Why do Great Wall and Geely prosper while other Chinese automakers …

15 Май 2014 | Author: | Комментарии к записи Why do Great Wall and Geely prosper while other Chinese automakers … отключены
Geely Emgrand EC9 Electric Cars

Why do Great Wall and Geely prosper while other Chinese automakers flounder?

Facing strong competition from foreign brands, domestic Chinese automakers continue to lose market share.

But two companies, Great Wall Motor Co. and Zhejiang Geely Holding Group, have successfully fended off global rivals as they increase sales and profits.

Why have they succeeded while other domestic automakers failed? It’s because they learn quickly from past mistakes.

Car manufacturing is still a young industry in China. There was no domestic car brand to speak of until the late 1990s. Since then, a slew of new brands have been launched.

Some domestic automakers, such as Chery Automobile Co. and BYD Co. achieved impressive growth shortly after they entered the auto industry.

Perhaps growth came too easily, because these companies got drunk on their own success.

After Chery was incorporated in 1997, the state-owned automaker maintained strong sales growth for a decade. But it kept building new assembly plants, and it expanded its product lineup to include microvans and even agricultural machines.

BYD is a battery maker that entered the auto business in 2003. Just seven years later, it became China’s second largest automaker.

But BYD grew too ambitious — just like Chery. The Shenzhen-based automaker increased its dealership network to more than 1,000 stores, and it dabbled in non-automotive industries such as solar power and home appliances.

This reckless expansion stretched the company’s resources and hurt its product quality. Over the past two years, sales declined.

Yet, neither automaker has reined in ambitions. Chery is setting up production joint ventures with Israel Corp. and Jaguar Land Rover, while BYD is raising its bet on electric vehicles.

Geely and Great Wall also aggressively expanded.

Geely, which previously produced low-priced compact cars, went upscale with three new brands in 2009. A year later, Great Wall — known mainly for its line of SUVs — introduced a new line of sedans.

Geely Emgrand EC9 Electric Cars

In 2011, Geely and Great Wall realized they were heading in the wrong direction. Both companies quickly adjusted; Geely phased out its Geely car brand, and Great Wall went back to the basics and focused on SUVs as its core product.

By shrinking their models lineups, Geely and Great Wall had enough resources to upgrade their remaining products. They also found new allies.

Great Wall lined up key foreign suppliers — including Bosch and Delphi — to develop new SUVs. And Geely upgraded its models with six-speed automatic transmissions built by its Australian subsidiary, Drivetrain Systems International.

These efforts have paid off nicely. Helped by robust SUV demand, Great Wall’s sales rose 28 percent last year, while profits surged 66 percent.

Geely, which has yet to disclose its 2012 earnings, raised vehicle sales by 15 percent. But since Geely’s Emgrand premium brand is prospering, there is good reason to expect healthy profits.

Moreover, both companies are penetrating overseas markets. Last year, Geely and Great Wall each exported about 20 percent of their vehicles.

Great Wall and Geely still face tremendous competition from global rivals in and outside China. But as long as they remain clear-eyed about their growth prospects, they stand a good chance to gain market share.

That’s a valuable lesson, but other Chinese automakers have yet to learn it.

Geely Emgrand EC9 Electric Cars
Geely Emgrand EC9 Electric Cars
Geely Emgrand EC9 Electric Cars

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