Automotive News Europe - February 16, 2009 - 18

PAGE 18 · www.autonewseurope.com Commentary February 16 , 2009 Chery needs a stronger brand SHANGHAI Chery Automobile, China’s largest independent automaker, had a tough time in 2008. Sales dropped 6 percent in 2008 and cash flow nearly dried up. Now, bailed out by state-owned banks, the company plans a comeback with 15 new and redesigned models in 2009. That’s an ill-conceived plan. Chery needs a stronger brand, not more new models. Last week was the Chinese New Year holiday. I left Shanghai to see my parents in Zhenjiang, a thirdtier city in east China’s Jiangsu province. At home, I was surprised to see more Chevrolet Spark small cars There are more Chevrolet Sparks to be than its looklike, the Chery QQ. The Spark is built by General Mo- seen in China (top) than the lookalike tors’ joint venture, SAIC-GM-Wul- Chery QQ. ing Automobile, in south China’s Guangxi region. share with competitively priced I asked taxi drivers why more models. Sparks are appearing in the city. I In 2008, sales of the Spark surged got similar answers: Con25 percent to 40,800 sumers trust GM more units. By contrast, sales than Chery. of the QQ dropped 5 “Chery is a low-price percent to below and low-quality carmak133,400 units, accorder. How can you compare ing to Automotive Reit with GM, an internasources Asia, a unit of tional company?” said J.D. Power and Associone taxi driver. ates. To be sure, Chery has Weak brands also started spending to immean weak pricing Yang Jian prove its quality. power. The starting Last year, it repeatedly price of the QQ is 31,000 delayed the launch of its yuan (about ¤3,500), Chery A3 compact sedan. When much lower than the 40,000 yuan of the car finally debuted in October, the Spark. its styling and interior looked A strong brand is essential to surmuch better than Chery’s previous viving in the competitive market in cars. the long term. But Chery still has a lot of brand Chery can’t afford let up its brandbuilding to do. In the meantime, building efforts. Hastily launching Chery faces an even bigger chal- an array of new models is more likelenge simply keeping its market ly to increase Chery’s financial burshare. den than ease it. Chinese consumers are becoming E-mail Automotive News China increasingly brand savvy. Global players such as GM are quickly Managing Editor Yang Jian at moving downscale for more market yangjian@autonewschina.com. Chery’s smaller passenger vehicles will continue to use Chery as the brand name. Fast-expanding Chery will have 4 sub-brands Chinese automaker will use different badges for its cars, trucks, minivans Kevin Huang Automotive News Europe GUANGZHOU Chery Automobile plans to divide its growing product line into four sub-brands with different badges, said company spokesman Jin Yibo. Chery’s product lineup includes nine passenger vehicles, one commercial vehicle and one minivan. To date, all its vehicles are sold under the Chery brand and carry the same badge. In April this year, Chery will start implementing a multibrand strategy, Jin said. Acccording to Jin, Chery will put its products into three categories: 1. Passenger vehicles 2. Commercial vehicles 3. Mini vehicles. The passenger vehicles will be further divided into the mass-market and premium types. Thus, Chery will operate four subbrands in the future, for premium passenger vehicles, lower-end volume passenger vehicles, commercial vehicles and mini vehicles, respectively. will have new brand names, which will be unveiled later. “We need multiple brands to tap different market segments since the number of our models has increased quickly,” Jin says. Chery plans to launch 15 new and redesigned models in 2009. Jin adds that each of the four sub-brands will have “several” new cars to debut. But he declined to give further details. “We will debut 19 new cars in Shanghai auto show in April, many of which will be launched into sales soon,” Jin said. Jin also said Chery sold 356,000 units in 2008, of which about 135,000 units were exported. He adds the company targets to sell 260,000 cars in China and export 150,000 units this year. The global economic crisis posed big challenges to Chery’s exports, Jin said without providing more detail. ANE Premium brand The premium brand is mainly for large sedans while the commercial vehicle brand is for vans and small buses with more than seven seats, and the mini vehicle brand is mainly for minivans, Jin adds. He said Chery’s smaller passenger vehicles will continue to use Chery as its brand name; its commercial vehicles will carry a new brand, Karry. Its premium cars and mini vehicles Q & A: Burkhard Weller German dealer sees consolidation after growth BERLIN Dealership by