By JPM Sandie
In the previous parts we have looked at the stories around and the performance of MG UK in 2016. Now we move on to a brief discussion of MG’s international performance, something often overlooked in UK based reports. This report will focus on China, a market that accounts for nigh on 90% of MG’s present global volume but will also briefly talk about performance in Thailand (a key market and home to MG’s only non-Chinese factory).
MG China: Annus Horribilis or Annus Mirabilis?
The last time we reported on MG’s international performance we reflected on 2014 which had been an Annus Horribilis for MG in China. An ageing product line up had seen sales plummet by 30%. However, the landscape has changed somewhat since then. And, as predicted back then in that article, this proved to be largely due to the GS and the Chinese lust for SUVs.
2015 proved to be a year of recovery for MG in China as sales swelled to 70,377 an increase of nearly 35% but still short of 2013 levels. 62% of all 2015 sales were down to the GS which arrived in February but didn’t hit its stride until April. This had disguised the continued declines from the older products. Whilst the GS had a strong first year, the MG3, MG5 and MG6 once again lost volume dropping 47%, 78% and 78% respectively. That’s a brief summary of what we missed from the 2015 so did a full year of the GS mean it was finally an Annus Mirabilis for MG?
Not quite. China is one of the fastest growing and most dynamic new car markets in the world and consequently provides an environment where standing still is not an option. Chinese MG sales increased in 2016 to 80,389 an increase of 14%. However, this growth was just below a buoyant market which had swelled 17% over 2016 to a whopping 23.6million cars overall.
Again, the GS proved to be key accounting for 61% of MG sales but its performance in the latter part of 2016 should give us pause for concern with sales dropping against 2015 every month from August on. By December the collapse had hit a rather a severe 55% which is more than a little bit worrying considering it’s dominant position within the make up of MG’s sales figures.
For point of comparison, local assembly of the Land-Rover Discovery Sport commenced during 2016 and by November and December it outsold the GS. This may not seem like a surprise from a UK perspective, but the GS is the product of a vast state-owned manufacturer in China whilst the British car has a limited supply network and costs roughly three times as much. The GS was also outperformed by the Borgward BX7 from that car’s launch in the summer. Borgward being effectively a start up brand considering that it was unknown in China and defunct in Germany for over 55 years. With another smaller SUV, the GS-rivalling BX5, launching very soon what odds on the German ghoul brand outperforming the entirety of MG in their second year?
MG’s saving grace in the last months of 2016 proved to be the GT. Launched in 2014, the GT was immediately installed as the most popular MG before dropping like a stone after just a few months. After over a year in the doldrums it suddenly rallied in August 2016 and achieved over 2,000 sales in each of the following months. It’s because of this that the GS collapse didn’t send MG sales into negative territory. For the remaining models it still wasn’t good news. The already low domestic sales of the MG3 and MG6 endured a third successive year of decline dropping 19% and 14% respectively. Meanwhile, only 89 MG5s were shifted all year, a drop of 95%.
In spite of being an “own brand” of a state-owned giant MG are far from a major player. Market share peaked at 0.55% in 2012 but in 2016 was 0.34% which was marginally down on 2015 and doesn’t even appear particularly successful compared to the 0.16% they claim in the UK. In 2016, MG were 41st in the brand ranking (between Leopaard and Landwind) but by December they were 48th and 2,000 units below Yema. A company who not that long ago had a range consisting entirely of cars based on the platform of the dear old Austin Maestro. SAIC Group build millions of cars every year but over 90% are joint-venture products and of the remainder only a quarter wear an MG logo. Years on SAIC are still struggling to make MG relevant to the Chinese.
It wasn’t all mediocre news from SAIC, as well as those successful joint-ventures with VW and GM it was a very good year for Roewe whose sales jumped 142% to 241,328. This was entirely down to a relative of the GS, the RX5, which arrived in July and by the end of the year was regularly accounting for over 20,000 units each month. This was more than four times the volumes the GS was making at the same time. Indeed, the collapse of GS sales mentioned above coincided with the RX5s arrival.
The reasons are obvious, the RX5 is more handsome than the GS and appeals more strongly to a market with conservative aesthetic tastes. It has a far better interior design including a high-tech infotainment system developed by e-commerce firm Alibaba. This system has internet capabilities that can allow the owner to pay for parking, fuel, tolls and the like without leaving their seat. 70% of RX5s sold in China last year had the system underlining the extent to which it acted as a selling point.
