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China’s Lynk Tilting At Windmills With Europe, U.S. Plan

China’s Lynk Tilting At Windmills With Europe, U.S. Plan.

“The whole concept seems a bit airy fairy, but there’s one good thing; Volvo technology”

Lynk & Co, the Chinese auto maker owned partly by Volvo, has set out an ambitious plan to make some of its cars in Europe from next year, and sell them here and in the U.S., but experts reckon its chances of success are slim.

Without a dealer network yet, and trying to enter a section of the market dominated by German car makers presents huge obstacles.

Lynk will produce the 01 SUV at the Volvo factory in Ghent, Belgium, starting next year alongside the XC40 compact SUV with which it will share much engineering.

Lynk has said it aims to sell 500,000 cars annually, with half in China and 125,000 both in Europe and the U.S. starting next year. China volume will be produced there. There is speculation it might eventually make Lynk cars at Volvo’s new plant in Ridgeville, South Carolina.

IHS Markit doesn’t think these numbers are viable, and points to the difficulties more established companies like Infiniti and even Lexus in Europe have had trying to establish brands in the premium sector, where BMW, Audi and Mercedes dominate. Industry consultants JATO sees an uphill struggle for Lynk, which nevertheless might be followed soon by other Chinese manufacturers.   

Lynk, calling itself the global connected and shareable mobility company, uses much opaque marketing language to outline its plans, which involve new methods of reaching the public using the internet and so-called pop-up showrooms in big urban centers with holograms of its vehicles. So far it hasn’t spelled out whether it will eventually build up a dealership system, but given its close links with Volvo, that would seem to provide a ready-made network eventually.

Lynk said its first European store will open in Amsterdam, quickly followed by new locations in Barcelona, Berlin, Brussels and London.

Fun
“These ‘Offline Stores’ will be located in central fashion districts as easy-to-navigate, sociable and fun brand boutiques. Supporting the city stores in Europe will be the online store at Lynkco.com – the hub of the business in Europe, together with the ‘Offline Tour’ of pop-up stores that will visit many other European cities every week,” Lynk said in a statement.

“For its car collections, Lynk & Co has abandoned the traditional automotive concept of base models, entry points and endless options lists. Inspired by the worlds of fashion and technology, trim levels and optional extras are replaced with a simple selection of fully equipped, one price collections (its italics).”

“At the core of the Lynk & Co brand is connectivity. Customers will find a range of connected technologies on offer in the vehicles, from a sharing function with the world’s first in-car share button to wireless charging and a dedicated Lynk & Co app store – all aimed at making life easier on the move. Described as a ‘smartphone on wheels’, all models come with a large central touch-screen and advanced telematics systems – always connected to the internet and the car’s own cloud,” it said.

Lynk might think that’s original, but most of it reflects what just every car company is saying. 

Plug-ins and hybrids
Sales will begin in the U.S. and Europe in 2019. The first Lynk will be called the 01, an SUV, with future models following in numerical order as in 02 and 03. Lynk hasn’t announced many details, but the compact SUV 01 will be a hybrid powered by a 1.5 liter, 3-cylinder gasoline engine and an electric motor. Lynk also aims to add a compact sedan. Later versions of the 01 can be powered by a 2.0 liter, 4-cylinder engine. There will be plug-in hybrids and electric versions.

IHS Markit analyst Tim Urquhart said the 01 and the XC40 will be almost identical under skin. The strategy sounds adventurous with the talk of central fashion districts and fun brand boutiques.

“This is a new brand and it won’t have dealers in the established sense, although Lynk hasn’t given a clear answer to question of where the cars will be serviced. The link with Volvo would seem obvious, but that’s not official policy,” Urquhart said.

Will it point to its Chinese origins or try to hide them?

“It will emphasize the connection with Volvo and the XC40, but it’s trying to create brand value from nothing. Look at Lexus (in Europe) and Infiniti. They’ve found it difficult and they have huge manufacturers behind them. Unless you have something novel or outstanding to offer it is very difficult. There is the new novel retail experience, but it should offer the premium experience for less money,” he said.

Toyota owns Lexus and Nissan owns Infiniti.

Airy fairy
“The whole concept seems a bit airy fairy, but there’s one good thing; Volvo technology. All the engineering bits will be the same as Volvo and if it significantly undercuts Volvo for price, that would be a compelling offer. Look at Skoda and Volkswagen,” Urquhart said.

Skoda is VW’s Czech subsidiary, which has been very successful lately because the car buying public figured out its sedans and SUVs were more expensive VWs in disguise.

JATO’s global automotive analyst Felipe Munoz agrees the so-called novel approach from Lynk is not really very different from conventional players.

“Lynk SUVs are likely to sit one step below the Volvo XC40 in terms of price, as they are expected to become the hybrid entry cars of the group in Europe. The XC40 and 01 share a lot of things, but the latter is not known and plays as Chinese. Which means it can’t be equal to any premium brand, at least not now. It means it has to increase the brand’s awareness by becoming the “cheap” Volvo,” Munoz said.

Lynk faces an uphill struggle.

“It won’t be easy, but this is the first time we’re seeing a serious project of a Chinese brand in the Western world, and it will be the base for future arrivals by Chinese brands,” he said.

IHS Markit’s Urquhart sees a struggle ahead.

“I don’t think it’s viable, particularly in America with all this trade stuff going on and I can’t see it happening for a long, long time. There are too many car makers at the moment and there should be some consolidation in the industry and I don’t see much space for new Chinese entrants not matter how good, unless at half the price and that’s impossible,” he said.

Nobody’s quaking
If it was successful, which companies would be threatened?

“Hyundai and Kia (of Korea) perhaps with their small and medium SUVs and possibly Skoda, but I don’t think they will quaking in their boots at the prospect of a head to head. I don’t understand why (Geely) don’t just concentrate on Volvo,” Urquhart said.

Volvo owns 30% of Lynk & Co, and Geely Automobile Holding has 50%. The rest is held by Zhejiang Geely Holding which bought Volvo from Ford Motor in 2010. Chinese billionaire Li Shufu’s Geely recently bought 9% of Daimler. 

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