Text and photography: GG van Rooyen
The US is a country obsessed with the automobile. Ever since the first Model Ts rolled off the assembly line, Americans have been in love with cars. And to be sure, this love affair continues, but it has been dealt quite a few blows over the last few years.
Most notably, the global recession of 2008 placed severe pressure on the country’s largest manufacturers (Chrysler, Ford and General Motors), which in turn resulted in a need for massive financial bailouts.
Meanwhile, the Chinese auto industry experienced nothing worse than the financial equivalent of a speed bump. While American automakers were fighting for survival, Chinese manufacturers were expanding their operations.
Sure, vehicle sales in the country dropped in 2008, but government quickly reduced taxes on vehicle purchases, and the market rebounded – so spectacularly, in fact, that it was announced in early 2010 that year-on-year sales had increased by 46%. Roughly 13,6 million vehicles were sold in China during 2009. In the US, on the other hand, there was a 21% slump in sales, and only 10,4 million vehicles were sold that year.
The world’s most car-obsessed nation had officially been supplanted as the largest global automotive market.
Perhaps the US will reclaim its title eventually, but for the moment, that seems unlikely. More than 18 million vehicles were produced in China in 2010 and around 14 million were delivered to customers. It was also announced in January this year that GM had managed to sell more vehicles in China than in the US in 2010. For the first time in its 102-year history, the company was having more success in a foreign market than in its domestic one.
A UNIQUE MARKET
China is now the biggest automotive market in the world. And understandably, the country’s own manufacturers want a piece of the pie.
Locally, we tend to think of Chinese manufacturers as small operators, but in fact they operate on a pretty large scale. Great Wall Motors, for instance, sold 390 000 vehicles in 2010.
Most of Chinese manufacturers’ sales are generated in their domestic market. In 2009, around 13,8 million vehicles were produced in China and only 370 000 of them were exported.
What this focus on the domestic market inevitably leads to is the production of vehicles that are geared towards it. And China, you see, boasts a vehicle market that is unlike any other in the world.
As already mentioned, it’s very big. It is also driven primarily by the cheaper segments. Around 90% of China’s buyers are interested only in small, economical cars. So if a Chinese manufacturer wants to succeed, it has to keep its cars as affordable as possible.
Vehicle financing through banks also doesn’t really exist in China. Less than 10% of new vehicles are purchased with the help of financing. People don’t like to use of banks. They prefer to pay cash.
So the focus has always been on affordability, and this has resulted in a fairly cold reception of China’s vehicles in other parts of the world.
Chinese manufactures have been accused – and not without reason – of simply copying old designs from well-established manufacturers such as Toyota and Isuzu. If one considers the Chinese market, however, the reasoning behind this becomes clear. If you need to produce very cheap vehicles, you can’t spend loads of cash on research and development, so it makes sense to purchase the rights to old technology from established manufacturers.
But this approach won’t necessarily work in foreign markets, because demands are different. Peddling old technology won’t get companies a foothold in European and American markets, so if they want to expand to other countries, they need to change their approach. But can they do it?
Wang Fengying, president of Great Wall Motors, is confident they can. “The Chinese auto industry is experiencing a period of transition at the moment. After more than 20 years of development, it has reached a point where it can compete on the world stage. Enough experience has now been gained to take that next step.
“The challenge, of course, is to prove that China can produce world-class vehicles. Perceptions have to be changed.”
Wang adds that not all Chinese automakers will be able to tackle world markets, but she feels confident that GWM will, because it is now investing heavily in research and development to produce vehicles that will appeal to overseas customers.
For example, a European version of its Haval H5 SUV that conforms to all of Europe’s stringent demands was released in 2010. Things such as performance, safety and environmental impact are all tested before a vehicle is given the okay for importation. The H5 did very well, and is currently sold in Italy and Russia.
The H5 has also just arrived in South Africa and should be on showroom floors by the time you read this.
To those familiar with the company’s Hover SUV, it will be instantly recognisable. It is similar to the Hover in many ways (dimensions are about the same and performance is comparable), though the H5 has a more aggressive stance, with narrow headlights and a swooping front end that’s reminiscent of a Mazda.
The interior is plush and has good quality finishes. It also boasts Siemens smokeless airbags and received a four-star Euro NCAP rating. So overall, it’s an impressive vehicle, especially if one considers the price. The entry-level 4×2 petrol model will retail at around R210 000, while the 4×4 diesel will retail at roughly R260 000.
While visiting GWM’s factory in Boading, we had an opportunity to see the new H5 petrol and diesel models. We didn’t get to test drive them, but we did ride shotgun on the company’s test track. The petrol engine is the familiar one already doing duty in the Hover, and generates 100 kW of power and 200 Nm of torque. The diesel model is powered by a two-litre oilburner that delivers 110 kW and 310Nm of torque. Both versions will be available in 4×4 and 4×2.
What sort of ride do these vehicles offer? Not bad at all. Quality has definitely taken a step in the right direction. The diesel model in particular is impressive. It might not offer the sort of power or refinement one would find in a German vehicle, but it is still very good. It is also evident that this is a vehicle designed with overseas buyers in mind, and not one aimed at the budget-conscious Chinese market.
We were impressed, but we’ll have to reserve our final verdict until we get behind the steering wheel.
PREPARING FOR THE WORLD STAGE
Producing quality vehicles obviously requires modern factories, and when it comes to erecting immense facilities in record time, China excels.
GWM is constructing a massive new factory complex in Tianjin that will increase its annual production capacity by 800 000. Indeed, showcasing this facility was one of the main reasons we were invited to visit the company. And we have to admit that it’s impressive. Production began in 2009 with an investment of more than R12 billion, and when completed, the facility will cover roughly 3,6 million square metres. It will consist of several large factories, and even have dormitories capable of housing its thousands of workers. The first phase of this three-phase project is already complete, and the second phase is currently under way.
Another important development is the creation of a R5 billion research and development centre. Called the New Technology Centre, the facility will focus on designing, producing and testing new vehicles.
Company representatives showed us all the brand-new manufacturing equipment with obvious pride. And they were quick to point out that it came from respected companies in Switzerland, France and Japan. GWM clearly wants foreign visitors to realise that it is constructing world-class design and production facilities, and understandably so, because it wants to prove it can compete with European and American manufacturers.
So taking into account all the money that it’s spending, can GWM compete on the world stage when it comes to design and production? Well, it might be a bit early to say. The New Technology Centre was completed only in October last year, but there are promising signs that the company is moving in a bold new direction.
At the recent Auto Shanghai Show, Great Wall Motors unveiled a gargantuan sedan-like SUV, the IF Concept, that looks like a cross between the BMW X6 and the Audi Q7. And this isn’t simply a one-off concept vehicle – it will definitely enter production. GWM says it will be ready for the road by 2013. Its size and features (it has six airbags, keyless entry and climate control) make it obvious that it’s aimed at the US and European markets.
Another vehicle revealed at the show, the Wingle CL Concept, has also clearly been designed with foreign markets in mind, specifically the US. It is 5550mm long, making it larger than Ford’s popular F-150.
These vehicles might not be particularly groundbreaking, but they show that GWM is capable of producing interesting, eye-catching products that will appeal to foreign markets. And considering how quickly it is catching up to European and American manufacturers, it will be interesting to see where the company is in a couple of years’ time.