Due to their extremely affordable pricing, SAIC-GM is gearing up to ax Chevrolet's flagship models - the Cruze and the Malibu XL - which have been pillars of the brand's sales in the past.
The reason for halting production is the low pricing strategy, which has resulted in minimal profits, necessitating a timely cut to stem losses.
An internal employee of SAIC-GM Chevrolet has leaked to the media, stating that the overall operational status of the brand is not good at the moment, making it difficult to sustain Chevrolet with losses.
Chevrolet is the only one among SAIC-GM's three brands that is operating at a loss, with the Cruze being the least profitable product in Chevrolet's product lineup. Following the cessation of sedan production, Chevrolet will shift its focus to personalized SUV models.
There are also reports indicating that it's not just the Cruze; another sedan model under Chevrolet, the Malibu XL, is also set to cease production. These two models collectively represent 80% of Chevrolet's sales in China, with the Malibu selling around 15,300 units in 2023, accounting for 9% of sales.
These two flagship models are being discontinued despite their popularity?
According to Chevrolet's official website, the only sedan models available are the Cruze and Malibu XL. The 2024 Cruze comes in three versions: the 1.5L Enjoy Edition, Joy Edition, and the 1.3T Mild Hybrid Premium Edition, priced at 94,900 CNY, 100,900 CNY, and 108,900 CNY respectively.
The Malibu XL has five models available, with prices ranging from 175,900 CNY to 219,900 CNY.
This is just the official retail price. According to consultations with the Hyperdrive Lab, in Shandong province for example, the entry-level version of the Corolla can be as low as 59,900 CNY after discounts, with a discount of up to 35,000 CNY.
Even the Chevrolet Malibu XL, positioned as a B-segment car, has extremely exaggerated terminal prices. Dealers are offering it for 125,900 CNY to 169,900 CNY, which is 50,000 CNY lower than the official list price.
In other words, you can now buy the highest trim level at the price of the base model's list price. This price drop is quite significant within the entire joint venture B-segment car lineup.
Despite such substantial price cuts, Chevrolet is still lowering its sales expectations. According to the Economic Observer, insiders say that Chevrolet will drastically reduce its sales target, with a target of only 50,000 units in 2025, which is less than 30% of last year's sales volume.
As a mainstream brand, Chevrolet's models launched in China are generally known for their cost-effectiveness. Even though some flagship models may be discontinued, it doesn't mean SAIC-GM is giving up on Chevrolet. On the contrary, they have decided to shift their focus to the popular SUV track in the American market, where Chevrolet is well-received.
At the previous Guangzhou Auto Show, Mr. Lu Yi, Vice General Manager of SAIC-GM, stated that starting from 2024, Chevrolet will further adjust its positioning to become a brand characterized by individuality and SUVs.
Mr. Zhou Peng, Marketing Director of Chevrolet, had previously revealed that they will strive to improve the SUV product line, introducing high-end models popular in the American market, hoping to reshape Chevrolet's brand image in the market.
It seems that Chevrolet is planning to abandon the low-margin sedan models in the domestic market and return to the traditional American large SUV market. It is reported that under General Motors' premium import car platform, Delang, Chevrolet TAHOE will be officially introduced into the domestic market this year.
However, Chevrolet's current lineup of SUV models in the Chinese market has not generated much response. Sales of American large SUVs such as the Trailblazer and Explorer have also not been impressive. Taking the Explorer currently on sale as an example, the monthly sales average is only about 500 units, with just over 100 units sold in February.
The Chevy Malibu has had quite a journey, starting as a representative of the American muscle cars in the 1960s, then transitioning to its own series when Chevy replaced the Chevelle with it. It made a decent splash upon its release. Fast forward to 2011, Chevy introduced the ninth-generation Malibu to the domestic market in China, naming it the Malibu XL. It officially hit the market in February 2012, boasting a rugged exterior design that stood out among its competitors. Coupled with the halo effect from the "Transformers" movie franchise, Chevy experienced a period of significant success.It's not unusual for mainstay models to be discontinued within the General Motors lineup. In 2019, the classic Chevy Cruze was also officially discontinued, making way for the current Cruze model. But now, with just a brief five-year stint in the Chinese market, it's time for the Malibu XL to "retire" as well.
When we mention the Corvair, it's inevitable to talk about the Chevrolet Monza from the 1970s. If you're somewhat versed in motorsports, you surely wouldn't be unfamiliar with this term.
