tongyue/J3 Turin | ¥ 57,800 | $ 9,173 | R$ 39,900 | $ 23,120 | 253.0% |
| Chery A1/Face | ¥ 56,800 | $ 9,014 | R$ 31,900 | $ 18,556 | 205.9% |
With profit margins razor thin at home, JAC and Chery must be enjoying their success. Other Chinese automakers have probably noticed this as well, and are all eager to enter this highly promising and profitable market. Stay tuned for a history of Chinese brands in Brazil, plus some sales figures.
I’m a brazilian, and would like to point out to you that you cannot make this price comparisons between prices in Brazil and US or China without taking into account the outrageous sales tax(not called exactly that here, but sales tax in practice) in Brazil. Depending on model, up to 50% of the sales price is tax only, distorting every comparison. I agree on everything else you said, but suggest that you revise the price comparisons.
How much is import tax and sales tax on top of imported cars for the BZ market?
In the US, sales taxes and other vehicle purchase fees vary depending on the state you are buying the car, its size, whether or not it’s a “green” vehicle, etc.
To factor in everything would complicate things a lot, so I thought it would be easier to just focus on the MSRP. But usually these taxes add up to no more than 10% of the vehicle’s MSRP.
I am going into more detail on import taxes in the next article.
They’re selling the car with 210% of difference because the brazilian tax.
The chinese cars are selling in Brazil cause they have: ABS, Airbags, AC etc and competes in price with the “Brazil made” cars (VW, Chevrolet, Fiat).
Chinese cars are even cheap than the Brazilian cars.
Some Chinese car companies, like Greatwall, are not just setting up distribution channels, but plan to open factories in Brazil. I was wondering how they can compete locally in Brazilian market in terms of cost? If cars are made under SKD, CKD, then it is understandable.
I feel they are actually doing the same strategy as they did decade ago in entering the Chinese market, due to the market oligopoly – Cars are too expensive…
Great. probably wont be long before that cheap chinese crap enters the us.
The main reason they aren’t here now is because they crumple like aluminum foil when crashed.
Hmm, the usual crap about Chinese cars being unsafe.
Wake the fuck up, they have made huge strides in safety. The last two models tested by Euro NCAP got a respectable 4 stars. Won’t be long before they get 5.
The main reason they aren’t there is because of the United States’ ridiculous regulatory standards, which are different from the rest of the world’s and a huge non-trade barrier to any car maker. Even established European brands have a hard time entering the American market because of that.
I’m with analyst. GM, Ford, and formerly Chystler have a death grip on American regulation – they design regulation to prevent anyone who is not them from being able to sell inside the states. It’s absolutely retarded. Free my market – not at all
Yes and the EU does exactly the same, as does Japan.
Ultimately the Japanese, German and Korean automakers have all been successful in the US though.
The Chinese will be too, even more so in fact, but probably only after they have dominated the market in most of the rest of the world.
Hi, I am Karen from Chinese car levellers and actuators factory.
After knew the car’s market in Brazil,I am going to explore Brazil market for our products (include levellers and actuators also auto-stepper ones for BMW and so on), welcome to share your needs in such field, we may cooperate then. MY SKYPE:karenzhao2009
That is crap about the USA censoring their markets, BMW, MERCEDES, HYUNDAI, KIA,NISSAN, HONDA AND TOYOTA ALL HAVE PLANTS in the USA making vehicles with non- Union workers in the South…
Latin America has lax SAFETY standards for cars.. but I hear that is got to tighten up before the 2016 Olympics occurs in Rio.