Great Wall Motors defies industry slowdown
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E-mail bjreview, October 15, 2012
![Workers at a Great Wall Motors factory. [Photo / bjreview.com.cn]](http://images.china.cn/attachement/jpg/site1007/20121015/00080282e94111e6188419.jpg "Workers at a Great Wall Motors factory. [Photo / bjreview.com.cn]") |
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Workers at a Great Wall Motors factory. [Photo / bjreview.com.cn] |
When Wei Jianjun took charge of Great Wall Motors in 1990, the privately owned automaker, based in Baoding, North China's Hebei province, had been in the red for years. Wei decided to focus the company on pickup trucks, which is still a "niche vehicle" in the Chinese market.
Wei's decision has helped Great Wall vehicles win high esteem in the auto world. Great Wall Motors has outshined its competitors with its Haval SUV, the champion of the Chinese SUV market for nine consecutive years, and its Wingle pickup, the top seller among Chinese pickups for 14 years in a row.
Without the backing of the Chinese Government and State-owned banks, the company is now debt-free and has been listed on both the mainland and Hong Kong stock exchanges.
Against adversity
A slowing economy - coupled with the phasing out of policies to stimulate consumer spending and auto purchase limits in some megacities - has put the brakes on China's auto industry, sending car sales to a historical low after explosive expansion. According to statistics from the China Association of Automobile Manufacturers, from January to July, total vehicle sales rose just 3.6 percent after an anemic growth of 2.5 percent in 2011, setting China up for its slowest two years of growth since the late 1990s.
Despite tough conditions facing domestic manufacturers, a handful of companies have managed to rise above the challenges. Great Wall Motors is one such company. According to statistics from the China Passenger Car Association, Great Wall Motors sold a total of 487,000 vehicles in 2011, 22.5 percent higher than in 2010, nudging itself into the top 10 car sellers in China. Its business returns and net profit for 2011 totaled 30.14 billion yuan ($4.81 billion) and 3.56 billion yuan respectively, representing year-on-year growth of 31.13 percent and 25.77 percent, well above the declines seen in the industry during the same period.
Great Wall's success is due to its "category strategy". Its advantage in the SUV, pickup and sedan markets has given its brand an added boost. In 2011, the manufacturer sold 187,500 sedans, 147,300 SUVs and 121,700 pickup trucks. "Great Wall Motors will continue to focus on strengthening Haval and Wingle as the leading brands in China's SUV and pickup truck market, and push the Great Wall sedan as the king of family cars," said Shang Yugui, head of the carmaker's media relations.
The carmaker has developed a strategy called "three highs" - high-quality, high-tech and high-performance - in an effort to alter the impression of domestic cars, often seen by consumers at home and abroad as low grade and unsafe.
The aim of the strategy is to meet the New Car Assessment Program standards for safety, European and American standards in energy and emission reductions, German standards in operational stability and Japanese standards in durability.
This year, Great Wall Motors plans to unveil five new models, one of which is the 1.5 L turbocharged Haval H6 SUV, which made its official Chinese debut on Sept 29.
With the 3 billion yuan ($477.3 million) invested in research and development in the past five years, Great Wall Motors will spend another 5 billion yuan ($795.5 million) over the next five years to close the gap with its overseas rivals in technology rather than focusing on the ruthless cost-cutting favored by other domestic carmakers.
With an R&D team of more than 5,000, construction of the company's new research center is expected to be completed in late 2012, focusing on preliminary research, appearance design, conceptual design and simulation design.
At the same time, a new production base is under construction and slated for operation in 2014. When completed, the two projects with an investment of more than 20 billion yuan ($3.182 billion), will undoubtedly give a leg up to its R&D capability.
The brand concept - concentration, profession and proficient - makes Great Wall distinctive, highlights its aspiration to build a world-class brand.
"Great Wall Motors has the money and ability to develop independently. This may explain why we have no plan to establish joint ventures with our overseas counterparts," said Shang, "but that doesn't mean we refuse to team up with competent parts makers.
In fact, international cooperation is a distinguishing feature of Great Wall Motors. For example, we have cooperated with Le Groupe Dassault, Bosch, BorgWarner and Valeo in engine, transmission and vehicle design. Such collaboration allows us to expand our global network."
For the first eight months of the year, the carmaker sold 378,600 units while its year-end sales goal is 600,000 units. Great Wall Motors says that by 2015 its production capacity will reach 1.5 million units, with a sales target of 1.3 million units.
Overseas expedition
As its own auto market slows, China's exports to overseas markets are surging. According to the the China Association of Automobile Manufacturers, the country exported 814,300 vehicles in 2011, 49 percent higher than in 2010. Among the domestic manufacturers, Great Wall Motors exported 83,000 units, among which there were 13,200 sedans, 34,300 SUVs and 35,600 pickup trucks.
For the first seven months of this year, it exported 63,995 units, up 16.75 percent from the same period last year. Now, Great Wall vehicles are seen in more than 100 countries and regions with 800 dealers present in 80 countries.
Great Wall Motors is preparing to increase in exports to emerging markets. "They are easy for us to operate in," said Shang. Russia is now Great Wall's largest export destination. A quarter of Great Wall's total exports last year, 20,000 vehicles, were sold to Russia and sales in the country are expected to total 100,000 vehicles in 2015.
"While we have previously targeted emerging markets, our latest desired market is the EU," said Shang. Great Wall Motors just launched operations in Bulgaria in February, becoming the first Chinese automaker to assemble cars in the EU. Since Bulgaria is an EU member, the project provides Great Wall Motors with access to other EU countries at zero tariff levels. The UK recently welcomed its first model - Great Wall's Steed double-cab pickup, built at the Bulgaria plant with a selling price of 13,998 pounds ($22,404).
Challenges
Global automakers have made their models as affordable as domestic brands.
Even though Chinese carmakers have scored well in automotive crash testing, changing motorists' perceptions of the inferiority of domestic brands will take time. Great Wall Motor is no exception and its brand remains weak both abroad and at home.
"We are confident in our overseas moves. Although we're still suffering from a weak brand image and consumer doubts, we have been met with great popularity in the low-end market," said Shang. Lower prices always seem more appealing. The roomy and well equipped Haval H6 is priced between 110,000 yuan to 120,000 yuan, while Honda's CRV with similar features costs about 180,000 yuan to 200,000 yuan. In the EU and the United States, a locally produced pickup usually costs $100,000 or more, while a Great Wall pickup is priced at $10,000 to $20,000.
In the United States, Japan and South Korea, where the auto industry is quite developed, customers are more loyal to familiar brands. "Higher thresholds in these countries make it difficult for us to enter," said Shang. Nonetheless, the carmaker is eyeing Canada and the United States.
Great Wall's exports are expected to top 300,000 vehicles in 2015. By that time, exports should account for 20 percent of its total sales.
To become a world-class player, Great Wall Motors may have to shift to a more extensive development model. Further improvements should be made in after-sales service, Shang said. Another major hurdle in its development is its current sales network and overall customer service, which lag behind competitors. Great Wall Motors still needs to upgrade its enterprise management system and enrich its corporate culture, he said.
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