China Startups Launching Brands Alongside Products

Ward’s Auto, June 13, 2017

The Lynk & CO startup is leaning heavily on the Volvo brand heritage for legitimacy, but an investment analyst says not having the burden of a parent brand actually may help electric-vehicle startup NIO.

NIO, maker of ES8 electric vehicle, plans autonomous EV for U.S. in 2020.

by Alysha Webb

SHANGHAI – Lynk & CO and NIO both launched their first production models at the Shanghai auto show in April. Both tout their unique ownership experience, which includes lots of cool technology.

Cool technology is becoming standard in new cars, however.  The automakers arguably have a bigger task before them on the road to success.

“They must go through the painstaking process of building a brand,” Bill Russo, managing director at Gao Feng Advisory, a Shanghai-based consultancy, tells WardsAuto.

Most new brands can rely on predecessor brands from the same company, for example, Lexus and Toyota, he says.

Lynk may have a leg up in the brand-building battle. It is the offspring of two automakers, Zhejiang Geely and Volvo, which Geely acquired in 2010. “But I’m not sure that helps Lynk & CO very much,” says Russo.

Meanwhile, the Lynk & CO website proclaims, “Forget what you know about car brands and buying.”

Its first model, a compact luxury CUV called the 01, is scheduled to go on sale in China in fourth-quarter 2017, in Europe in 2019 and the U.S. “some months” later.

Lynk will offer the option of shared ownership of its vehicles, which will include electric and traditional internal-combustion-engine models. The brand, which calls itself “the world’s most connected car,” offers a lifetime warranty and, more important to its desired image, lifetime free connectivity.

The car-sharing feature may be a bonus in trying to attract younger buyers in China, says Namrita Chow, principal automotive analyst with IHS Markit. But, she notes, “The tough part will be brand awareness and gaining traction in a market already saturated by existing brands as well as a throng of newcomers.”

The aim, says Alain Visser, senior vice president-marketing and sales at Lynk, is to create a “hassle-free ownership experience” that clearly will differentiate his company from its competitors.

The startup is leaning heavily on the Volvo brand heritage for legitimacy. The 01 and future models will be “built in China in a Volvo plant according to Volvo standards,” Visser says.

NIO, formerly known as NextEV, also displayed its first production model at the Shanghai show. The ES8, a fullsize SUV, is an all-electric vehicle with a swappable battery.

The startup is leaning on its ownership experience to differentiate it from the crowd, although details aren’t out yet.

“We believe that a better electric automotive product and a better ownership experience will make more and more users willing to own an electric car,” NIO founder and Chairman William Li says at the Shanghai show.

NIO says the ES8 will be on the market in China in 2018, and it will offer an autonomous EV for sale in the U.S. by 2020.

Not having the burden of a parent brand actually may help NIO, says Robin Zhu, senior analyst at investment researcher Sanford C. Bernstein in Hong Kong. “NIO is free to build a brand story consisting of Nurburgring lap times, Formula E and other achievements,” he tells WardsAuto.

The NextEV team has competed in the FIA Formula-E Championship race series since its inception in 2014, winning the series in 2015 with driver Nelson Piquet Jr.

In May, its EP9 electric supercar set an electric-vehicle lap record of 6 minutes, 45.9 seconds at the famous Nurburgring track in Germany. In February, an autonomous version of the EP9 set a new record for an autonomous vehicle with a lap time of 2 minutes, 40.3 seconds at the Circuit of the Americas in Austin, TX.

It won’t be easy for the startups to use customer experience to brand themselves, says Tom Doctoroff, senior partner at global brand and marketing firm Prophet. Most Chinese companies still are much more focused on sales than service, he says.

“When you want to talk about customer experience, you have to look at corporate structure and whether it can provide an integrated holistic experience,” says Doctoroff, who lived in China for decades and is the former Asia Pacific CEO of communications firm J. Walter Thompson. “The ecosystem that is required is a very refined ecosystem.”

