Text | Lee Ho-hyun
In this issue, we will turn our attention to the South American continent, 20,000 kilometers away from China, to see if Chinese cars can overcome the same difficulties on the other side of the world as they do in Russia.
South America market environment: Mainly Brazil
To know how Chinese car brands perform in distant South America, we must first let everyone know the composition and overview of the South American car market.
South America is composed of more than ten countries, with a population of about 442 million people, but because the economic level is relatively not high, the demand for cars in South America is not strong, some countries such as Uruguay and Bolivia, annual sales are even only tens of thousands of units, so South American car sales composition, generally look at the sum of the first few countries is about the same.
In terms of total volume, South American car sales are around 3.5 million units, only about 1/7 of the mainland. Among them, Brazil is the main force of automobile consumption in South America because of its largest population and relatively developed economic level, accounting for more than half of the total car sales in South America.
If we take Brazil as an anchor and list the top 10 car sales in the country, you will find that this most developed country in South America does not have its own local car brand, relying entirely on "imported products", and there are no Chinese brands (after the Top 10).
In fact, the entire South American region does not have its own local car brand and relies heavily on foreign car products. But if you think that the automotive industry in the region must be very backward, in fact, the South American automotive industry is very well-established.
This is because foreign car brands have long entered the South American market and are producing them locally.
In 1958, for example, Toyota began producing the Land Cruiser Canvas Top (FJ25L) model in Brazil. It is worth noting that Brazil is the first case of Toyota producing a car in a country other than Japan.
In 1959, Brazil's São Bernardo do Campo built the first German Volkswagen production line and began producing the Volkswagen T1 Kombi model as we know it. Later, Volkswagen also produced the world's most famous national car, the Beetle, in Brazil.
After this, including German Mercedes; Ford and GM in the United States; Italy's Fiat, Iveco; Japan's Honda, Mitsubishi, Nissan; Peugeot-Citroën and Renault in France; Sweden's Volvo, Scania, etc. have set up factories in South America, mainly distributed in Brazil and Argentina.
Therefore, it also shows from the side that in South American countries led by Brazil, the hot-selling automobile products are still mostly "foreign brands" in our eyes, after all, the pit occupies early.
So the question is, what is the progress of Chinese cars in South America?
First of all, South America does not account for the majority of China's auto exports, only about 14%, lower than Asia and Europe, slightly higher than North America, if calculated based on last year's 3.4 million vehicle exports, South America exports are about 470,000 units.
On the other hand, the overall market share of Chinese brands that started late in South America is certainly not as high as that of other foreign brands, but it is not lost at all in terms of layout.
Taking Chery, the "little prince of export", as an example, the South American market has always been the focus of Chery's exports, and Chery's plant in Aragua, Venezuela, was officially put into production as early as September 2011, and the first models put into production were Chery A1 and A3.
In July of the same year, Chery's $400 million plant in Brazil also began construction. It is understood that Chery is the first Chinese passenger car company to invest in and build a plant in Brazil, and the Brazilian plant is also Chery's largest overseas plant, with an annual production capacity of 150,000 vehicles. Not long ago, Chery also announced that it will invest 400 million US dollars to build a plant in Argentina, aiming to achieve an annual production of 100,000 vehicles in Argentina by the end of 2030.
Great Wall Motor's Ierasemapolis plant in Brazil was originally part of the Daimler Group. Great Wall Motor took over on January 27, 2022, and is expected to start production in the second half of 2023, with an annual production capacity of 100,000 units, which will radiate throughout Latin America in the future. In the next three years, Great Wall Motor will launch 10 new energy power products in Brazil, including 4 pure electric vehicles and 6 hybrid vehicles.
In terms of industrial layout, Chery and Great Wall are centered on Brazil, where the automobile industry is more developed, but the real focus of Chinese brands is not in Brazil, but in Chile on the other side of the mainland.