So what’s MG’s outlook for 2017? The XS compact crossover arrived on the Chinese market in March and this should become MG’s most popular product and, considering what we’ve noted above, it needs to be. A lightly facelifted GS will arrive around the same time though it is questionable how much that can accomplish considering the strong internal competition provided by the Roewe RX5. A new MG6 and a facelifted MG3 will be seen this year, though the existing versions have been stagnant for a long time so is it too little too late?
There is some hope for growth for MG in China. However, there is a large, tusked mammal in the room. Since October 2015 the Chinese market has been buoyed by tax breaks on cars with sub-1.6 engines. Tax was halved from 10% to 5% but 2017 will see that increasing to 7.5%. This has boosted the market substantially particularly last year as people have rushed to buy before the incentive ends. It simultaneously provides an explanation for the much improved GT performance and leads us to question why other small engined MGs like the MG3 haven’t done better. With the tax break ending, analysts are expecting growth to cool to 3% or even the market to decline making any growth more difficult to achieve. That said, as Brexit and Trump showed analysts and experts are not always correct in their predictions and projections and any impact hasn’t been obvious in the first figures released for 2017.
Back in the 2014 piece, we saw a difficult start for MG in Thailand. Ambitious plans for local assembly with huge targets stalled after the launch of the MG6 which ran at around tenth of sales targets. It’s a different story now.
According to BSCB, In the first 11 months of 2016, 7,148 MGs were sold in Thailand an increase of 156%. This was made up of 4,776 MG3s, 1,276 MG5s (The Thai MG5 is actually a re-badged MG GT), 783 MG6s and 313 MG GSs. Again, we see a single product making up the vast majority (in this case the MG3 with 67%) of units. After a very successful December, 2016 saw a total of 8,319 MGs delivered. Very near double MG Motor UK’s efforts.
Those figures equate to 1.1% market share compared to 0.34% in China and 0.16% in the UK. MG are 12th in the manufacturer table (higher if one excludes CVs) and nestle between BMW and Mercedes. Quite clearly, Thailand is the most successful MG market in the world.
Most people would be happy with this performance but back in the early days of Thai production, MG had hoped to get to 14,000 annual sales in 2015 once the MG3 came on stream. Now, they have just over half that with the 6, 3, 5 and GS. Were these targets, like many of those we have seen from MG Motor UK, completely unrealistic? Thailand is a market dominated by the big Japanese companies particularly Toyota and there was never that much room for MG. Do SAIC have a problem with Chinese managers setting delusional and unrealistic targets for markets they don’t understand then employing inexperienced local managers to deliver them as they do in Britain?
Work has now commenced on the second Thai plant and when it opens in 2018 MG’s production capacity in Thailand will be 200,000 p/a. A future Longbridge? In Britain, MG launched with ambitious plans announced with much fanfare, followed by disappointing sales and the bulldozers moving in. There are other parallels, when I wrote in 2014, exports to other AESAN countries like Malaysia and Indonesia were mooted for 2015. As of 2017, these plans haven’t come into fruition. Is this similar to the constant carrot of European exports dangled for Longbridge and totally shelved in 2016? As things stand, MG Thailand look like a slightly more successful version of MG Motor UK but have yet to see the reality check following over-ambitious targets that the UK importers saw last year. Their saving grace might be supplying other RHD markets like the UK and Australia but as things stand both markets are supplied by China.
As we’ve seen over the three parts, it continues to be difficult to find a compelling MG success story. The nearest they have came to cracking it is in Thailand but, somewhat predictably, performance has proved below expectations. Coincidentally, it is years of such below-par performance that resulted in a 2016 that saw MG Motor UK cutback on their British. Meanwhile, the brand struggles to make an impact at home in China. Sales have recovered in the past two years but have only done so back to previous levels which were also somewhat underwhelming. This comes in spite of huge growth in the Chinese car market as MG finds itself failing to become relevant and eclipsed by start up brands in its home market.
There are of course other markets could be covered. MG make a handful of sales in the Middle East and South America amongst other places. They have also tried to make some difficult first steps in Australia which have been undermined by the still available and heavily discounted stock of the previous importer and negative reviews2. SAIC’s plans to try and spread the MG marque around the world show no sign of abating however. The latest development being ambitious plans to enter the Indian market with local assembly.
However, considering the lukewarm reception to the brand in many corners of the globe so far – including markets like China and the UK where they SHOULD be doing well – one has to wonder the sense in the strategy. SAIC seem to over-estimate the love for the brand and particularly how they are using it. They are the automotive equivalent of the drunk that sits next to you on the train, talking to all and sundry oblivious to how their audience isn’t really interested. But, hey, maybe the XS compact SUV will change that. Maybe.