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Five Features of SAIC-GM

Date:Yesterday06-22 11:14 Authour:He Lun

——Auto Market Hotspots Q&A (130)

June 12th was the 20th Anniversary of SAIC-GM. Though known for its strong marketing, SAIC-GM did not hold any large ceremony like other automakers. Instead, it simply offered some discounts and after-sale services at the dealership level. But that didn’t prevent people from giving special attention to this Sino-US joint venture at this moment, not just because it is one of the top automakers in China, but also because it is unique in many ways.

Q: What is your strongest impression of SAIC-GM?

A: I’ve been working as an auto reporter since 1997. It can be said that I have been witness to the whole growing process of SAIC-GM. Compared with other auto joint ventures, the thing about SAIC-GM that has impressed me most is this: it doesn’t look like a joint venture, but it is also one of the successful joint ventures (see the article “Is SAIC-GM Still a Joint Venture?”).

It doesn’t look like a joint venture mainly because its operations are largely dominated by the Chinese partner. Most of the time, the other partner doesn’t seem to exist. Of course, there are other similar joint ventures like Dongfeng Peugeot Citroen Automobile Company Ltd. (DPCA). It too is dominated by the Chinese partner, and for a long time it has even been regarded as a purely local enterprise, but the point is that it has never been as successful as SAIC-GM, and in fact, it has struggled every once in a while.

SAIC-GM made a profit as early as in the first year, when its first product was launched, and in the past 20 years, it has paid taxes totaling RMB 178.16 billion Yuan, which is 14 times the investment made by both partners (RMB 1.521 billion Yuan). Meanwhile DPCA has spent the last 25 years in a constant battle between losing money and making a profit. In 2016, SAIC-GM sold 1,887,000 vehicles, second only to SAIC-VW in the ranking of domestic passenger vehicle makers, and this was 3 times the sales of DPCA.

Q: Both controlled by the Chinese partner, why are the two so different from each other?

A: There are various reasons. One theory is quite interesting: the Chinese partner of SAIC-GM has been treating the foreign brands as its own – it has built Buick, which is a declining brand in the United States, into a first-class JV brand in the mid-range; while DPCA, in contrast, has tried to make the famous French brand Citroen a local brand – Citroen Fukang. It almost succeeded, but then abandoned the strategy. However, in the process, Citroen has been driven into an awkward position. Having the lowest brand premium among JV brands, it has become the biggest loser in the sluggish auto market.

Five Features of SAIC-GM

If you compare the tail logos of the first models of the two brands – the Buick Century and the Citroen Fukang, you will have a visual impression of how these two are branding (see the articles “Advance and Retreat in DPCA’s Branding” on International Business Daily on June 18th, 2002, and “Local Brands vs. Foreign Brands” and “Who is SAIC-GM Building Brands for?” on International Business Daily on June 7th, 2003).

Of course, the difference lies not only in the car logo. The truth is, if you are building a brand with your heart, you will incorporate the concept, value, position and standards of the brand into every aspect - products, marketing, services, target user requirements and image. All these factors together determine whether the brand will be successful.

Q: So what caused such differences between SAIC-GM and DPCA in brand building?

A: The Chinese management team and the Chinese partner of SAIC-GM are pragmatic and make every decision based on market demand and the brand position, while DPCA is too political – it overemphasizes the Chinese elements in product and brand and does not care enough about the customer’s needs.

Speaking of this, I think SAIC-GM is the most commercial and the least bureaucratic joint venture. It can “build brands for foreigners”, and often it is Chinese executives who talk about brands at launch events. The top executives usually do not have a special seated area; instead, they stand there and support their subordinates till the end. Its launch events are always punctual and have their own process and style. The media usually check in at daytime, attend the launch event and exclusive interview at 7:00 P.M., and check out the next day. This has almost become a pattern, which is simple, efficient and predictable, unlike in other enterprises, where different leaders adopt different approaches. Regarding internal communication, subordinates can challenge their superiors and middle and senior management can challenge top executives. This is a corporate culture formed over the years, which is stable and unique among the joint ventures in China.

