Happy hours for the van people

Multi-purpose vehicle makers are gaining from China's big move into the cities

Wang Xing runs a small rural inn near Guangzhou, Guangdong province. He's kept the original farmer's house look and serves dishes made from wild vegetables to attract city residents on weekends. "Happy hours at the farmer's", as the business is known, has made him happy too - and it's brought him much more money than growing crops.

He used to use a minivan to pick up guests from the city, but later he felt the van was not comfortable or safe enough, and it got so shabby that Wang was afraid of losing face, and possibly customers.

Earlier this year he sold the van and bought a multi-purpose vehicle, with a front that looks like a bullet.

"It is more spacious and sharp-looking, and it earns me face," Wang says.

Many of Wang's neighbors have set up "happy hours" farm businesses and dozens of shuttle vans or MPVs now travel constantly between the city and the small village transporting customers. These farmers may not be urban dwellers yet, but some have already bought apartments in the city.

Figures from China's National Bureau of Statistics show that the nation's urban population increased by 12 percent between 2002 and 2011. It is now increasing by 20 million every year, says the Ministry of Housing and Urban-Rural Development.

Cheng Daoran, general manager of Dongfeng Liuzhou Motor Co, says this mass movement is changing consumer habits and creating enormous opportunities for automakers.

"The auto industry has seen demand for another 4.3 million cars every year," he says.

As a company that specializes in making MPVs, Liuzhou Motor, a subsidiary of China's Dongfeng Group, is seeing increasing demand for the vehicles among new migrants to cities.

An MPV can carry up to seven people, big enough to hold an extended family in small towns or counties, and when the rear seats are folded, there is enough space for large cargoes - produce just harvested or equipment used in self-employed businesses, for example.

"MPV is a niche product that can never reach the scale of regular passenger cars in sales, but it can bring lucrative returns with the backdrop of China's quick urbanization," Cheng says.

Last year, the company sold 72,746 MPV models, notably the Lingzhi models, leading the Chinese market. Sales increased by 159 percent on 2011.

"When more farmers move to small towns or cities, they have regular work to attend to every day, and on weekends they may still want to do some business, like selling yields from their land, so they need vehicles as flexible as MPVs."

The golden days for multi-purpose vehicles started three years ago, Cheng says. Before that, rich people in villages were still chasing minivans and small cars such as the Suzuki Alto.

"Consumer trends are heading upward," Cheng says. "In the late 1980s, when the first group of farmers got some pocket money, they bought tractors to transport grain and other goods. In the 1990s, they bought tiny cars such as Alto, and later, minivans such as the Wuling to do small business."

SGMW detected this demand even earlier. As a major automaker also based in Liuzhou, in the Guangxi Zhuang autonomous region, SGMW is a joint-venture between General Motors, SAIC and Wuling.

Its star products are the Wuling Zhiguang and Hongguang, both minivan models that can accommodate five to eight people or transport large amounts of cargo. In cities, they are frequently seen at roadsides, used for selling fruits and vegetables. But usually they don't have big trunks in the back.

Liang Xiaodong, sales director of SGMW passenger car division, says Wuling has covered all the first- and second-tier cities in China, and almost 70 percent of county-level cities, with more than 200 dealerships.

Last year, Wuling accounted for half the sales in the minivan market, according to figures from the China Association of Automobile Manufacturers.

To cater to the wave of migrants to cities, SGMW has been promoting its new passenger car model Baojun for those who want to split business and leisure use. It will also launch MPV and SUV models soon.

"With people trading up, the 8 million Wuling owners may shift to Baojun or our MPV models," Liang says.

Liuzhou Motor classes its MPVs as high, medium and low end. The budget model ranges from 50,000 yuan ($8,150; 6,225 euros ) to 80,000 yuan, with an engine size of only 1.5 liter, to reduce the fuel bill.

The medium-level M5 model shoots up to 80,000 yuan to 140,000 yuan, and is suited to government use.

"Every year, we get a big order from the government," Cheng says.

At 150,000 to 200,000 yuan, the high-end CM7 model, which was only launched in April at the Shanghai International Auto Show, is still much cheaper than the imported or joint-venture brands that sell for between 400,000 and 600,000 yuan.

Cheng of Liuzhou says the major market for MPVs is now in coastal and central China where more villagers are moving to the cities. But as villages in the Yangtze River Delta region become more affluent, momentum in that market is showing signs of slowing down. "So Liuzhou Motor gradually moves westward," he says.

Being a niche market, models from Liuzhou Motor and SGMW don't face as much competition from foreign rivals as regular passenger cars do.

"This year, government officials began to drive Chinese cars more," Cheng notes. "This sends out a very positive signal for Chinese brands, especially for government purchase."

The current market share of MPVs among China's auto market is only 4 percent, while in mature markets the average level stands at around 10 percent - a share that would translate into 1.3 million vehicles a year in China, Cheng says.

wangchao@chinadaily.com.cn

(China Daily Africa Weekly 07/19/2013 page21)