According to statistics, the top ten countries in China's automobile exports in 2022 are Mexico, Saudi Arabia, Chile, Belgium, Russia, Australia, the United Kingdom, the Philippines, Malaysia and the United Arab Emirates. Among them, Chile is the third largest exporter of automobiles from the continent, contributing 212,000 units (including commercial vehicles).
Currently, more than 20 Chinese car brands have entered the country's market, and according to the National Association of Motor Vehicles of Chile, Chinese brands accounted for about 33% of Chile's sales share of medium and light vehicles in 2022. In other words, one out of every three new cars sold in Chile belongs to a Chinese brand, with an average price of about $19,000.
So why is Chile one of the continent's largest car exporters?
First of all, the trade relationship between the two countries is stable and close.
Chile has established diplomatic relations with the mainland for more than 50 years, and since 2009, China has been Chile's main trading partner, accounting for 34% of Chile's international trade volume, much higher than the second-place United States. In the past two years, China has become Chile's largest source of foreign investment and the largest export destination for small and medium-sized enterprises. To put it bluntly, international relations are stable, trade is smooth, and there are not so many bad things.
Secondly, the Chilean automotive market is unique.
As mentioned above, the automobile industry in South America is mainly concentrated in Brazil and Argentina, and Chile has neither its own brands nor foreign brands in the country, so Chile has always maintained an open and inclusive policy for foreign cars, and the implementation of zero tariffs on most countries can naturally attract car brands from all over the world.
But don't be too happy, looking at the distribution of sales of Chinese brands in South America, you will find interesting phenomena. It is not difficult to see from the above figure that the share of Chinese cars in South America is mainly concentrated in low-potential markets, such as Chile, Peru, Ecuador, and sales in Brazil, where demand is greatest, are only 33,000 units, only a few thousand more than Colombia.
In other words, Chinese cars in a market with high potential energy such as Brazil are not very good, and their acceptance is not high, and they can only compete for share in the low potential market.
Growth point: electric vehicles look at Brazil
Where will the growth space of Chinese brands in South America be in the future? The author believes that the key lies in two points, one is to come up with the new energy vehicles we are good at, and the other is to enter the high potential energy market in a big way. To put it bluntly, it is to sell new energy vehicles in a market with high demand for automobiles.
That's right, it's Brazil. One thing is crucial: Brazil is making a big push for electric vehicles.
The data shows that in 2022, the sales of light electric vehicles in Brazil will be 49,245 units, an increase of 41% over 2021, although the annual sales are not as much as some of our domestic new energy brands, but the data is enough to show that the country has good growth potential.
Adalberto Maalouf, president of the Brazilian Electric Vehicle Association, said that the record number of electric vehicle sales in Brazil in 2022 shows that the country's low-emission vehicle market has great potential. At present, the number of electric vehicles in circulation in Brazil has reached 126,000, which is higher than expected.
However, it should be noted that the country's so-called "light electric vehicles" also include gasoline-electric hybrid models, and occupy the absolute majority, taking 22 years as an example, hybrid model sales reached 30,439 units, accounting for 62% of the total annual electric vehicle sales; Plug-in hybrid vehicle sales were 10,348 units, accounting for 21% of total electric vehicle sales for the year; Pure electric vehicle sales were 8,458 units, accounting for 17% of the total electric vehicle sales for the year.
For Chinese brands, this is undoubtedly good news. Because the mainland's new energy development strategy is the common development of hybrid (HEV, PHEV) and pure electric, unlike Europe and the United States. Now looking at each independent brand, basically can come up with a variety of different solution products, European and American car companies in the next transformation competition, is very likely to be gradually surpassed by Chinese brands.
Remember the above mentioned that Great Wall will launch 4 pure electric vehicles and 6 hybrid vehicles in Brazil? The author believes that this is an obvious "charging signal", and in the context of the global new energy track switching, the new round of Chinese brands' journey to the sea will undoubtedly be more exciting