Buddy Lo
Buddy Lo is a Sr. Technology and Consumer Electronics analyst at Mintel. He is responsible for researching and writing reports on technology and consumer electronics.
January 17th, 2018

Years of speculating when a Chinese branded auto firm would enter the US ended this week as the Guangzhou Automotive Group (GAC) announced plans to sell vehicles in the US market by the fourth quarter of 2019.

Launching a new automotive brand in the US is an extremely difficult endeavor. There are significant logistical and legal hurdles that GAC will need to overcome to hawk its wares in the States, the most important being who will sell their vehicles? Franchise dealership laws prevalent throughout the country prevent manufacturers from selling their vehicles directly to consumers, so GAC will need to find a third party willing to sell their vehicles to US consumers.

Company President Yu Jun also announced that the company plans to attend the NADA (National Automobile Dealers Association) convention this upcoming March in Las Vegas to explore multiple options in its quest to sell vehicles stateside. Some possible results could include GAC building out their own dealer network or even partnering with brands like Fiat Chrysler that already have an established dealership network in the US.

“Made in China” isn’t the death sentence for vehicle sales it once was.

Even if GAC overcomes all of the obstacles to bring their vehicles to market, the question remains – will it be successful? “Made in China” isn’t the death sentence for vehicle sales it once was. The Buick Envision is a compact SUV manufactured in China and it sold over 40,000 units in 2017. Mintel’s recent report on the perceptions of auto brands found that 47% of Americans agree they would consider buying a vehicle that was not made in America, so there is certainly an appetite for foreign made vehicles.

It is often said, “Go big or go home” and GAC is going big with a seven seat SUV as the first vehicle for the US launch. GAC’s timing for entering the US market may seem a bit suspect given that 2017 was the first down year for new vehicle sales since 2009, but the decline can be attributed to a precipitous drop in passenger car sales.

Our research on new car sales shows that US consumers continue to favor larger vehicles, with forecasts indicating the light truck segment will continue grow at a 3.8% annual rate through 2022. So while car sales overall continue to suffer in the US, GAC will compete in the thriving and profitable SUV space. But success is not guaranteed; the SUV market is extremely competitive with plenty of models from more established brands vying for consumer dollars.

62% of new car shoppers find the reliability of a new car appealing.

GAC will need to deliver on a variety of critical performance indicators for long term sustained success, which includes building a high quality product that excels in both performance and reliability. Mintel research shows that 62% of new car shoppers find the reliability of a new car appealing. A poor initial product launch could sink consumer perceptions of a new brand and ruin the viability of the brand before it gets a chance to succeed.

It will be interesting to see how GAC plans to bring their vehicles to market in the US, and whether or not they can deliver a quality product that Americans will buy.

Buddy Lo is an Automotive Analyst at Mintel. He is responsible for researching and writing reports on the Automotive Industry within the US.