Shanghai Auto Show 2019: There will be blood as carmakers fast-track launches or get swept away in uncertain environment

The Shanghai Auto Show opened earlier this week in an uncertain climate for the Chinese new vehicle market. As we have noted in our Q1 2019 update, wholesales of passenger cars in China have now endured 9 consecutive months of year-on-year decline (including 7 straight double-digit drops), a stint unseen since the eighties. Even if March (-6.9%) could signal the light at the end of the tunnel with the first single-digit drop since last August, the market isn’t out of the woods just yet. Adding to these troubled times, the only engine of growth left (electrified vehicles, up 110% YoY in Q1), is about to get hit by halved government subsidies that will make them much dearer to purchase. The stakes have never been that high and unpredictable at the same time, and for manufacturers that want to succeed here it’s either improve at breakneck speed or die. There will be blood.

The Shanghai Auto Show is housed in the largest convention centre in the world.

1. The victims

This new reality was overwhelming in Shanghai this week, with a small amount of foreign carmakers tuned to the impossible rhythm of new launches that is required to stay afloat on the Chinese market, but most couldn’t keep pace. As for the Chinese, EV makers that didn’t exist just two years ago are now affording massive stands that are larger than those of much more established foreign manufacturers, but far from seeming out of place it is all very normal as most newcomers have earned the right to stand up to the big guys given the showroom quality of their product. These new arrivals mean that a long list of sluggish local carmakers have been swept away and locked out of the opportunity to exhibit at the show, sometimes also for strategic reasons within an automotive group: ranked by their 2019 sales the list of absentees includes Wuling, Hawtai, SWM, FAW, Lifan, Borgward, Cowin, Karry, Yema, Weichai, Bisu, Neta, Lark, Zhi Dou, Yudo, Link Tour, FQT Motor, Luxgen, Horki, Denza, Fiat, Huasong, Dearcc and Jonway. Don’t be surprised if most of the aforementioned brands have been discontinued by the time the next Shanghai Auto Show opens in 2021.

Chevrolet Tracker, Onix interior detail and Traverse.

2. The foreigners that got it right

Based on their respective Shanghai showcase, it’s the two most popular groups in China, GM and VW, that appear to be the most in-sync with the extremely demanding Chinese market, a bad omen for the majority of the remaining foreign contingent that was seen panting in comparison. For once General Motors is the most dynamic of all foreign manufacturers present at the Show, with Chevrolet at the top of the list. The American brand showed a completely revamped lineup with only two locally-made nameplates that existed a year ago in Beijing: the Malibu XL and the Equinox. All others, alluring and consistent in an elegant grey robe and sporty Redline streaks, are new: the Onix sedan slots in below the Cruze and features a surprisingly high quality dash, the Monza sedan, the all-new Tracker small SUV, the Trailblazer SUV, the Orlando sporty MPV and the FNR Carryall sporty SUV. There are no concepts on the stand, it’s all down to business now and that’s what we like to see in China. Buick also had some news in the form of an all-new Encore SUV with an extended Encore GX version also showcased.

A new brand is born!

The VW Group also rises to the occasion with no less than a new low-cost brand, Jetta, that was launched to the public for the first time in Shanghai. The strong, almost caricatural German accents of the press conference didn’t deter the local media and professional contingent that rushed to examine every inch of the three new models presented: the VA3 sedan and the VS5 and VS7 SUVs. We will cover this momentous event in a separate Strategy article that will focus on the positioning, marketing and potential of the Jetta brand in China, with Volkswagen finding itself in a very similar position to  that of Renault at the launch of Dacia in Europe some 15 years ago.

VW ID. Roomzz and Tharu

Volkswagen introduced the Lavida, Passat and Tiguan L PHEV variants as well as the new generation Sagitar, the Teramont X Coupe SUV and an ID. Roomzz EV concept that we would like to be tantalisingly close to production-ready, but the most striking evolution of the brand compared to the 2018 Beijing Auto Show is its suddenly dominant position on the SUV segment with the new T-Roc, Tharu, Tayron and T-Cross, the latter marking a frank improvement in terms of interior quality – an area that was paradoxically lagging before with the bargain basement Jetta and Bora sedans for example. Improved quality is essential for VW if it wants to create a credible gap with its new low-cost Jetta brand. Market leader in China for the past three decades but seemingly out-of-touch recently, Volkswagen has clawed back at critics and made such progress in the past 12 months that it now seems unattainable all over again.