Guangzhou Automobile aims to entice Americans with 30% cheaper cars than rivals

Article by Andrew Christian, on May 3, 2015

Would you seriously consider a Chinese car brand? No? How about if it’s 30% cheaper than others in the same segment? Guangzhou Automobile Group Motor Co. (GAC), which is preparing to launch its GS4 crossover model in 2017, believes that the 30% price difference will help its cars become successful in the U.S. GAC general manager Wu Song said that if everything goes as planned, he will test his bargain-basement pricing strategy with the launch of the GS4 in the U.S.

When interviewed by Automotive News at the recently held Shanghai auto show, Wu said that the company is confident that the model will be popular and will be competitive due to its low price. Wu is presently in the process of finding dealers, distributors, and importers in the U.S. GAC isn’t the first Chinese automaker to announce that it will bring built-in-China cars to the U.S. market.

Great Wall Motor Co. and BYD Auto Co. have both given announcements about their aspirations to enter the U.S. There are many critics to this kind of pronouncements, saying that many Chinese brands have said that they will enter the U.S. in a few years. So far, no one has. Wu hopes to capitalize on the fact that there are no true bargain brands that have remained in the U.S.

Many Chinese brands are confident that potential buyers will be interested at their interesting pricing strategy. GAC has launched the GS4 in China last April 18. It has a price tag of between 99,000 and 146,800 yuan ($16,245 and $24,088).

The automaker has set an annual target of 120,000 units in the U.S. The GS4 will be rivalled by the Toyota RAV4, with a starting price of $24,565, which includes shipping, putting it right above the price range for the GS4.

Wu claims that the GS4 will be more spacious, powerful and fuel-efficient than the RAV4. According to the testing cycle in China, the GS4 will use up 6.3 liters per 100 kilometer. This doesn’t have an EPA rating conversion but it’s actually equivalent to around 37 mpg. On the other hand, the RAV4 gets a city-highway combined 26 mpg.

When considering the possibility about the GS4 making its debut in the U.S., Wu said that he is “90% confident.” He hopes to start sales before 2017. Before achieving this dream, Wu will have to get a certification for the car to be sold in the U.S.

He will also have to find dealers and importers. He believes that to find a partner is the “most important” thing. Consulting firm IHS Automotive’s Asia Pacific managing director James Chao said that it will be very hard for any unfamiliar brand to penetrate the U.S. market.

Chao also said that if Chinese automakers offer a 30% discount, this would still be lower than the more than 40% markdowns that other automakers will have to offer against global brands in the home market.

Chao added that the 30% discount is “way too small” and that it’s a challenge for an unfamiliar brand with an unknown track record. Chao also said that Zhejiang Geely has a better strategy to enter the U.S.

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