It’s not breaking news that Chinese brands such as MG, GWM Haval and BYD have made a big impact on the new car sales charts in Australia. But one of the main reasons why they’ve been so successful was highlighted this week – they’re affordable.
Prices have a tendency to rise over time, but inflation has hit the economy hard since the COVID-19 pandemic and the automotive industry is one of the most impacted sectors. Rising raw materials costs combined with increased shipping costs has led to car makers passing on these changes to consumers in the form of steady price increases.
It also comes at a period when established brands have shifted their business model to focus on quality over quantity, making more profit on individual models rather than trying to sell higher volumes at a lower cost. This has led to higher prices, particularly for ‘entry-level’ models that were often used as a way to attract first-time new car buyers, which brand’s would then try to retain throughout their motoring life.
Hyundai is a good example of this trend, with the brand once famous for its affordable circa-$15,000 small cars like the Excel and Accent, now starting its range at $21,990 (plus on-road costs) for the cheapest model, the Venue small SUV.
But Hyundai is far from alone, with most of the established brands following a similar path, which has created an opportunity for new car makers, particularly those from China, to enter the Australian market with a more aggressive pricing strategy.
MG launched two new models recently and both had very competitive starting prices, under-cutting all key rivals. The MG4 was Australia’s cheapest electric car for about a day at just $38,990 plus on-road costs, before being undercut by $100 by the BYD Dolphin.
The MG5 sedan, which will compete with the Toyota Corolla sedan, is priced from just $24,990 drive-away, which compares very favourably to the Corolla’s starting price of $28,630 plus on-road costs. That means buyers could save up to $5000 by opting for the MG over the Toyota, depending on on-road costs in their respective state.
It also represents a steep price increase for the Corolla, which began at just $21,240 plus on-road costs back in 2019, prior to the pandemic. There are some notable reasons for this, namely Toyota’s decision to drop the manual transmission option of the recently-updated model, which naturally increases the price point.
MG Motor Australia and New Zealand CEO Peter Ciao made it clear that this was a very deliberate strategy by the brand, offering tempting prices to Australian families that are currently feeling the economic pinch.
“Australians are doing it tough amid cost of living pressures, I know they are feeling those rising pressures at supermarkets, when they’re buying fuel, when they’re paying their energy bills,” Ciao said, announcing the MG4 pricing.
“Like I did when I launched the ZS EV, and as MG has done with our other models, we are creating affordable and accessible cars and the MG4 is helping Aussies get into an electric vehicle sooner than later.”
All this is putting pressure on brands like Toyota, Mazda and Hyundai, which have long dominated the more-affordable end of the market. But those brands are confident in their strategy, with Mazda Australia managing director Vinesh Bhindi telling CarsGuide recently that competition is always tough given the size and diversity of the local industry.
“In terms of competitors entering the market, that’s not anything new,” Bhindi said. “Australia encourages companies and brands to enter, we’ve got 70 brands and climbing – well ahead of places like the US. Competition is great, we don’t have an issue.
“Whether it’s us moving more premium or other brands creating space? I don’t think that’s the case, it’s more about Australia as a country [has] less tariffs to enter and less tariffs to exit, companies see an opportunity and Australians love choice.
“Each company will see an opportunity from their point-of-view and their strengths, and I don’t have any insights into what they’re seeing in Australia and what they’ll do but they’ll find their fans. That’s not a problem and we don’t have any concerns.”
Keyword: Are cars too expensive? Why rising costs are creating an opportunity for brands like MG, Haval, BYD and more