Chevrolet's "Magic Car" exits in a low-key manner

Author | Chai Xuchen

Editor | Zhou Zhiyu

Relying on the classic image of Bumblebee in the movie "Transformers," as well as "god cars" like Malibu and Cruze, Chevrolet once shone brightly in the Chinese automotive market, even once expected to sell over a million units annually.

However, the changes in the Chinese new energy vehicle market have gradually dimmed the shine of this American brand. Wall Street News learned that Chevrolet's old model "Malibu" is planned to be discontinued this autumn, and another key sales model "Cruze" is also on the verge of exiting due to continuous losses.

In the vast sea of cars, the exit of star models heralds the end of an era. Chevrolet's decline is also a microcosm of the retreat of second-tier joint venture brands in China.

The countdown of the elimination round has begun, and for this important automotive consumer market in China, those once shining star brands now need to break through with a new attitude and mobilize all resources to have a chance to stay on top.

Exit

The news of Chevrolet's two main models being discontinued has brought it back into the public eye.

In early May, General Motors (GM) announced that the Chevrolet Malibu will officially cease production in November this year, a trend that quickly spread domestically. A source close to SAIC-GM Chevrolet revealed that not only will the Malibu XL be discontinued domestically, but even the sales pillar Cavalier will not be spared.

These two models are very important to Chevrolet.

Malibu has a 60-year history and became a dark horse in the Chinese mid-size sedan market due to its "large volume, low price," once being called the "Three Treasures of B-Class Cars" along with Kia K5 and Hyundai Sonata.

Cruze is the backbone of Chevrolet's sales in China. After the first-generation model was launched in 2019, this A-class sedan performed explosively in the Chinese market, with customers having to wait for up to three months for delivery even with a price markup. Now, less than 5 years after its launch, it is "retiring."

Behind the tough decision lies Chevrolet's helplessness, as relying on continuous losses to maintain scale has reached a critical point.

Currently, terminal discounts for both models are as high as 40,000 to 60,000 yuan, making them one of the lowest-priced options among same-level vehicles of joint venture brands. The Malibu, positioned in the 200,000 yuan range, now has terminal prices sliding to 130,000 to 160,000 yuan; while the Cruze, priced in the 100,000 yuan range, has seen its entry-level price drop below 60,000 yuan after discounts.

Despite significant price advantages, both models still have mediocre responses in the market.

Cruze sales have dropped from over 8,000 units in January this year to just over 2,000 units in April; Malibu's average monthly sales in the first four months of this year were only over 400 units.

The decline in sales of these two main models has put considerable pressure on Chevrolet. These two models accounted for 89% of Chevrolet's sales in China this year. In the first four months of this year, Chevrolet's sales in China were only 22,000 units, a year-on-year decrease of over 56%, selling over 28,000 units less As a legendary brand backed by SAIC Group and General Motors, Chevrolet is no longer shining. Since reaching a peak sales volume of 717,000 units in China in 2014, Chevrolet's development in China has followed a parabolic trajectory, with annual sales plummeting to 169,000 units last year, even less than the sales of a single popular model during its peak period.

According to insiders, among the three brands under SAIC-GM - Cadillac, Buick, and Chevrolet, only Chevrolet is currently operating at a loss. Now, even when price reductions can no longer sustain a "decent" scale, a transformation for Chevrolet is inevitable.

The downfall of the once glorious Chevrolet in China is closely related to its strategies in the country. Since entering China in 2005, Chevrolet has mainly introduced overseas old models in the following decade.

Facing the peak sales decline in the domestic automobile market in 2017, Chevrolet began to change its strategy in the following years to synchronize its products globally. However, subsequent releases such as the Trailblazer using the Cadillac platform and the Camaro based on the global platform of General Motors did not perform as expected in the market.

The long-term "copy and paste" approach has weakened the Chevrolet brand and product strength.

Transformation

Chevrolet's awakening in the Chinese market came too late.

Facing the transformation of the new energy vehicle industry and the siege launched by independent brands like BYD against joint ventures, the high cost-performance advantage that second-tier joint venture brands have been struggling to maintain has disappeared. Recently, BYD introduced hybrid technology with a range of 2500 kilometers, directly lowering it to models below one hundred thousand yuan, casting a "nuclear bomb" across the entire mid-to-low-end market.

The intensifying price war has caused the three brands of SAIC-GM to lose their original market positions. Cadillac, originally positioned as a luxury brand, has replaced Buick's market positioning; Buick, responsible for the mid-to-high-end market, has directly compressed Chevrolet's already slim profit margin and high sales volume survival space.

Last year, General Motors' profit in the Chinese market decreased by 34.1% year-on-year, recording $446 million. With significantly reduced profits, SAIC-GM finds it difficult to continue subsidizing Chevrolet. Informed sources indicate that after adjusting its product strategy, Chevrolet will drastically reduce its sales target in China to 50,000 units by 2025, less than 30% of last year's sales volume.

Chevrolet's retreat is actually a microcosm of second-tier joint venture brands. The fierce attack of independent brands has accelerated the siege of mid-to-low-end gasoline vehicle brands, with new energy vehicle models rapidly eroding the market share of joint venture brands' fuel vehicles.

Second-tier joint venture brands may face an even more severe survival environment, only able to continuously "lower their prices" to barely maintain their position. In some regions, the all-new generation Honda Accord offers discounts of up to 45,000 yuan; the recently launched Kia EV5 has a guide price of only 149,500 yuan.

For them, the internal competition of domestic car companies is only an external factor, as slow product iteration, inability to meet Chinese market demands, and lagging behind in intelligence have become the Damocles' sword hanging over their heads.

In recent years, domestic brands have accumulated systematic capabilities in electric and intelligent aspects, while second-tier brands find it difficult to quickly catch up or imitate. Perhaps the only thing they can do now is to leverage the advantages of their parent brands and groups to make every effort to catch up The hot SUV market and the changing consumer demand have brought new hope to Chevrolet. Lu Yi, deputy general manager of SAIC-GM, stated that Chevrolet will further adjust its positioning starting this year to become a brand featuring personalization + SUV. Perhaps with the support of resources such as the General Motors' Ultium electric platform, Chevrolet will gain more confidence.

At the beginning of March, during the SAIC-GM Partner Summit, SAIC-GM General Manager Zhuang Jingxiong publicly stated that the focus will be on the plug-in hybrid market. The first batch of "Explorer Equinox", as Chevrolet's first intelligent plug-in hybrid SUV, will bear the heavy responsibility of revitalizing Chevrolet's sales.

In addition to improving the SUV product line, Zhou Peng, the marketing director of Chevrolet, previously revealed that Chevrolet will also introduce high-end models popular in the U.S. market. The General Motors' high-end imported car platform, Dalangge, will officially introduce the Chevrolet TAHOE to the domestic market this year.

From these measures, it can be seen that Chevrolet intends to abandon the low-priced and low-profit sedan models in the domestic market and return to the traditional American large SUV market. This will be the key to Chevrolet's fresh start.

Obviously, Chevrolet is far from being in a position to "fire the last bullet". How to make good use of its ace in the hole and achieve brand revitalization still holds hope.

However, facing the all-round competition from Chinese brands, Chevrolet needs to show even greater courage and determination in reform, accurately grasp the changing consumer demands, which is the core of whether a second-tier brand can turn the tables. Time waits for no one, and the rapidly adjusted Chevrolet still needs to act quickly