Low-cost SUV filled a niche in China
Auto sales in China, the world's largest car market, are dominated by foreign brands. But among local automakers, Great Wall Motor Co. stands out for a business strategy that illustrates the adage about keeping it simple.
Great Wall came on the scene as automakers were churning out sedans, by far the most popular type of vehicle among Chinese consumers. Some foreign companies sold SUVs, but no one offered a low-cost SUV that fit the budget of many first-time buyers.
"As a latecomer to the market, it's not about what you want to do but what the competition will allow you to do," said Simon Chuang, general manager of Ries & Ries & Chuang & Wong, the China affiliate of marketing-strategy consultancy Ries & Ries, of Atlanta. It began working with Great Wall in 2008.
"Our assessment was that although SUVs were a small slice of the market" in 2008, "China would follow the growth trends of the United States and the rest of the world," Chuang said. "One day SUVs would have a much more significant share.
"Midrange models are mostly Japanese and Korean, like the [Honda] CR-V and [Toyota] RAV4. But no one was making entry-level SUVs. It was wide open."
Great Wall began to shift its focus from sedans to its Haval SUV, priced in the $13,000 to $24,000 range. The Haval makes up nearly half of Great Wall's sales. Its sales volume rose 71 percent last year, data from Ries & Ries show.
"We could fully see the size and potential of the Chinese market and, in 2010, it seemed like a company could succeed making any kind of vehicle. But that might not be the case long-term," Great Wall President Wang Fengying said. "We focused our resources on creating Haval SUV products and pulled back on other products, losing sales in the short term. But our main objective was to build long-term brand value."
While Great Wall was placing most of its focus on one model, rivals made missteps, including diversifying into unrelated industries. After a decade of strong sales, Chery Automobile Co. began making microvans and agricultural machinery. BYD Co., a battery maker that entered the auto business in 2003, has dabbled in solar power and home appliances.
In January, Great Wall said net profit for 2012 was up 66 percent to $934 million.
The Haval is popular in lower-tier markets, particularly rugged parts of western China. Incomes there are significantly lower than those in coastal cities in the east, but residents need tough vehicles to navigate the mountainous terrain and often rudimentary roads.
Great Wall doesn't do much advertising, focusing on PR and events to reinforce its positioning as China's SUV leader. Agency partners include Allyes and OpenTide and BlueFocus.
Great Wall vehicles are sold in 120 countries. To continue its success, the automaker must commit to overseas expansion, Chuang said.
"The Chinese market is growing, so the company might have decided to just focus on China," he said. "But this kind of thinking isn't advantageous in the long run."