Q: SAIC-GM is best known for its strong marketing capability. Why is that?

A: I think this is probably because at first SAIC-GM did not have strong products. At that time, none of the American models like the Buick Century and the Regal and the Korean models like the Excelle and Epica quite matched the actual needs of the Chinese, prompting SAIC-GM to attach great importance to marketing to make up for the weakness of its products.

Luckily, as a new joint venture at that time, SAIC-GM could poach experienced talent from other joint ventures. Moreover, it was a period when advanced auto marketing philosophies and tools were starting to flow into China, creating plenty of space for this talent to develop. This was how SAIC-GM gained such strong marketing capability and formed its market-oriented corporate culture. Later, with the launch of the global GM auto platform and the new-generation engines, and the joining of the German carmaker Opel, its products became much stronger, adding to its strong marketing and helping SAIC-GM to achieve even better results (see the article “SAIC-GM, a Praiseworthy JV”).

Cadillac is also a good example. In terms of product design, Cadillac is a niche brand in China. However, from January to May this year, it overtook Jaguar Land Rover in sales and became the new leader behind the three leading German brands. The XT5 launched last May was the direct reason for its booming sales, but without strong marketing, Cadillac could not have achieved such good performance.

Q: You mentioned earlier that SAIC-GM was dominated by the Chinese side, but the U.S. side did not attempt to gain more say. Why was that?

A: I don’t recall ever hearing any kind of rumor about the two partners of SAIC-GM trying to gain more say in the joint venture. I have talked about the reasons in these two articles “Is SAIC-GM Still a Joint Venture?” and “SAIC-GM, a Praiseworthy JV”. Generally speaking, I think SAIC-GM is the joint venture with the most harmonious partner relationship, whether on the shareholder level or the management level.

SAIC increased its shares in SAIC-GM by 1% and later returned them to GM; SAIC and GM jointly exploited the Indian market; SAIC and GM jointly developed and shared the new-generation engines and dual-clutch transmissions; and their Sail and Envision were exported to overseas markets. These moves were all mutual decisions made by both partners out of compromise or support for each other due to different interest demands. These breakthrough events were either challenging or controversial, but both partners managed them effectively.

Q: So what do you think about SAIC-GM’s R&D capability?

A: Supposing one day all foreign partners decided to withdraw their investments, I believe SAIC-GM would be one of the few joint ventures that could survive, because it has no weak spot in the whole business chain and value chain system. In particular, it has great strength in hardware and software R&D and an excellent range of talents, indicating that it is already capable of independent design and development of its own vehicles.

This should be attributed to the good initial top-level design of SAIC-GM. For example, Pan Asia Technical Automotive Center was founded at the same time as SAIC-GM. During the past 20 years, it first conducted local adaptive development of the Buick Century, then, through reverse engineering, developed the “RMB 100,000 compact car” the Sail, and later carried out the modification of the new-generation domestic Buick Regal, the simultaneous global development of the Buick Excelle and the development of the new-generation LaCrosse and Regal by integrating global resources.

Step by step, it has gradually built the capability to develop vehicles on its own. The New Sail launched in 2009 was its first independent design - the first among all joint ventures. The CHEVROLET FNR-X concept, which made its world debut at Shanghai Auto Show this year, was the latest case (which pioneered the “dual-element” design idea involving both high performance and full functions). In 2013, Pan Asia also undertook the next-generation small-displacement engine project between SAIC and GM and shared its intellectual property with the world, a groundbreaking event in China. Pan Asia also provides many technologies to enterprises outside and within its system on a paid basis. It can be said that SAIC-GM has already become a shining example of market for technology.

Q: How would you describe SAIC-GM, that is, what are its major features?

A: Firstly, it is a Chinese-dominated joint venture and it has been very successful; secondly, it has excellent marketing; thirdly, it is very strong in independent R&D; fourthly, its partners have a very harmonious relationship; fifthly; it is business-oriented and free from bureaucracy.    

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