Luxury Brand Business of Chinese Automakers

Chinese automakers are stepping up luxury car business. Geely Automobile introduced the luxury brand “Lynk & Co” in October 2016, and Great Wall Motor announced the luxury SUV brand “WEY” in November 2016. Both private automakers began commercial production of their respective brand in the following year. Looking at state-owned automakers, BAIC Group has launched the ArcFox brand exclusively for BEVs. Similarly, GAC Group and Dongfeng Motor have put forth their own premium BEV brands the Aion and Voyah respectively. It has been also reported that SAIC Group and Changan Automobile are also working on their own luxury brands.

In the Chinese market, the image that foreign-affiliated manufacturers handle middle-class and luxury cars and Chinese manufacturers handle entry-level and middle-class cars is well established. The entry into the luxury brand business is a major challenge for Chinese manufacturers. For this reason, many companies choose to launch a new brand that sets them apart from existing brands. Most of the luxury brand products are new-energy vehicles (NEVs) with many of them equipped with connected, driving support and other functions. In the internal combustion engine vehicle sector, Chinese automakers cannot compete with global manufacturers in terms of technology. For this reason, many Chinese manufacturers promote luxury brand business using NEVs as a breakthrough.

Naturally, building brand power requires many years of accumulation. It takes a considerable amount of time and effort for a new brand to penetrate the market because multiple factors such as quality, technology, cost, design, and marketing affect brand power. Many Chinese companies say that the reason why manufacturers bother to launch new brands and develop luxury brand business is because Chinese brands still have the image of low price and low technology compared to foreign brands. However, another reason why Chinese automakers launch new brands is to minimize the negative impact on their gasoline vehicle business in case the new brand fails.