beijingwalker
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Chinese EVs changing the rules in Israel's car market as Israeli consumers rush to buy electric vehicles
6 Oct, 2022 16:35Dubi Ben-Gedalyahu
As Israeli consumers rush to buy electric vehicles, purchasing a well-known brand has suddenly become less important.
Until recently the conventional thinking was that cars, as the most expensive of consumer items, could only be sold in Israel after importers had invested heavily in building a brand and nurturing the manufacturer's image, and prestige and presenting its history. Even veteran successful manufacturers like Hyundai, Kia and Skoda took years to build their brands in Israel and win consumer confidence.But the Israeli car market is currently undergoing a swift and fundamental transformation as Chinese electric vehicle brands are quickly and extensively gaining ground in the local market. This success is despite the fact that Israeli consumers barely know the brands and manufacturers producing the cars. Judging by recent developments in the market, this trend is expected to strengthen in the coming months.
Who'll protect the consumer if the manufacturer ceases to exist?
The change in the consumer approach to cars in Israel stems from several factors. Firstly, the current unique situation in the Israeli market. The demand for cars in general, and electric cars in particular, is significantly greater than the supply and the "established" manufacturers cannot provide the required quantities and models at prices that cover the bulk of market demand. This fact lowers the "filtering threshold" among customers, especially for fleets of vehicles.
Another factor is that many of the new Chinese brands are imported by large car import groups that are known by Israeli consumers. Consequently, Israelis are willing to buy car brands, which, although not familiar to them, come with the backing of service, reliability and a trade-in options. The minimal depreciation, if any, that is currently typical of used electric vehicles in Israel also contributes to this.
Of course, none of this will protect the Israeli customer in the event that the little-known manufacturer of the car they have purchased ceases to exist or decides, for its own reasons, to exit the Israeli and European market for a few years and stops producing follow-on models.
This is by no means a theoretical situation. This has already happened in the past with other Chinese car manufacturers including Great Wall Motors, which halted its exports to Israel after just two years, GAC, which took indefinite 'time out' after just one year of operations in Israel, and even SAIC, which was not able to achieve sustained marketing in Israel until five or six years ago.
Of course, you can't make generalizations. There are Chinese car brands, mainly in the premium segment, that have adopted the methods of Western car manufacturers and made major investments in building their brand image in Israel and Europe, without "shortcuts." One recent example is the new premium brand VOYAH of Chinese car giant DONGFENG, which according to the manufacturer's statement last week will reach Israel next year.
The brand is currently carrying out expensive preparatory work for its entry into Europe, and it requires its importers throughout Europe, and in Israel (Metro), to build a physical and online marketing and service system in line with the expected standards for luxury vehicles, together with investment in branding.
Manufacturers see the Israeli market as a springboard
Emerging Chinese manufacturers with fewer resources tend to see the Israeli market as a kind of springboard or "experimental field" for expansion to the West. For them, branding is sometimes a secondary goal alongside more important aims such as proving the feasibility of exports and globalization of that manufacturer in the eyes potential investors in the stock market, especially if an IPO is planned.
Only last month, we saw three interesting examples. The first is Leapmotor, which is in the second rank of China's car manufacturers, selling just 76,000 vehicles throughout China between January and August 2022, out of the 14.86 million vehicles sold in China during that period. At the start of the month, Leapmotor announced that it would begin exporting its compact electric vehicle to Israel together with pictures of the dozens of cars in its first consignment. The move was only officially published in China together with declarations like "the first step in making the company a global exporter." Less than two weeks after that the company held its IPO on the Hong Kong Stock Exchange.
Over the past few weeks, emerging Chinese company AIWAYS, which has been exporting electric vehicles to Israel since last year, has been preparing to list on Wall Street through a SPAC merger at a company valuation of $5 billion.
In this instance too, exports to Israel have occupied a prominent place in the company's pre-IPO announcements, and for good reason. According to the published data, in the first half of 2022 the company sold only 1,426 vehicles worldwide (including in China) and about 20% of those sales were in Israel.
The third example is the HOZON group, which markets cars under the NETA brand name. The group delivered 93,185 electric vehicles worldwide between January and August and last week published an official announcement in China about signing a franchise contract with the Balelius Group in Israel (which is also the importer of AIWAYS).
The announcement said, "This is the right time for NETA to enter the Israeli market. Israel belongs to the developed countries and its economy, technology and level of consumption are relatively high... The relatively favorable government policy and the significant market potential open a window of opportunity for electric vehicle manufacturers from China to enter the Israeli market... The signing of the strategic agreement with the Balelius Group is another step in NETA's global strategy that will help it expand to the Middle East, Europe and other export markets."
NETA's vehicles are supposed to be marketed in Israel in the second half of 2023, but according to the Chinese press, the company will go public long before that.
Less of a status symbol, more of a product providing a service
The company planning to enter full throttle into the marketing of Chinese electric vehicles in Israel is the Carasso Motors (TASE: CRSM). Last week, the Chinese car manufacturer Jiangling Motors announced that it had signed an agreement with Carasso to export its new electric sedan to Israel, and its announcement said that the first shipment will include about 600 vehicles.
According to Carasso's plans, the cars, which are manufactured in China as part of a joint venture with Renault, are not intended for sale to the general public but rather will be used for advanced B2B services, such as shared car rentals for taxis and Uber-style services based on the format in which Renault's new transport services division, called MOBILIZE, operates in Europe. This will most likely be conducted through the large leasing company owned by Carasso.
In other words, this Chinese brand and manufacturer will only be exposed to the end consumer in Israel in terms of its utility. It is conceivable that this is the direction in which the entire market will go in the future: the car will no longer be an expensive item of private property and status symbol, but "a product that provides mobility services."
Chinese EVs changing the rules in Israel's car market
en.globes.co.il
