Date:02-12 14:07 Source：autochina.comnews.cn Authour：He Lun
——Auto Market Hotspots Q&A (116)
“Does the world need another new car company?” Qoros Auto threw this question to the whole auto industry a few years ago. Unfortunately for Qoros, the answer that came back appeared to be ‘No’. Last year, however, two new car companies with traditional roots - GAC Fiat Chrysler and Beijing Borgward - achieved great sales and proved to the market that they are not “excess to requirements”, although they were not completely new carmakers like Qoros. So why the difference?
Q: After 50 years in hibernation, the German brand Borgward launched its first model in China – the domestic BX7 - and in only 6 months, it sold over 30,000 vehicles. This is more than the total sales of Qoros 5 for the whole year (24,200 vehicles). What’s more, most Borgward dealers have started to make profits. What is the reason?
A: Borgward’s success surprised a lot of people, indicating that even in what is already a highly competitive market, a new brand still has a chance of success. The key lies in whether it can accurately target a customer base in this huge and complex market, and meet their needs. As for why Borgward has succeeded, the simple answer is that it has done the right things at the right times. For example, it chose an SUV as its first model while Qoros chose a sedan. Borgward’s marketing strategy is “aim high, shoot low” – positioning itself as a luxury car brand but selling at a mid-range car price - while the Qoros strategy is “aim high, shoot high” – positioning itself as a high-end brand and selling at a high price. And in terms of after-sales services, Borgward offers “lifetime warranty for free + old for new at half price after 5 years”, while Qoros offers nothing special. Based on the above, it’s not hard to understand why there was such a huge gap in performance between the two, for all that they are both good cars.
Q: There is another difference between these two. Borgward is a German brand while Qoros is a completely new one. How much is this affecting sales?
A: “Who am I? Where do I come from? Where am I going?” These are supposed to be profound philosophical questions, but for a car brand, they will tell you how much recognition and how much trust you will get from the customer. On this matter, I would say that Borgward has a huge advantage over Qoros. According to a third-party survey, 35% of Borgward customers consider “German brand” as their first criterion when buying a car, and another 40% give top priority to “cost effectiveness”, followed by “German brand”. Adding the two together, we can see that “German brand” really weighs heavily.
Qoros has repeatedly emphasized that its R&D team is made up of top talent from Europe, that it applies European standards and processes in its production management, and that its major suppliers are also internationally respected companies, but prospective customers still have doubts about its two major shareholders - Chery and Israel Corporation, and there is nothing Qoros can do about it. Now what Qoros needs is more time to answer the question “Who am I”.
Q: Jeep is not a new brand, but it is a latecomer to localized production. To our surprise, the Cherokee, Jeep’s first domestic model, escaped what you call the “localization curse”. In the first year following its launch, sales were more than 100,000 vehicles. In your opinion, how did Jeep achieve that?
A: When I talked about the “localization curse”, I was referring to luxury brands like BMW, Mercedes Benz, Volvo and Jaguar Land Rover. Jeep is not a luxury brand; even so in this highly competitive market, achieving such great sales in its first year of localization is really extraordinary.
I remember at the Guangzhou Auto Show in November 2015, I came across Chen Daohong, Executive Vice President of GAC Fiat Chrysler Automobiles Sales Co. at the hotel, and he said to me that the recently launched Cherokee was being sold at a starting price of RMB 200,000 Yuan, the lowest price for a JV-brand B-class SUV, putting this model between the biggest A+-class seller, the Tiguan, and the B-class SUV, the Envision. Jeep obviously made this bold move to compete for the JV-brand SUV market, which is the largest customer group. Only by maximizing sales and taking enough market share can Jeep avoid putting pressure on its production capacity, achieve economies of scale, and at the same time keep dealers out of difficulty and store up some energy for itself. That’s what we call “killing several birds with one stone”. A smart move like this is worth making even if it does not make money. Chen told me that his bosses, Zeng Qinghong and Feng Xingya, thought the same.
In the first year following its launch, the Cherokee saw sales of over 100,000 vehicles, indicating how well GAC Fiat Chrysler had positioned this model and its price, and that is the key to its success. In fact, accurate positioning is also what made the Geely Borui, the Geely Boyue and the Roewe RX5 into hot sellers these years, and Qoros apparently needs to work hard on that.
Q: The merger of Chrysler Group (China) Sales Limited and GAC Fiat Sales Co., Ltd. and the integration of 4 brand dealer networks were once very controversial moves, but can we now say that this integration has really paid off?
Zheng Jie from the foreign side and her Chinese partner Chen Daohong
A: At the time, the modular integration of 4 brand dealer networks was believed to be an efficient, flexible and low-cost multi-brand integration. Some saw it as an innovation. However, the integration of sales companies for imported cars and domestic cars, including the new “one-signature” system where Zheng Jie, the GM designated by the foreign side, called the shots alone, was presented by some media as “the Chinese side having no say” and “a JV becoming an OEM”.
Now no one questions this anymore, because the sales performance says it all. After the integration, the two sides did not fight about how much say they should have in the company; instead, they concentrated their efforts and resources on doing business, and that was the key to their outstanding performance. GAC, in particular, as the party that “lost the say in the JV”, withstood pressure from the media, integrated the sales company and the dealer network based mainly on the original imported car sales system, and gave the dominant power to the foreign side, who were more experienced and resourceful.
“They did give us a lot of space and trust”, says Zheng Jie, showing GAC’s pragmatic style and great foresight. On the other hand, Zheng Jie and her “foreign team”, which is entirely Chinese, did not let the shareholders down – they worked well with the Chinese team. As Chen Daohong has said, “Through the alignment of values, now, in our company, we can no longer tell who is from Shanghai (Chrysler China) and who is from Changsha (GAC Fiat), because we are all part of the GAC Fiat Chrysler family.” This consistency in market goals and values between shareholders and management is really paying off.