26 Apr Chinese Billionaire Adopts English Name in Bid to Sell More SUVs
Bloomberg News, April 18, 2017
Most auto executives have reasons to feel at ease after hitting the one-million annual sales mark in China, an exclusive club that includes General Motors Co. and Volkswagen AG. For Great Wall Motor Co.’s Wei Jianjun, the feat stoked fears that the SUV maker may be doomed.
That’s because history is littered with companies that grew big but eventually failed because their products became a commodity and lacked the star power to create clamor among customers, according to the chairman of the manufacturer that has kept a 14-year streak as China’s top SUV seller.
“Moving up is testimony of a company’s strength; if you can’t, you’ll disappear the way Nokia did after Apple muscled in on their turf,” Wei said during a recent interview in Hong Kong, as he recalled how the iPhone maker upended the mobile-phone industry and eventually toppled the erstwhile Finnish leader.
Wei’s paranoia signals the maturing of the world’s largest auto market, where an increasingly sophisticated middle class is no longer satisfied with cheap, me-too products. China’s more successful homegrown automakers, also including Zhejiang Geely Holding Group Co. — the owner of Volvo Cars — and BYD Co., have embarked on efforts to burnish their nameplates in the belief that with more than 100 brands competing for buyers, the fight will be won by those who look beyond price competition to create income streams from products with higher profit margins.
For Great Wall’s Wei, it turns out, the effort also involves adopting the English name “Jack Wey” and creating the premium nameplate “WEY.” Sales of the brand’s first model that has features such as a warning system for lane changes are set to begin at the Shanghai auto show this week, and another three models will be added this year, Wei said.
Wei, a native of Baoding born in 1964, has built Great Wall into China’s top seller of SUVs without leaning on any foreign partners, and by offering consumers spacious models at cheaper prices than sedans such as Volkswagen’s Passat and GM’s Buick. That strategy helped boost deliveries to a record 1.07 million units last year, outpacing industrywide growth.
At 26 — and after several factory jobs — Wei took over a small car-modification business and turned it into a van maker. He later shifted focus to pickup trucks after witnessing their popularity in Thailand. Small business owners and farmers turned Great Wall’s Deer into China’s most popular pickup brand by 1998. And in 2002, he rolled out the first Haval SUV model. The popular Haval H6 accounted for more than half of the company’s deliveries last year.
The idea for going upscale came just over four years ago when branding guru Al Ries, chairman of the Atlanta-based market-strategy firm Ries & Ries that counts Microsoft Corp. and Ford Motor Co. among its clients, advised Wei to create a separate brand. “Jack Wey” would help foreigners get around the difficulty of pronouncing Wei’s name in Chinese, Wei was told.
“A new idea requires a new brand name. To keep a company competitive in the future requires a constant launch of new concepts,” said Ries. “The future belongs to multiple brand companies, not single-brand companies.”
As Chinese consumers shift their tastes away from sedans, demand for roomier SUVs is surging, with such vehicles accounting for 37 percent of the total sales last year, up from 5.7 percent a decade ago. Still, the introduction of WEY comes at a time when new models are flooding the market. PSA Group to Hyundai Motor Co. are boosting their lineup in the segment. Geely, owned by billionaire Li Shufu, will start selling the first SUV model under its new upscale Lynk & Co. from the fourth quarter, using the same platform adopted by affiliate Volvo Cars.
“We added WEY brand to prepare for the SUV market to enter the price competition era,” said Wei, who has a net worth of $5.3 billion, according to the Bloomberg Billionaires Index. “Sales of WEY brand cars will bring us higher profit margins and with the rising sales volume, it will make bigger contribution to Great Wall’s bottom line.”
Shares of Great Wall fell 2.2 percent to HK$8.91 as of 3:19 p.m. in Hong Kong. The benchmark Hang Seng Index declined 1.1 percent.
WEY carries features usually found in more-expensive foreign models, such as a cruise control that maintains a safe distance from the car ahead. The marque targets buyers who patronize brands such as Kate Spade, Calvin Klein and DKNY, according to Wei.
Wei estimates the new brand will have a gross profit margin of about 27 percent. Great Wall is more profitable than some of its peers including General Motors and Volkswagen.
“Even successful mass-market players like Hyundai have struggled to add brands above their mainstream brand,” said Bill Russo, managing director of Gao Feng Advisory Co. and a former head of Fiat Chrysler Automobiles NV’s Chrysler unit in China. “In the age of hardware commoditization, he will need a key feature to attract upscale consumers or a unique selling proposition. The odds are against him, but he’s beaten the odds so far.”
Great Wall is targeting to sell 56,000 units of WEY brand vehicles this year, competing with Toyota Motor Corp.’s RAV-4, Honda Motor Co.’s CRV and Volkswagen’s Tiguan SUVs. The first model will be priced in the 150,000 yuan to 200,000 yuan ($22,000 to $29,000) range, according to Wei. That would put the vehicle in the same bracket as Great Wall’s H8 and H9 models.
Wei, who rues the fact that his company didn’t change its strategy quickly enough to focus only on SUVs, isn’t satisfied with being leader in the segment just at home. Great Wall is in the process of selecting a site in the U.S. to assemble Haval vehicles after reviewing an earlier plan for Mexico. Wei wants Haval to surpass Jeep and Land Rover becoming the world’s biggest SUV brand by 2020 and Haval H6 to become the global No. 1 by then.
“By counting on a strong domestic market, we will develop our global business and build our brands into global ones,” Wei said. “It’s a huge challenge and a golden opportunity as well.”
— With assistance by Tian Ying