Return of the world car: China backs one-size-fits-all approach

Chinese brands are reviving what many volume carmakers had written off: the idea of the global car that works across all regions. At the same time however, premium carmakers are reluctantly having to admit their once powerful ability to sell almost exactly the same car everywhere is coming to an end. “The new trends are changing the game,” Renault CEO Fabrice Cambolive told journalists at a recent event held in Brazil. “All the Chinese OEMs are coming with global cars, and we are also going in this direction.” The Renault event was to mark the introduction of the Geely EX5 electrified SUV into the French company’s plant in Brazil. The model is essentially the same as sold in China, the UK, continental Europe, Australia, Chile, Mexico and elsewhere. The EX5 will be built on the same line as the Renault Boreal, a compact SUV derived from the Dacia Bigster that is being sold in 54 markets globally including South America, Eastern Europe outside the EU and Turkey. “To be sure the direction is to grow with global cars,” Cambolive said. The car that works everywhere is the dream for an industry that grows rich on size and scale. When that scale is diminished by having to offer different models and variants for different markets, then profits start to dwindle. China is reliving that dream to a large extent. Two years ago, if you were carspotting while holidaying somewhere exotic, the Toyota Hilux or Honda CR-V might be the extent of the overlap with models available at home. Now go almost anywhere but the US you’ll see increasingly familiar Chinese cars such as the EX5, BYD Seal U, Leapmotor C10 and various Chery Tiggos. China has achieved what others couldn’t partly because of its low cost-base and high technology. It wasn’t that one car doesn’t work globally, it’s that European, Japanese and US cost levels didn’t work globally. China has shown if you build a car cheaply enough, you can sell the same car almost anywhere. Perhaps unsurprisingly, size and body style is often a function of affordability – not preference. In predominantly small-car markets like Brazil, if you offer a bigger car at a similar cost with a surround-view camera and a plug-in hybrid drivetrain, customers will jump at the chance to trade up. With bigger SUVs the Chinese can cover all major markets. “Compact and mid-sized SUVs and crossovers are in high demand in many markets globally, and therefore, exporting these vehicles works well,” Patrick Hummel, head autos analyst at the bank UBS told Autocar. Renault wants to tap into the Chinese mindset, with the cost savings coming from building the same car in different factories as close as possible to the key markets. Then it hopes to get onto some sort of cost parity with the Chinese with deep parts localisation, protecting against both tariffs and dreaded currency fluctuations. Chinese makers are working on the same model, albeit one that allows them to import as many parts as possible from their low-cost manufacturing base back home. Premium carmakers meanwhile are finding that the fragmentation of their key markets is destroying their once prized global model. “Globalization – building one car and try to sell it everywhere and build it in one factory at high scale – worked some years ago. It's not going to work in the future,” Hakan Samuelsson, outgoing CEO of Volvo, told investors at the company’s capital markets day in September: “We need to be much closer to our customers.” While volume brands can rack up good volumes in lower-cost markets like Brazil, the European premiums have to have a strategy that works in the big three markets of the US, Europe and China. Increasingly, that means building cars specifically for the needs of those markets. In the US, for example, premium buyers increasingly want very large SUVs that are larger than anything European buyers will buy. So Volvo is developing an SUV above the XC90: “Our car should not look small when they park beside a Range Rover [in the US],” Samuelsson said. Porsche, Audi and BMW are also developing larger SUVs to keep pace. At the same time US buyers are moving much more slowly towards electrification as global legislation frameworks sharply diverge under President Donald Trump. Meanwhile, the Chinese car market has evolved so fast that European technology no longer cuts the mustard there. Volvo is developing six models just for China leveraging Geely platforms with locally tailored software. The first is the long-range XC70 PHEV. Audi has come to the same conclusion, going so far as to launch a separate brand there, the no-ring AUDI. “I think the idea of the global car, one car that fits for the world, is gone, to be honest — it's not fitting anymore in the U.S., it's not fitting anymore in China, so you need this kind of local-for-local [approach]," Audi's chief technical officer, Rouven Mohr told Australian publication GoAuto earlier this year. It’s obviously not cheap to build different cars for different markets, or even swap the software. “Although we have the advantage of operating with NVIDIA in the US and with Momenta in China, that brings extra cost,” JLR chief financial officer Richard Molyneux told investors earlier this year. “We don't want to have to develop two software stacks. But we're going to have to because of the way geopolitics is going.” As Molyneux referenced, it’s not just consumer tastes forcing diverging model development. The US is banning Chinese connectivity software from 2027 models and hardware from cars sold from 2030. That doesn’t just affect Chinese brands but everyone using China as a low-cost parts sourcing base. Ultra-luxury stuck with global model Brands operating at the very top of the luxury ladder however have little choice but to carry on with what they’ve always done and build global cars. At one point in time in the mid- to late-2010s when China was emerging and emissions regulations were roughly in sync, brands like Porsche made hay. Now life looks much tougher. Porsche has seen China plunge from being its biggest market to one it predicts will account for under 10% of sales going forward. “A recovery in China is not in our plan right now,” CEO Michael Leiters told investors Oct 7. “A recovery is only possible for us if we have the right product in the market,” he added, suggesting that only something China-specific could kickstart sales again there. But luxury brands can’t afford models specific to one market, even if the net effect with China taken out of the equation is to focus just on Europe and the US. “It's economically challenging to say we're going to produce a vehicle for Europe, for China or for North America. You need to have a vehicle that's going to work ideally in all of those regions,” Rawdon Glover, managing director of Jaguar, told Autocar. One reason for Jaguar sticking to electric was because it presents fewer barriers to entry globally. “An electric platform gives us many, many things, but obviously an ability to access markets is one of them,” Glover said. Electric might not resonate with all customers everywhere, but it certainly presents fewer regulatory barriers. “In my opinion, the Tesla Model Y is the best example of a recent global car,” Pedro Pacheco, senior director for automotive at consultants Gartner, told Autocar. Like the Chinese, Tesla has also worked on pricing to pull customers into a size category that they wouldn’t normally consider, boosting sales in markets like Europe that typically prefer smaller models. “Make a D-segment SUV that is strong in overall product attributes, spec and the price goes below the sweet spot of its segment, this actually will attract new buyers to the segment,” Pacheco said. What the Chinese do now will determine how the global model unfolds. China’s ‘global cars’ are more local cars they’ve pushed abroad as their own market sank. “Product cycles of the Chinese OEMs are very, very short, so they tend to react quite quickly to trends in their home market and then obviously try to leverage that and export markets,” UBS’s Hummel said. The trend now in China is for SUVs over five meters long, Hummel pointed, which could stop them becoming sellable in volume numbers in most global markets. Or maybe not if they’re cheap enough. There is a limit then to global cars. Europe’s traditional focus on smaller segments while still retaining the sophisticated attributes of segments above has forced all incomers to adapt, and the Chinese are no exception. Already they are starting to design smaller cars with a more emotional appeal, such as the MG Go concept that previews a new small EV. A hike in tariffs on Chinese PHEVs in the EU and possibly the UK could further encourage them to further differentiate European models as they start to build here. The global car is still the dream but the reality of increasingly fraught geopolitics, divergent local regulations and regional tastes is continuing to frustrate, perhaps more than ever. Even China’s success selling the same model can’t truly be called global when the US has slammed the door in their face. Global cars can’t really work when globalisation itself is in retreat.

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Return of the world car: China backs one-size-fits-all approach

China's ability to build competitive cars at cheap prices shows that one product for all markets can work

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Return of the world car: China backs one-size-fits-all approach

China's ability to build competitive cars at cheap prices shows that one product for all markets can work

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