This week, two car importers announced the entry of new brands into the Israeli market, ones that are very likely to influence it: the Carso Group, which imports Renault and Nissan into Israel, announced the entry of Chinese Chery cars, while Shlomo Motors, which is owned by the Shlomo and Allied Group, the parent company of Che Mafion Motors (Volkswagen importer) will import the Chinese BYD cars to Israel. In addition, according to the estimates of the Ministry of Transport, Calmobile may also announce in the coming weeks the import of cars of the electric vehicle brand ORA, which is part of the GREAT WALL group.
Contrary to many attempts from the past to import Chinese cars to Israel, some of them from unknown brands that did not pass the barrier of the Israeli audience, this time we are talking about large manufacturers that do not need to be introduced. These are not only manufacturers that have nothing in common, the manner in which their cars will be marketed in Israel is different because of the range of models, the positioning and the identity of the importers.
In the case of Chery, the importer Carso Group hastened to announce that the cars it will import to Israel will not be electric. According to estimates, this fact caused competitors to give up attempts to enter Israel at least until the introduction of an electric vehicle. In the case of the BYD importer, there is no mention of the identity of the models that will arrive, but the dedicated website that the importer set up already includes quite a bit of information that relates mainly to the manufacturer’s battery technology, which means that it is reasonable to assume that BYD will market in Israel what the manufacturer calls “new energy cars”. New energy cars are not necessarily “pure” electric cars. The reason for this lies in the Chinese government’s definitions of what constitutes green energy in a vehicle. Thus, the definition of a vehicle that is “new energy” is quite broad and includes plug-in hybrid cars for example, so BYD does not hesitate to use this definition when it states that it is China’s largest manufacturer of clean vehicles. This is a kind of cleverness with half a nod to Tesla that produces “only” an electric vehicle.
Is the Israeli market ripe for such cars? In terms of positioning, the psychological threshold that exists in Israel regarding a Chinese vehicle has gone through stages of development in recent years. The Chinese cars that arrived in Israel in limited quantities were simply not good enough, but factually there is one car manufacturer that is “distinctly” Chinese that managed to break the stigma: Geely Geometric C. Today it is the Chinese electric car sold in Israel and thanks to it the way was paved for more Chinese cars. Factually, this is a difficult task: the Israelis haven’t really heard of Great Wall, they don’t really know BYD and don’t really know much about Chery. These are cars that do not have a “back”. The Israeli car market is in an ideal period for those who want to import Chinese cars to Israel. The reason for this is the global shortage of cars from most of the major car manufacturers, which has created a vacuum of consumers who will be willing to purchase almost anything, whether it is a decent car or a less-regarded car. But the image is still problematic. In the case of BYD, the manufacturer will be presented as an innovator, as an extreme marker of technology and as a direct competitor to Tesla. In the case of Chery, this is a much more complex task, because on the one hand, Chery has the reputation, but it is not a reputation that is recognized in Israel – and it does not have the innovation required to back up the technological reputation enjoyed by car manufacturers such as Geely and Tesla.
Another important fact that cannot be ignored is that the car importers have strong relationships with the car fleets. The connection between Shlomo Motors and Shlomo SIXT or alternately between Carso Motors and Pacific cannot be missed. Selling cars that a car importer imports to the leasing company associated with him is not a topic they like to talk about. Selling to a company that is “owned by the importer” does not contribute to building a brand that sells to individuals, which is more profitable, but selling to a leasing company “owned by the importer” has an advantage: you can put many cars on the road and fight with competitors. It is likely that quite a few Chinese cars will find their way into the fleets that are currently boycotting Tesla and are reluctant to purchase Chinese electric cars. In practice, a situation in which a car importer has a “desirable” Chinese brand that enjoys a technological aura that, although not comparable to Tesla, but still exists to a certain extent, such as BYD, can also create chaos among leasing companies. Nowadays, the leasing companies want an electric car, but are reluctant to buy it. Most of the leasing companies imposed a silent veto on Tesla, with only Alden purchasing from it. The entry of strong Chinese electric brands with a strong wink to the market may well tip it.
The entry of Chinese electric car brands into the Israeli market is almost inevitable, but the entry towards the end of the year has a clear purpose: when Geely entered Israel it was very clear that the importer Geo Mobility enjoyed almost complete support from the manufacturer: the prices of the cars were maintained for a long time, the delivery times were favorable , it is evident that the Chinese wanted a visit from the State of Israel. But now we are facing a significant regulatory change: the purchase tax on a new vehicle will increase this January. On the face of it, this is bad news, but not for a car importer who now needs to break into the Israeli market, the formula is simple: an Israeli importer has to commit to a car manufacturer for quantities, and in the case of an initial penetration into the market it is about large quantities, the cars will arrive by December and then they will be freed from tax before the tax authority collects its liter of meat – and finally they will be released to the buyers “at the new and high price, it is not our fault but the fault of the state” who do not necessarily know that they actually subsidized to some extent the penetration of the new brand into Israel.
The question of questions is how much will the new Chinese models cost? The answer is that there probably won’t be many surprises. That means the new Chinese cars will not be cheap at all, at least not significantly compared to equivalent western cars. The reason is that all the conditions are kosher, and there is a problematic precedent here. If in the past new brands that penetrated Israel, at least the few Chinese who dared to do so, the price was competitive, today it is a different situation. First, because in many cases these are cars that are destined to reach fleets that are thirsty for goods. And secondly, because there is another set of circumstances that simply makes the Chinese cars such that they won’t bring a price tag, because ironically they don’t need to. If an importer is able to brand the Chinese car as advanced, luxurious and a legitimate competitor to Tesla then there is no reason to pay less for it. Beyond that, the Israeli car market is in the days of the “Tesla effect”. When Tesla arrived in Israel it was an affordable electric car, then it became more expensive, and again, six times. The car importers are aware of this fact, they followed the Israelis who did not stop ordering cars even after the increase in price, and realized that in light of the situation in the market it is certainly possible to incur more costs.
Beyond that, there is the issue of the global shortage of components that makes the cars more expensive, and other burning issues: Tesla is currently the only car manufacturer in Israel that imports the cars itself. The Chinese, who have entered or will enter Israel, have veteran car importers standing behind them who have already imported quite a few cars to Israel, some of them electric, and here there is a problem of positioning versus price. Can the Carso Group that imports a Nissan SUV sell a similar sized Chery SUV for a close price? The answer is positioning: if Chery’s vehicle is priced for much less money than Nissan, it may be perceived as too cheap and bad, if it is priced similarly to Nissan, it is necessary to invest in marketing and branding to create among consumers a feeling that this is a product that does not fall short of the old car brand. Alternately, Shlomo Motors is not Champion Motors, but there is no denying the connection between it and Allied, the parent company of the Volkswagen importer, which imports a Skoda Aniac for NIS 190,000. Will BYD’s cars be perceived as “Tesla” level technologies to compete with Skoda? In any case, the very existence of the old brands is a problem and it is likely that with regard to the new and Chinese models, the importers will emphasize what catches the eye of those who do not understand cars that much, that is, those who prefer leather seats to high-quality plastic, those who want a huge multimedia screen over Advanced safety systems.
In any case, considering the gap created in the Israeli car market and the huge shortage of cars that the market is experiencing these days, the coming months will probably be the months of the Chinese attack and this will also be the basis for a fascinating study on car marketing. One can only hope that this penetration will not be carried out on the consumer’s back.