China’s Brilliance Withdraws from European Market
We have yet to see Chinese cars in the US, and they’re about to become more scarce in Europe. Back in November 2009, HSO Motors, the European importer of Brilliance automobiles, filed for bankruptcy protection. Brilliance itself took over distribution of its cars, which sold only about 4,000 units since 2007. Now, Brilliance has halted exports to Europe.
Five years ago, it seemed as if the entry of Chinese automakers into developed markets such as Europe and the US was all but imminent. It was not so much a question of whether it would happen – that seemed to be a foregone conclusion – but more like one of when it would happen, or which automaker it would be.
Although we have yet to see the expected Chinese car invasion, we did find out how difficult it is for Chinese brands to make inroads into developed markets as early as 2006. At that time, the BS6 from China’s Brilliance Automotive became the first Chinese car to be sold in Europe. The BS6, an unremarkable, unrefined, and uninspired front wheel drive midsize sedan earned most of its reputation for spectacularly failing a crash test. Brilliance went back to the drawing board on the BS6 and improved its crashworthiness, but the damage was done.
Aside from this being a fairly high-profile departure (mainly because of the aforementioned BS6 crash test that doomed the car in Europe), few buyers are likely to notice the departure of Brilliance. The company sold just 46 BS6s and 181 BS4s in 2009, according to UK-based market research firm JATO Dynamics.
According to two Brilliance executives interviewed by Reuters, the company’s departure from Europe is not permanent, but they blamed continuously-evolving European regulations. The BS4 and BS6 comply with Euro 4 specifications – supposedly just barely – and compliance with upcoming Euro 5 regulations would likely require all-new cars, which Brilliance doesn’t yet have ready.
The company’s former importer told Automotive News Europe in March that the crash test fiasco was not the only nail in Brilliance’s coffin. Hans-Ulrich Sachs told the publication that his organization learned through contacts at BMW – the Chinese home-market joint venture partner of Brilliance – that the company had stopped working on getting the cars ready to meet upcoming emissions and safety standards.
Futher, Sachs told ANE that Brilliance did not want to lower pricing to an appropriate price point, given the company’s safety reputation and perceived quality of the vehicles. Instead, the automaker wanted the importer to absorb losses, which didn’t sit well with HSO. Those strict regulatory requirements in Europe required parts outsourcing from Western countries, which cut into any cost advantage that Chinese labor might have.
Many Chinese automakers are now focusing more on their red-hot domestic market rather than taking the trouble to compete in the hyper-competitive US and European markets, which makes a lot of sense. It’s clear that eventually the Chinese firms will get their acts together in the same way that Hyundai and Kia have done, but it’s also clear that doing so is much easier said than done.