Click here to read the article at wardsauto.com

China’s thriving SUV-only automaker looks to global growth

ASSOCIATED PRESS  / Feb 22, 2017, 03:06 AM

By JOE McDONALD AP Business Writer

In this photo, taken, Feb. 19, 2017, a worker assembles a Haval SUV H3 model at the Great Wall Motors assembly plant in Baoding in north China’s Hebei province. Great Wall Motors became China’s most profitable automaker by making almost nothing but low-priced SUVs. Now it wants to expand into global markets. (Photo by ANDY WONG/AP)

BAODING, China (AP) — Wei Jianjun is the chief matchmaker in China’s love affair with the SUV.

A decade ago, the chairman of Great Wall Motors Ltd. saw opportunity as the bulky vehicles began shedding their image in China as a farm tool. Wei cut back on making sedans and poured resources into its fledgling line of Havals.

That gamble paid off as SUVs caught on with drivers who saw them as the safest ride on bumpy, chaotic streets. By 2013, with demand surging, Great Wall had become China’s most profitable automaker and Wei was a billionaire.

Now, Wei wants to make the Haval a global brand. It’s an ambitious goal that requires advances in safety and features for a company known until now mainly for low prices. Great Wall sells Havals in Australia, Italy and Russia, but exports were less than 5 percent of last year’s output of just under 1.1 million units.

“By 2020, we hope Haval can become the world’s biggest specialty SUV brand,” Wei said at a reception at Great Wall headquarters in this city southwest of Beijing to celebrate sales passing the 1 million mark.

That “globalization strategy” includes working toward meeting American safety standards, Wei said. But he gave no indication when Haval might export to the United States or major European markets such as Germany.

Great Wall is part of a cadre of small but ambitious independent Chinese automakers that grew in the shadow of state-owned giants such as Shanghai Automotive Industries Corp., which assembles vehicles for General Motors Co. and Volkswagen AG.

Without foreign joint-venture partners, the independents created their own brands and started exporting to Africa and Latin America.

Geely Holding Ltd., which owns Sweden’s Volvo Cars, plans to start U.S. and European sales of its new Lynk & Co. brand in 2019. BYD Auto, the world’s biggest-selling electric car maker, supplies battery-powered buses and taxis in the United States and Europe. Great Wall opened a European assembly plant in Bulgaria in 2012. It has similar facilities with local partners in Russia, Indonesia, Iran, Egypt and Ecuador.

SUVs have an outsized role in China, where their popularity has helped offset sagging demand for sedans and other vehicles.

Sales of domestic brand SUVs soared 58 percent last year to 5.3 million units out of total sales of 24.4 million in the world’s biggest auto market. They are growing fastest in the lowest price ranges, dominated by Haval and Chinese rivals. That has helped Chinese brands to claw back market share they were losing to global competitors.

The top seller was Haval’s flagship H6, starting at 89,000 yuan ($12,900), which has become China’s most popular vehicle to date. H6 sales surged 55 percent last year to 580,000 units while the overall market grew 15 percent.

“They are definitely one of the most successful car companies in China,” said Yale Zhang, managing director of Automotive Foresight, a research firm.

“This company has some very special strengths,” Zhang said. “Of course, it also has weaknesses, because their products are focused on one model. But they are correcting that. They have tried very hard to cultivate another star product.”

Great Wall’s 2016 profit rose 31 percent to 10.5 billion yuan ($1.5 billion) on revenue of 98.6 billion yuan ($14.4 billion). Wei, 52, ranked No. 36 on the year’s Hurun List of China’s richest entrepreneurs, with a fortune estimated at $5.9 billion.

Begun in the 1980s as a collective that repaired and modified vehicles, Great Wall was bleeding cash when Wei, then 26, left his father’s business making industrial machinery and signed a deal in 1990 to take it over and share profits with the collective’s members.

The company launched a sedan in 1993. Its popular Deer brand pickup trucks were its first hit, in the late ’90s.

Its CEO, Wang Fengying, is a former saleswoman who worked her way up the ranks, becoming the first woman to lead an automaker a decade before GM Chairman and CEO Mary Barra.

Wei has a reputation for military-style discipline.

“He wants a quick decision and a thorough execution,” Zhang said. “This style is very different from large automotive companies, which can be a huge bureaucracy. This company definitely doesn’t have that weakness.”

