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Chevrolet Europe targets booming new Eastern markets

General Motors may be having to beg, plead and bribe for every sale in the US, but its blue-collar subsidiary Chevrolet is on the crest of a wave in Europe – report by Neil Winton.

Chevrolet sales are booming, but the model names won't mean much to Americans, with the tiny Chevrolet Matiz, and other small cars like the Kalos (the Aveo in the US), Lacetti and Tacumas swarming off dealer lots across Europe. The Captiva, Chevrolet's new Sport Utility vehicle launched recently here in south-west Ireland, won't mean a lot to Americans either, although if you look closely you'll realize it is a Saturn Vue in all but name. Chinese readers will know it as the XL7. Chevrolets are doing best in new markets like Poland, Ukraine and Russia, where buyers are often finally able to buy their first cars, but it is also competing well in Italy and Spain, where little and cheap go down big.

General Motors already has two important brands in Western Europe, German-based Opel and British Vauxhall, and until recently it used its Korean subsidiary Daewoo to spearhead sales in less developed markets. It was one of General Motors' better ideas to change the name of products made by its Korean subsidiary Daewoo, to Chevrolet. Daewoo made worthy cars, but the brand name had zero power in the dealership. You might say that Chevrolet isn't very well known either in Europe, although motors like the Chevrolet Impala and the Corvette had their admirers here.

So why dump Daewoo and start all over again with Chevrolet?
“Chevrolet is GM's global value brand, it is our foundation brand and it is GM's largest global brand. Chevrolet stands for affordable products that offer durability, high quality, expressive design and, above all, outstanding value for money. When GM decided to significantly expand its value brand activities in Europe with a range of small and compact vehicles sourced from GM's Korean operations, it was only natural that the choice was Chevrolet,” said Wayne Brennan, Executive Director, Chevrolet Europe, in an interview with Detroit News Online. And Chevrolet Europe has expanded its value brand activities significantly. Automotive consultancy CSM Worldwide expects Chevrolet sales to hit 500,000 a year by 2011. Chevrolet's global sales in 2006 totaled 4.3 million.

“Chevy broke the 300,000 barrier last year and we expect the bulk of these new sales to come from central and Eastern Europe,” said Walt Madeira, Manager, European Vehicle Sales Forecasts for CSM. “It is the Russian, Ukraine and Poland markets that are exploding. Daewoo did well for GM, but Chevrolet does have a positive image. Last year sales were split close to 50/50 between western Europe and the rest, but going forward we see sales slipping in the west to about 30%, with 70% in Eastern and Central Europe. That makes sense; conditions in the West are cutthroat and sales overall are stagnating. Better to go where markets are rising and new buyers are emerging,” Madeira said.

Russia is now the market that excites car manufacturers most in Europe. “At the end of this year, the Russian market will be as big as Italy's and just behind the UK and Germany," Jonathan Browning, GM Europe's vice president of sales and marketing said in a speech last month in Prague, the Czech Republic. Germany is Europe's biggest market, accounting for just under a quarter of West Europe's annual sales of close to 14.5 million cars. German sales totaled 3.4 million in 2006. Russian car sales were 2.1 million in 2006. Chevrolet's Brannon wouldn't comment on the 500,000 forecast made by CSM, but did say this. “The speculations of CSM certainly show trust and confidence in our performance.”

Why not use Opel and Vauxhall, which have a wide range of vehicles from little city cars to big sedans, to push for sales in Eastern Europe?
“Opel/Vauxhall are respected brands with the GM brand portfolio, but they are mainstream and positioned above the value brand products that Chevrolet offers in different segments of the market. Chevrolet vehicles and Opel/Vauxhall products are targeting very different customers,” Brannon said. Ralf Landmann, automotive partner with Roland Berger Strategy Consultants in Frankfurt, Germany, believes GM's strategy is on the money. “Their sales targets look realistic and I do believe they will have success. Yes, Chevrolet is growing in Europe and it has potential not only in the East but in the West as well. They've done a very good job in launching the brand and it is on the radar, even here in Germany”. It made good sense to use the Chevrolet brand for lower priced cars. “It all depends on how far you can stretch a brand. Yes there are the established brands like Opel and Vauxhall, but in the lower price segment Chevrolet is much better positioned than Opel. They took an established, well-known brand (Chevy) and used it to their advantage. Sensible,” said Landmann

Some analysts point to the possibility of cannibalization of Opel sales by Chevrolets. For instance, a version of the Chevrolet Captiva is going to be sold by Opel and Vauxhall as the Antara. “The Opel Antara and the Chevrolet Captiva are based on the same vehicle architecture. However, they are completely different vehicles, not only in the sheet metal where each part is different, but also in the interior design and specifically the ride and handling. Captiva offers great value for money for families while the Antara addresses an audience likely to be without children - it's only got five seats - looking for more specification and additional refinement,” Brannon said. Detroit-born Brannon has been in post since January 2006, arriving via various GM posts around the world including Africa, the Middle East and South America.

Chevrolet's success in Europe is in vivid contrast to GM's Cadillac luxury division. Last year, Cadillac's Dutch importer said it would sell 20,000 Cadillac's and Corvettes in Europe by 2010. According to Automotive Industry Data, in the H1 of 2007, sales were going into reverse, slipping to 2,600, from 3,000 in the same period of 2006. CSM Worldwide's Madeira said GM is ahead of the game with its use of Chevrolet. “In the East we see that all ships are rising in the high tide. As volume grows every one gets a bigger slice. The Japanese have been very quick and are well established in large markets like Russia. But we see European efforts trailing. Renault (of France) with its cheap, world vehicle the Dacia Logan (made in Romania) has done well, but Volkswagen and Peugeot are dragging their feet with a world budget vehicle. Fiat is trying again. The worry is that China will come into those markets and beat the Europeans with a budget vehicle,” said Madeira.

There is one potential cloud on the horizon for companies seeking to climb on the bandwagon of booming sales in Eastern Europe. Recently, Russia has been flexing its political muscles and making scary noises about arms buildups and missile shields. This isn't going to have a long-term impact on business in Russia, according to Roland Berger's Landmann. “No. Not at all. Look at the sales figures in Russia and they are all growing by double digits and this success will be long term. Yes, there are rows now, but I don't think these political developments will gravely influence the sale of cars in Russia long term,” Landmann said.

With the clamor for smaller, more fuel efficient vehicles, will any of these little Chevys find their way to the US market?
“The Chevrolet Aveo is already successful in the US market place, in fact it has been the best selling sub-compact over a long period. If the demand is there, Chevrolet is certainly in a good position to introduce small cars from its portfolio in the US market,” said Brannon. (detnews.com)

Neil Winton, European columnist for Autos Insider, is based in Sussex, England.