Monza refers to the famous Italian racetrack, Autodromo Nazionale Monza. It's Italy's most renowned high-speed circuit, the oldest Formula One track still in use today, and famously dubbed as Ferrari's "semi-private test track."
After the decline of the Monza model back in the day, Chevrolet swiftly introduced the Cavalier as its successor. The launch of the Cavalier was a huge success, marking the beginning of Chevrolet's history of selling popular and affordable small cars after the oil crisis. This success led Chevrolet to revive the Cavalier name in 2017, renaming it as the Cruze.
In fact, both the Malibu and the Cruze have respectable product offerings in terms of both price and features. They are well-equipped and powerful vehicles.
Upon the release of the first generation model, the Cruze performed exceptionally well in the Chinese market. During its peak, prospective buyers queued up to make deposits, and those who wanted immediate delivery had to wait for up to three months, even with added premiums.
Moreover, the Malibu, due to its high visibility and sales performance, briefly stood alongside the Kia K5 and Hyundai Sonata eighth generation as one of the top choices in the B-segment sedan category.
The Chevrolet Malibu can be considered a lukewarm contender among joint venture sedans from the perspective of consumers. Even though its value for money is widely acknowledged, when it comes down to actually making the purchase, consumers tend to vote with their feet. It's like the saying goes, "You recommend it, but when it's time to buy, I won't."
Everything about it, from the price to its positioning, is just average. But being average also means it struggles to compete with other car manufacturers' innovative endeavors. For instance, its slow product upgrades and iterations fail to meet the extensive demands of the Chinese market, and its lack of smart features lags behind, like the sword of Damocles hanging over the head of the joint venture brand.
In addition, BYD fired the first shot in the 2024 onslaught against joint ventures, once again resetting price standards across all levels. Subsequently, several other car companies followed suit, fully embodying the concept of "there's no limit to how far one can go," thereby undermining the previously held advantage of second-tier joint venture brands in terms of cost-effectiveness.
Moreover, with the rise of domestic brands and the intensification of the "Matthew Effect" among mainstream brands in the Chinese automotive market, the gradual decline of American joint venture car companies in the Chinese market has become a reality.
Last year, profits in China fell by 30% While joint venture brands are engaged in a fierce elimination battle in the Chinese automotive market, they are still raking in profits overseas.
Taking General Motors as an example, its full-year financial report for 2023 showed that its net income for the year hit a historical high, with adjusted cash flow from automotive operations reaching $11.7 billion, a 10% year-on-year increase. Net profit reached $10.1 billion; adjusted EBITDA reached $12.4 billion, exceeding financial expectations for the third consecutive year.
In 2023, General Motors achieved a global sales figure of 6.18 million units, with the U.S. market serving as its primary profit driver. Within the U.S. market, most of General Motors' products were in high demand, allowing the company to maintain its position as the sales leader, particularly in the full-size SUV segment, which has held the title of America's best-selling vehicle for 49 consecutive years.
Behind the stellar financial report, conventional fuel vehicles continued to account for the bulk of its profits. However, General Motors' performance in the domestic market leaves much to be desired.
SAIC-GM released its sales figures for 2023, indicating a total of 1.001 million new vehicles sold throughout the year, marking a 14.45% year-on-year decline. With fewer cars sold, it's only natural that profits took a hit. Last year, GM's profit in the Chinese market amounted to $446 million USD, down by 34.1% compared to the previous year.
Moreover, GM's transition to electrification hasn't been smooth sailing either. Continuously reducing the proportion of bonus performance payouts, GM has announced round after round of restructuring and layoffs.
The significant disparities between domestic and international markets help explain why some argue that automakers like Toyota and Ford are hesitant to fully embrace electrification. It's understandable when considering that the electrification transition has been a grueling process in the Chinese automotive market, turning it into a meat grinder for automotive stalwarts. However, in the global market, industry giants are still raking in profits from their combustion engine businesses.
Currently, Chevrolet's cessation of production on its main vehicle models seems more like a strategic move to focus on electrification and the SUV segment. It's reported that by 2025, SAIC-GM plans to introduce 8 new energy vehicles, including pure electric and plug-in hybrid models under the Chevrolet brand.
But can the SUV market guarantee smooth sailing? Compared to sedans, Chinese brands excel more in the SUV market. Traditional giants like Great Wall, Geely, and BYD are all launching hybrid SUVs.
Faced with local competition, is Chevrolet resorting to price reduction to survive?
