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Roewe Teaching Qoros a Lesson?

Date:12-19 11:01 Authour: He Lun

---Auto Market Hotspots Q&A (113)


Although 2016 is not yet over, preliminary conclusions on the performance of SAIC Motor Passenger Vehicle and Qoros, two high-end Chinese auto brands, can already be drawn. From January to November, the sales of SAIC MPV hit 274,700, up 87% year on year, and overwhelmingly surpassed its annual sales target of 240,000. In contrast, Qoros sales were 21,200 vehicles, which exceeded 2015 by 14,000. However, this figure is way behind its 2016 target of 40,000. If the two companies are to be graded, SAIC Motor Passenger Vehicle has got an A while Qoros has obviously failed. How come their performances differ so much? 

Roewe Teaching Qoros a Lesson?

Roewe Teaching Qoros a Lesson?

Q: what do you think the difference of the performance of SAIC and Qoros?

A: In addition to the hard indicator of whether an automaker succeeds in achieving its sales target or not, two others should also be highlighted: one is that in September SAIC began to turn around and make a profit, and 97% of its dealerships were profitable, the highest in the automotive industry. In contrast, Qoros remained in the red and its cumulative loss in the first 3 quarters amounted to 1.35 billion yuan. Its gross margin deficit per vehicle increased to RMB 37,000 Yuan up to the third quarter. You can imagine the plight of its dealers.   

It’s obvious that manufacturers’ and dealers’ profits are tied directly to sales. The sales of SAIC MPV attained a certain scale; they began to approach its production capacity of 400,000 vehicles; it was even the case that they began to run short of vehicles. Coupled with relatively stable end-buyer prices, the manufacturer and the dealers both began to make money. The breakeven point for Qoros lies at annual sales of 40,000 (See Chen Anning: annual sales of 40,000 Vehicles Shore up Flat Fund) and stable prices. However the reality is far distant. Sales are lagging way behind the target and the company’s capacity of 150,000 vehicles lies largely unused. Dragged down by the tremendous pressure of depreciation and amortization costs, coupled with a slide in the end-buyer terminal sales price, Qoros is cannot get our of the red.

Generally speaking, sales are key and the cars sold have to be of high quality.

Q: The SAIC MPV sales surge is mainly down to the RX5. Total sales reached 65,000 in the 5 months after it hit the market, and in two consecutive months its sales exceeded 20,000. The Qoros 5 SUV, a compact SUB newlywed introduced to the market in March 2016, has had positive reviews but sales have been poor. Only 5100 5 SUVs were sold in the same period, about 1/12 of the sales of the RX5. Is it the price that has led to this huge gap?

A: Yes! The starting price for the RX5 is 99,800 yuan while the Qoros 5 SUV starts at 139,900 yuan – a gap of 40,000 yuan. Such a differential tells you that the two models belong to a different grade, level and type. But in fact the RX5 and the Qoros 5 SUV are both high-end compact Chinese-brand SUVs. A closer comparison reveals that they are both superior in quality, but with different styles of design. Their process and quality are both on par with similar high-end models from joint-venture manufacturers. The interconnection function of the RX5 uses innovative technology and offers a fresh experience to customers. It is a notch above the Qoros 5 SUV in this regard.

No wonder there exists a huge sales gap.  

Roewe Teaching Qoros a Lesson?


Roewe RX5 vs. Qoros 5 SUV in terms of Sales and Price Range from July to November

Brand &model

Sales and price

Roewe RX5

Poros 5 SUV

July 2016 (Vehicles)



August 2016



September 2016



December 2016



November 2016



July-November total  (Vehicles)



Price range (RMB 10,000 Yuan)




As I have said before, the top Chinese brands should not indulge themselves in the “high-end” fantasy. After a while, they should lower their sights, take full advantage of their “high-end” quality, and scoop up the market at a lower price. In so doing they can work miracles (See Can its SUV Save Qoros?). Unfortunately Qoros refrained from cutting its price, where the RX5 went ahead. When the RX5 hit the market, I said, “I wouldn’t be surprised if RX5 sales reach 10,000 in the 3rd month (See How should Competitors Respond to the Low-Priced Roewe RX5?). The outcome was as expected. The Qoros 5 SUV serves as a counter example.

Q: This question addresses how a Chinese brand should approach the “high-end” conundrum. Do you think the RX5 is a success story?

A: Chinese manufacturers need to address two facets of the “high-end conundrum. On the one hand, they should raise their quality and technology to the level of the joint-venture brands; on the other hand, they have to set their price at a level matching local Chinese brands. This is the way to promote sales, build a good reputation among customers, and strengthen the brand image (See Can its SUV Save Qoros?).Let me put it in another way. If your car is better than the competition while the prices are the same, you are going to be more competitive (See Roewe RX5’s Pricing Entails a Desperate Fight?)

The Roewe R5 was a pioneer in this regard and has turned out to be a success story. The RX5 has had buyers flocking to the stores, and this has contributed to the sales of another main model – the Roewe 360. Before August, the monthly sales of the Roewe 360, a compact car model, were about 5000 to 6000. After the introduction of the RX5, sales of the Roewe 360 hit 8000 for 3 consecutive months. If they were not held back by capacity limitations, breaking the 10,000 vehicle sales threshold would not be a problem at all. This demonstrates that Roewe's brand power, product strength, and sales have entered a virtuous circle. Its performance merits reflection on the part of Qoros, Luxgen, Pentium and other high-end Chinese auto brands.

Q: Other than Red Flag, Roewe and Qoros are the two Chinese automobile brands with the highest positioning. They both attract a lot of attention from customers. Besides products and marketing strategy, are there any other significant differences between them?

A: The biggest difference lies in the two companies’ background.

SAIC Motor Passenger Vehicle is backed by the two strongest joint ventures in China - SAIC Volkswagen and SAIC GM. For product R & D, spare parts procurement, and vehicle manufacturing standards and processes, it draws on and integrates German and American heritage. Technically its bloodline evolved from Korean, American and German lineage, and gradually developed its own independent style (See SAIC Independence, Self Formation out of Mixed Evolution). It enjoys natural synergies with the aforementioned joint ventures in terms of knowhow, capital, spare parts supply, and dealer networks. Its strength in resources inspires envy. Shanghai is a hot center of business attracting a broad range of talent, and its business culture revolves around the idea that business is business. A strong and systematic capacity exists that is favorable for its development.

Qoros came from nowhere. It is a top-down operation designed by a global team of high level professionals. It carries no burden of tradition. It started at the top and enjoys a reputation for efficiency. However it is not a rival to SAIC in any sense. 

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