Automakers face tough road to ignite, reshape China's pickup market

Yang Jian

Automotive News | 2017-5-5

SHANGHAI -- Never before have automakers displayed so many pickups at the Shanghai auto show that ended late last month. It gives one the impression that China is on track to become a major pickup market. 

But outside the show venue, pickups are rarely spotted in Shanghai, either in the megacity's downtown area or in its suburbs.

What will China's pickup market be like in the future? It is likely to unfold somewhere between the impression a visitor got at the show and the harsh reality on China's urban roads.

Three global automakers displayed their latest pickups at the show. As the growth in China's light-vehicle market slows, automakers hope to boost volume and profits by targeting new segments.  

Ford Motor Co. exhibited the F-150 Raptor. The pickup went on sale in China one week ahead of the auto show, with a price of 499,800 yuan ($72,435). 

General Motors displayed the Chevrolet-badged Silverado and Colorado, and Nissan Motor Co. revealed the NP300 Navara.

At least 10 Chinese automakers, looking to grab some of the spotlight, also introduced their new pickups. 

The domestics, including SAIC Motor Corp., Jianghuai Automobile Co., Zoyte Holding Group Co. and SG Automotive Group Co., exhibited a wide array of pickups, from full-size to compact models.

For years, pickups have been seen as low-end, no-frills vehicles in China that farmers and construction workers use to haul agricultural products and building materials. And they carry value-oriented price tags that typically start at 50,000 yuan. 

The latest pickups showcased by automakers -- foreign or domestic -- at the Shanghai auto show are anything but.

They all feature sleek and dynamic designs and powerful engines. They also provide refined interiors with touches such as large-screen liquid crystal displays, and convenience features such as keyless entry. 

Advanced technologies such as automatic transmissions and turbochargers, which are common in pickups from global brands, can also be found in high-end trucks from the domestics.

In a major change, the latest pickups were displayed alongside passenger vehicles in the exhibition halls. In the past, most pickups were showcased in the open space outside the main exhibition halls. 

With a new generation of pickups, companies want to attract affluent individuals rather than farmers and small businesses.

But can they?  

Indeed, there is pent-up demand for pickups in China but the market is still dominated by low-priced small pickups. 

That has become evident after some cities in inland China relaxed restrictions on the use of pickups in urban areas last year at the urging of the central government. 

In the first quarter, roughly 96,800 pickups were sold in China, a gain of 18 percent from a year earlier. And nearly all the pickups were bought by farmers and small businesses in rural areas, according to cnpickups, a Beijing-based website that covers China's pickup market.

The household income of the average Chinese family has been on the rise for years, which means more car shoppers can afford high-end pickups offered by global brands and domestic companies such as SAIC.

But it is unrealistic to expect the market for high-end pickups to take off, cautions John Zeng, Asia director of LMC Automotive, a market consultancy.

Major cities are unlikely to remove limits on the use of pickups given worsening traffic congestion and pollution concerns, he predicted. 

Also, the vast majority of urban residents in China live in apartment buildings, which are not ideally designed to park pickups. For example, the basements of these buildings are not tall enough to allow large pickups to drive in and park, Zeng pointed out. 

The other main constraint on the demand for large pickups is China's increasingly stringent fuel economy standards, Zeng added.

Beijing requires automakers to cut their average fleet fuel consumption to 5.0 liters per 100 kilometers by 2020 from 6.9 liters in 2015. In U.S. terms, that's equivalent to a fleet fuel economy goal of 47 mpg in 2020, up from 34 mpg.

IHS Markit, another consultancy, predicted that China's pickup deliveries will increase 14 percent to 368,791 in 2017, accounting for 1.4 percent of the country's annual light-vehicle sales. 

By contrast, it expects U.S. pickup sales will reach 2.7 million vehicles this year, about 15 percent of the market, according to Reuters. 

The Shanghai auto show may have marked a splashy turning point for the marketing of pickups in China -- and a chase for fatter profits -- but the market won't get anywhere close to the pickup market in the U.S. in size or in value.

Pictured: Yang Jian is managing editor of  Automotive News China.

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