U.S. Automakers Reinvent Premium ‘Grandpa’ Brands for China

The newly unveiled Cadillac CT6 sedan. (Courtesy Photo) As the explosive growth of demand for automobiles in China over the past decade has seen the country surpass the United States as the world’s largest auto market, it’s not just an important market for automakers—it’s a crucial one. This isn’t just the case for major German players like Audi, Mercedes-Benz, and BMW, which (in tandem with local JV partners) essentially built China’s premium auto industry from the ground up. American automakers, some of which were active in pre-Revolutionary China, have also come back in force, with Ford, Buick, and Cadillac in particular looking to cultivate a decidedly more high-end image in China to take on their German and Japanese counterparts. In the wake of China’s ongoing anti-corruption campaign, which has hit many of the brands so beloved of Beijing bureaucrats in recent decades, American brands of all stripes are seeing new opportunity to break out in the market Having flown beneath the radar, being seen as reliable but not flashy brands, American marques like Cadillac have adroitly cultivated a loyal driver-base particularly among newer buyer segments. Instead of going for the safety or spaciousness angle, the latter of which has been dominated by the Porsche Cayenne in China, American auto brands have had particularly good luck with one demographic: China’s independently wealthy urbanites—those immune to the anti-corruption campaign. Being relatively new to China (compared to Mercedes-Benz or Audi), Cadillac in particular has actively targeted China’s upper-middle class, while Ford is targeting the country’s growing legion of gearheads, exporting its popular Mustang to China as of this January. Despite growing sales, American brands remain the underdogs in China’s luxury auto market. German players like Audi, BMW, and Mercedes-Benz have largely cornered the market, boasting market share of around 75 percent, leaving little wiggle room for the likes of Buick, Ford, and Cadillac. Yet these marques have shown a strong willingness to jettison old ways of thinking to boost their brands in a crucial market. One thing these brands learned early is that cars built for the American consumer don’t necessarily mesh with the Chinese consumer. In light of this, new cars tailor-made for China have been rolled out in recent years— with the 2014 Buick Lacrosse being one of the first such cases of a car developed with the Chinese market very much in mind, with design features such as “sumptuous back seats for executives with drivers, feng shui principles[,] and swooping designs based on Chinese art.” Soon, we’ll see the revived Lincoln Continental (featuring a back-seat laptop table, electric sockets, and a champagne cooler) and China-built, plug-in hybrid Cadillac CT6, each of which represents over a billion dollars in development costs, hit the streets in China. Meanwhile, Ford has tailored its Mustang for China with a smaller engine in order to sidestep punitive tariffs for engines over four liters. The Lincoln Continental was revived with the China market in mind. (Courtesy Photo) In recent years, foreign automakers have continued to invest in China operations despite stiff competition and a slowing economy for a simple reason: because, despite all its growth, the market remains vast as new drivers in inland China continue to enter the market. Particularly in these emerging, relatively impressionable inland cities, it’s automakers like Ford and its premium Lincoln marque that catch these emerging buyers as their incomes rise and tastes change. This is particularly true for higher-end sedans like the new Continental. Although often considered a “grandpa car” in the United States, the Continental’s classically American design may be a plus. Cadillac has announced its intention to release a new chauffeur-style sedan as well as a new SUV, both of which remain strong sellers in the China market. Rather than looking to compete at the highest-end of the market, an area still dominated by the Germans, in its CT6 model in particular, Cadillac can heavily promote consumer-friendly features like fuel efficiency, vast amounts of legroom, and self-parking system. Clearly, American automakers have learned the same lesson as red-white-and-blue counterparts like Coach or Michael Kors in the China market: it’s best not to take on entrenched European luxury rivals head-on, but rather to attack segments where American brands can quickly dominate. For Coach and Michael Kors, that happens to mean creating and cultivating the “affordable luxury” market in China. For the likes of Ford and Cadillac, it means aggressively tailoring products and brand image to appeal to China’s feature-hungry middle-class.

Sectors

Insights

Company

U.S. Automakers Reinvent Premium ‘Grandpa’ Brands for China