Chinese car brands have made great inroads into the European car market recently. Partly because the price is usually much lower than comparable established models, but there has been a concerted effort by China to back its car and motorcycle makers as they seek global markets. The UK has seen great success for BYD, Jaecoo and Omoda, but other new brands are are looking to enter both the UK and EU – which for homologation purposes remain pretty much the same market.
For insurers the challenge is offering cover which includes things like courtesy cars, spare parts for rapid repair, distribution centres and dealership networks. Without all that infrastructure insurers can only offer a write-off settlement, and long term, that increases premiums for everyone on the motor book. Including petrol and diesel car drivers.
It’s interesting that Tesla went down the solus insurance route when faced with high premiums in the US market during its early expansion. Maybe Chinese insurers should look at offering one-make cover at the point of sale, especially as many new Chinese vehicles are leased, not owned. It could be a good way to help a brand enter a market for 2-5 years until that brand is well established? Just an idea.
Meanwhile here’s an extract from Unive’s website in the Netherlands, where the mutual has declined to quote on some Asian car brands;
New brands are gaining ground
According to an analysis of RDW license plate registrations, 88 car brands are currently active on the Dutch passenger car market. Sixteen of these appeared on the Dutch market in the past five years. Together, these newcomers represent 2.4 percent of all newly registered passenger cars during that period.
Among the new entrants, there are relatively many Chinese car brands. This aligns with growing openness among consumers: research by MarketResponse commissioned by Univé shows that 66 percent of Dutch motorists are not averse to purchasing a Chinese car. Only 12 percent resolutely rule out that possibility.
However, facilities for damage repair play hardly any role in the purchase. Only 12 percent of motorists check the availability of parts in advance.
Sales network is not yet recovery network
According to Univé, it is difficult for consumers to assess in advance how well damage repair is organized at a brand. A manufacturer may offer attractive models and have sales outlets, while the local parts supply and the network of qualified repair shops are still under development.
“The quality of a car and the quality of the repair organization are two different things,” says Matthijs. “When parts have to come from far away, repair companies lack technical information, or only a few companies can carry out a repair, it takes longer for an owner to get their car back. You usually only notice this when actual damage occurs.”
Univé therefore advises car buyers not only to look at price, range, safety, and equipment. According to the insurer, the availability of parts, clear repair instructions, and an accessible network of body repair shops also deserve attention.
Minor damage can have major consequences.
That a suitable repair route is not always self-evident is evident from the example of Matthijs, who cites recent damage to an American EV model that entered the market more than three years ago. A small crack in the front axle ultimately led to a total loss declaration, because the available repair instructions stipulated that the entire body had to be replaced.
“It is an extreme example, but it does show that the consequences can be significant when a suitable repair route is lacking,” says Matthijs. “Good technical support and clear repair methods are therefore essential. Without that foundation, it can take a long time before a car owner knows where they stand, and costs can quickly escalate.”
The origin or age of a car brand is not decisive, Matthijs emphasizes. “New providers can build a good local infrastructure in a relatively short time. According to the insurer, Lynk & Co, and previously BYD and Tesla, show that entrants can invest to bring aspects such as parts supply, technical support, and a network of qualified repair shops to the required level in a relatively short time.”
Call to manufacturers and importers
As far as Univé is concerned, manufacturers and importers invest not only in sales and marketing when introducing a car brand, but also directly in parts supply, technical support, and a good repair network. The insurer is open to discussions with brands that wish to further develop these facilities.
“New brands can be a valuable addition to the Dutch car market,” says Matthijs. “A mature market introduction also entails that a car can be repaired within a reasonable timeframe after damage. This prevents motorists from facing long waiting times and unexpected costs afterwards.”
Reparability impacts insurance options
Moreover, the organization of damage repair is important for a car’s insurability. According to Matthijs, insurers must be able to assess how a damaged vehicle can be repaired, how long that is expected to take, and what costs are involved. “If there is too much uncertainty about this, it can affect the available coverage.”
This connection is unknown to many motorists: research by MarketResponse shows that 56 percent do not know that limited parts availability can affect insurance options.
“More limited insurance options are, however, not a judgment on the quality or safety of a car, and such an assessment is not set in stone forever,” Matthijs emphasizes. “When a brand invests in parts, technical support, and a good repair network, the possibilities for responsibly repairing damage improve. Based on this, the insurance options can also be reassessed. And, if appropriate, adjusted.”
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