To register, get added benefits and unlimited access to articles, Become a Member. Already a Member? Sign in.

Great Wall Succeeds in China's Auto Market With Starter SUV

Automaker Seized Opportunity to Fill Untapped Niche in Country Full of Sedans

By Published on . 0

China is the world's largest car market, and it's dominated by foreign brands. But among local automakers, Great Wall Motors stands out for a business strategy that illustrates the old adage about keeping it simple.

Great Wall came onto the scene as automakers were churning out sedans, by far the most popular type of vehicle among Chinese consumers. But while some foreign companies sold SUVs, no one offered a low-cost SUV that fit the budget of many first-time buyers.

Credit: *Units sold; Source: LMC Automotive

"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, China affiliate of Atlanta-based marketing strategy consultancy Ries & Ries. 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 U.S. and the rest of the world. One day SUVs would have a much more significant share," Mr. Chuang said. "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. Haval makes up nearly half of Great Wall's sales. Its sales volume rose 71% last year according to data from Ries & Ries.

"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."

Besides Great Wall placing most of its focus on one model, it doesn't hurt that rivals have made missteps, including diversifying into unrelated industries. Following a decade of strong sales, Chery began making microvans and agricultural machinery. BYD, a battery maker that entered the auto business in 2003, has dabbled in solar power and home appliances.

In January, Great Wall announced net profit for 2012 was up 65.7% to $934 million.

Haval is popular in lower-tier markets, particularly rugged parts of western China. Incomes there are significantly lower than coastal cities in the east, but residents need tough vehicles to navigate the mountainous terrain.

Great Wall doesn't do much advertising, focusing on PR and events to reinforce positioning as "China's SUV leader." Agency partners include Allyes and OpenTide and BlueFocus .

Great Wall vehicles are sold in 120 countries, and to continue its success the automaker must commit to overseas expansion, Mr. Chuang said. "The Chinese market is growing, so the company might decided to just focus on China. ... But this kind of thinking isn't advantageous in the long run."

In this article:

Comments (0)

Read These Next