China's auto industry accelerates in race against foreign rivals

Rollout of new brand Lynk & Co., targeting younger consumers, is part of an push to gain ground on overseas competitors

A new auto brand, Lynk & Co., hit the market in China on Tuesday, part of an effort by domestic car makers to broaden their appeal by offering upscale vehicles capable of matching foreign rivals.

Targeting young buyers by offering a next-generation vehicle with free wireless connectivity and car-sharing services, Lynk’s rollout reflects the growing ambitions of Chinese auto makers aiming to move beyond the production of cheap cars for a domestic audience.

After China, Lynk plans to expand to Europe and then the U.S., as its parent company, Zhejiang Geely Holding Group Co., strives to become a global player.

“China is reshaping the global automobile industry at the highest level,” Geely’s president, An Conghui, said at a sales kickoff event.

Geely executives contend Lynk is a tech brand as much as a car brand, as the internet and automotive worlds continue to overlap. The brand—positioned between the premium vehicles made by subsidiary Volvo Cars and the mass-market cars of Geely Auto—will worry overseas competitors, such as Ford Motor Co. and General Motors Co.’sChevrolet, struggling in the world’s biggest auto market, where passenger-car sales have grown by only 2% this year, said Yale Zhang, managing director of consulting firm Automotive Foresight.

“Local (Chinese) cars are now the ones that really offer the best value for money,” said Mr. Zhang. “They will include more features, like connectivity, at a lower price.”

Hangzhou-based Geely has outperformed the sluggish China market this year, its sales rising 80% in the first nine months. Even so, “it’s a good strategy to have a new brand” above its mass-market cars, said Leo Hu, a credit analyst with S&P Global Ratings, with China’s premium autos delivering stronger growth than the overall market. Premium sales have increased this year by roughly one-fifth, according to S&P.

The Lynk 01, a gasoline-powered sport-utility vehicle, went on sale in China on Tuesday following a launch at the Ningbo Speedway, two hours south of Shanghai. With a sporty design and smart features including voice-operated music streaming, the Lynk car shares up to 90% of its underlying technology with its Volvo cousins, said Geely Auto Vice President Mats Fagerhag. 

Electric versions of the Lynk 01 will follow, with other models set to join the range soon, he said.

Lynk put 6,000 cars on sale online earlier in November to test demand—they all sold within two minutes.

The price of a Lynk 01 starts at around $24,000. That is more than Geely’s popular Boyue SUV, which starts at around $14,800, and slightly lower than the Chevrolet Equinox SUV, which is also selling strongly in China.

The Lynk launch comes weeks after the debut of Polestar, Volvo’s new premium electric-car brand.

Geely isn’t the first Chinese auto maker to try to expand its portfolio to reach new customers. Last year, Great Wall Motors Co., China’s top seller of SUVs, rolled out a brand called Wey positioned above its mainstream line.

SAIC Motor Corp. , the country’s largest auto maker, has recently found success with its Roewe marque. The Roewe RX5 uses an operating system developed by technology titan Alibaba Group Holding Ltd. to offer connectivity similar to that being promised by Lynk.

In November, Zotye Auto—which plans to build electric cars in a joint venture with Ford—unveiled a new brand, Traum, that is positioned above its core offering.

Chinese brands selling for around $25,000 is something that local auto makers “would never have imagined 10 years ago,” said Automotive Foresight’s Mr. Zhang.

The improved quality of Chinese cars made the conception of Lynk more difficult, acknowledged Peter Horbury, Geely’s executive vice president of design.

“The gap between Geely and Volvo … started to get narrower quite quickly” as the former advanced in quality, he said.

By carving out a sub-premium category in the Chinese market, new local brands such as Lynk and Wey have thrown down the gauntlet to mainstream foreign auto makers, said Mr. Hu of S&P. “Chinese local brands do have local expertise, and they have cost advantage,” he said. “Foreign brands may need to look at their strategies.”

Source: The Wall Street Journal