Geely's safety, technology investments pay off
Yang Jian is managing editor of Automotive News China.
SHANGHAI -- Over the last two years, China's domestic brands have steadily lost market share to foreign rivals, and most of the Chinese companies appear helpless to reverse the trend.
The slide began in 2011 after Beijing eliminated sales incentives for vehicles with engines of 1.6 liters or less. With no government incentives to prop up sales, the domestic brands' combined share of the market slid to 28.5 percent in June from 31.9 percent in 2010.
But Zhejiang Geely Holding Group Co. is fighting back, and other domestic automakers should look to it for inspiration.
To be sure, Geely's market share (excluding Volvo, which it acquired in 2010) slid to 3.2 percent in June from 3.5 percent in 2010. But Geely has made solid progress moving upscale.
In 2009, Geely launched the Emgrand EC7, a compact car for family and business use, with prices ranging from 70,000 to 110,000 yuan (about $11,000 to $17,300 at the current exchange rate), and demand has been strong.
In the first half of this year, sales exceeded 10,000 units a month -- a healthy result since few Chinese automakers have sold large volumes of vehicles priced above 70,000 yuan.
So how has Geely managed to shore up sales and sell more expensive products? It is the company's relentless efforts to improve product safety and technology.
In 2006, Geely's Freedom Ship subcompact failed a crash test in China.
Chagrined by its failure, the company launched construction of a 350 million yuan ($55 million) r&d center that year. Then it opened a 300 million yuan ($47 million) laboratory in 2009 to conduct safety research.
The investment has paid off nicely.
In 2009, Geely models received five-star ratings in China's crash tests. Two years later, the Emgrand EC7 earned a four-star overall rating in Europe's NCAP crash test. That's the highest safety rating ever achieved overseas by a vehicle designed by a Chinese automaker.
Geely also has made big investments in powertrain technology.
In 2009, Geely acquired Australian automatic transmission supplier Drivetrain Systems International and used its technology to produce six-speed gearboxes in China.
Now Geely's sales are gathering speed. In June, it sold 34,495 vehicles, up 16 percent from the same month a year earlier.
Geely is preparing another move to improve its vehicles. This year, it signed an agreement to develop small cars and electric vehicles jointly with Volvo.
Volvo's technology could be a windfall for Geely, but we shouldn't forget that Geely has made a sustained effort over the past six years to improve product quality.
In this business, there are no shortcuts.