dealership, the Weller Group has worked its way into top ranks of the German retail automotive business over the past few years. Despite static sales in 2008, the dealer group increased revenues by 4.2 percent to ¤830 million compared with 2007. But the company did not make a profit. In an interview with Matthias Karpstein, a staff reporter at Automotive News Europe sister publication Automobilwoche, CEO Burkhard Weller talks about the financial crisis as well as rationality and irrationality in the industry. How does a major German car dealer get motivated today? During the summer of 2008, I would have had a hard time answering. But now things are getting better, albeit on another level. We shouldn’t expect to see 3.6 million new cars sold in Germany again anytime soon [the average new-car sales in Germany between 1996 and 1999 was about 3.6 million; last year it was about 3.1 million]. We know that now so I am not expecting any dramatic changes. What were the most important measures that put you among the year’s winners? We made the last big investment in 2007. In 2008, we got our bearings. That is an advantage in the current situation. In 2009 and 2010, we have years of consolidation ahead of us. So we won’t grow dramatically, but we won’t shrink. We will grow 6 percent to 12 percent within the group, with the existing locations. What specific changes will there be? We will undertake significantly more benchmarking among the brands. That’s the way that we achieved an increase of 11.5 percent in the financial area last year. We will proceed in the same way in our other areas. It’s unacceptable that one operation makes a ¤300,000 profit and another breaks even in the same area, especially when the two operations have the same brand. This year, the Weller Group is 30 years old. To celebrate, the company at one time planned to push revenues to a €1 billion. Are you still pursuing this goal? We ended last year with revenues of ¤830 million. The goal for this year is ¤890 million. So we aren’t far from a billion. But revenues are not our main goal. So you will concentrate more on profits? The Weller Group went into the red in 2008 for the first time. Yes. For five years, we went full speed ahead on revenues. In the process, we didn’t completely lose sight of profits, but it’s normal that profitability takes second place during growth phases. Now we have that behind us. And if things aren’t going as well out in the market as you would like, you certainly can move into a consolidation phase. When do you believe that you will complete this consolidation phase? In 2011, we will go back on our growth course again. But we don’t live on an island either, and it has not been lost on us that the business has become much harder. Profit margins are under greater pressure. For two years, your sales figures for Toyota and Lexus have been in decline. Now Toyota is bringing a total of six new models into German showrooms this year. What do you expect from this model offensive? What a blessing! After months of waiting, we have new-model introductions. Two years without anything new was frustrating. You need to motivate the team. After three “What automaker would have scaled back production without this pressure?” Burkhard Weller, Weller Group CEO tough years, we are significantly above expected incoming orders at the moment. Right now, everyone is talking about the automotive crisis, but opinions vary greatly about what the starting point of the crisis was. Where do you see it? We would have had an automotive crisis without a financial crisis because we produce an excess of 3 million to 7 million cars a year worldwide. There had to be braking at some point. Now the crisis has been accelerated by other influences, but it would have come anyway. Perhaps not so brutal, but it had to be this way to help matters. What automaker would have scaled back production without this pressure? No one would have willingly cut back by 10 percent or 15 percent. That is really a dream! So are the current events helpful in the mid-term? Not just in the middle term. They will help us very soon. When the customer comes back to get his dream BMW, he can take it from April production. Then he won’t get it with a 15 percent rebate any more. Period. Will the crisis teach automakers a lesson or will the madness of overproduction quickly begin all over again? The madness is entirely normal and sets in again and again. In that regard, I don’t even exclude myself. All the rationality that people display in a slumping market, they quickly ANE abandon in better times.

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Automotive News Europe - February 16, 2009

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