China Watch : SAIC Motors’ lessons in own-brand building
May 14, 2009 1 Comment
At this year’s Shanghai auto show a multitude of young carmakers – from the largest own-brand automaker Chery Automobile Co to the small player Anhui Jianghuai Automobile Co. – displayed their own-brand vehicles.
Many were copycats of international brands. This is a shame because, for the most part, the Chinese carmakers efforts to build brands will be in vain. For valuable lessons on how to build a respected brand, they would do well to look to their older brother in the domestic industry, Shanghai Automotive Industry Corp.
Lesson 1: For brand building, copying international brands is no good.
The first model SAIC built under the Roewe brand, the Roewe 750 mid-sized sedan, was developed on the platform of the Rover 75 it acquired from MG Rover in 2005. Chinese consumers quickly realized SAIC’s car was, to a great extent, a copy of the original.
Recognized as such, the Roewe 750 has never truly won the heart of Chinese motorists. In the first quarter of this year, only 2,732 Roewe 750s were sold in China, according to Automotive Resources Asia, a unit of J.D. Power & Associates.
By contrast, SAIC’s second own-brand offering, the Roewe 550 compact car, was a completely new model. It was developed by the company’s R&D teams in Shanghai and England. With fine materials and a graceful styling, the car was launched at last year’s Beijing auto show to wide acclaim. Sales of the new model, which starts at 127,000 yuan ($18,621), are picking up. In the first quarter it shifted 11,774 units.
Lesson 2: Brand building is costly and therefore requires a focused approach.
Running two joint ventures with Volkswagen AG and General Motors Co., SAIC Motor is by far the most cash-rich automaker in China. Even so, it has long taken a cautious approach towards building the Roewe brand and to date the brand has only had two models: the Roewe 750 and the Roewe 550.
While domestic carmakers Chery and Geely used this year’s Shanghai auto show to display a total of more than 50 models under four sub-brands each, SAIC’s President, Hu Maoyuan, was talking about “integrating existing marketing and sales resources to boost brand recognition and sales volume.”
“From both a technology and financing point of view, SAIC stands the best chance of developing a premium brand,” says Duan Chengwu, Global Insight’s Asia Technical Research Analyst.
What chance do the other domestic Chinese automakers have of developing respected brands for themselves? Unless they adjust their existing product and branding strategy, I am truly pessimistic.