by Dan Sherman
Chinese vehicles are inevitable in the U.S. market. In fact, they have already laid the groundwork. Volvo is in the middle of a pending sale to Chinese automaker Geely, and Hummer may or may not be sold (depends on the week) to little-known Sichuan Tengzhong Heavy Industrial Machinery Company. The management at Sorgenfrei first asked me to find out how Chinese ownership will affect Generation Y’s impression of these brands. The answer is; it won’t!
When informed of the potential new owners of Volvo and Hummer, 90% of interviewees are unwavering in their brand opinions. And the vast majority of Echo Boomers haven’t heard the news; Volvo is still thought of as Swedish (even though it’s been Ford-owned for a decade) and Hummer is still…like nothing else.
I was next tasked with exposing American Echo Boomers’ overall opinions of Chinese-made cars. An informal survey of my peers revealed prejudices ranging from negative to neutral. Most hold the stereotypical attitude that all Chinese goods are cheap and inferior, and a few YouTube users have seen living proof. Some college-aged kids, however, have no opinion—they surely represent the easiest sub demographic for Chinese manufacturers to target.
Consider this hypothetical situation: a newcomer Chinese midsize car (let’s call it the “Chamry”), with comparable specs to a $25,000 Toyota Camry, enters the US market. I asked my interviewees if they would consider buying the Chamry and if so, at what price would they consider it. Respondents showed little deviation from one another; the Chamry would have to undercut the Camry by about $7,000 to entice an average Echo Boomer.
A wise, car-educated friend of mine once said, “In the South, brand is king.” Perhaps the Chamry’s low $18K sticker is to the lack of brand equity and not just the influence of its originating country. So, I introduced the same scenario but with the new mid size car was from a new American brand. Interestingly, a typical Echo Boomer’s expected discount with the “Amry” is about $5,000. Made-in-China only accounts for $2,000 of the price gap.
A Chinese entrant’s biggest obstacle will be to establish a household brand name in the US. An astute Emory Business student reasoned: “Chinese manufacturers would be smart to price their cars above these thresholds. A slightly higher price positioning could mitigate the preconceived notions of Chinese inferiority, the thought that cheap=low quality, especially in cooperation with a full-scale ad campaign.” Properly marketed and given some time to marinate in the American market, names like Chery will be on the lips of millions of Gen Y’ers.