Most of Great Wall’s 60,000 employees work at its Baoding factory complex, a 13-square-kilometer (5-square-mile) mini-city of assembly lines and workshops in long, pale yellow two- and three-story buildings.

A test track that wraps around the complex is banked to allow drivers to push vehicles to over 200 kph (125 mph).

“It’s an orderly, organized, very disciplined operation,” said Bill Russo, managing director of research firm Gao Feng Advisory. “You think, this isn’t China; this is what I would expect to see in Switzerland or Germany.”

Wei has emphasized product quality, in one case hiring Korean auto industry veterans to show Great Wall how to make better body panels, according to Russo, a former Chrysler executive. That has paid off by raising Haval’s image from entry-level to a mass-market brand that can charge higher prices.

“They have cracked that glass ceiling,” said Russo. “Their quality level is better than the basic Chinese car companies.”

Still, Great Wall’s market is increasingly crowded as Chinese rivals roll out dozens of new SUVs. Global brands including VW and GM are preparing to invade Haval’s segment with their own low-cost models.

Competitive pressures have reached a “deep red level,” Wei said.

The company is responding by trying to move up-market.

Haval opened a Shanghai design studio in 2013 and a Technology Center in Baoding, housed in a sleek glass tower with reflecting pools and a 23-story lobby. It includes engineering workshops, a wind tunnel and a low-pressure chamber that can mimic operating conditions up to 5,000 meters (16,500 feet) in altitude.

In November, Great Wall unveiled a premium brand, Wey, an alternate spelling of Wei’s name. It has yet to say how it will attract buyers to models expected to be priced above 200,000 yuan ($29,000).

Haval has struggled to lure drivers to its higher-priced models, such as its top-of-the-line H9, a seven-seater starting at 210,000 yuan ($30,600), that sold just 11,500 units last year. The H8, another full-size model, sold only 7,500 units.

In November, the company rolled out an updated H6, designed by a 50-member team led by Pierre Leclercq, a Belgian-born BMW veteran.

“The H6 is an extremely important product for us,” said Leclercq, the company’s senior vice president for design.

The company’s next rising star is the H2, a four-seat compact SUV that sold 197,000 units last year. But it starts at 87,000 yuan ($12,700), a step down in price instead of toward a higher market segment.

Great Wall also faces pressure from Chinese government rules that require improved fuel efficiency by 2020. That will hurt brands such as Haval that lack smaller models to improve the average of their product lineup.

In response, Great Wall has developed an electric car, the C30 EV, a compact sedan it says can go 200 kilometers (120 miles) on one charge. The company has yet to say when it might go on sale.

Geely set to unveil mid-tier brand

China Daily, October 15, 2016

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A Geely Auto’s SUV model Emgrand GS is presented at the Auto China 2016 show in Beijing.
[Photo/ REUTERS]

Chinese billionaire Li Shufu will test whether there’s room for another global car brand by introducing a new marque next week, built on technology jointly developed by his two car companies, Geely Automobile Holdings Ltd and Volvo Cars.

The new brand, called Lynk & Co, will be unveiled on Oct 20 in Berlin and share its underpinnings with Volvo Cars models. Sales are slated to start in the second half of next year, with the first model likely being a sport utility vehicle, according to Geely Auto Chief Executive Officer Gui Shengyue, declining to provide more details ahead of the official announcement.

“The new brand carries great importance for Geely’s development,” Gui said in a telephone interview on Thursday. “We are currently competing against other local car brands, as well as high-end brands with Volvo Cars.” Lynk & Co will help Geely fight against other mass-market foreign brands, he said.

The new mid-tier brand comes about two years after Li killed three sub-brands and unified its models under the Geely nameplate. The new marque, to be produced in China but distributed globally, will allow Geely to compete in the lower end of the market while freeing Volvo Cars to focus on the premium end.

Even so, any new brand would have to fight for consumer acceptance in a market crowded with more than 100 passenger-vehicle nameplates. Geely’s Lynk & Co will join newcomers such as Borgward Group AG, a defunct German brand revived by Chinese State-owned BAIC Group, and a host of electric vehicle startups in trying to carve out a niche.

Geely has some advantages because the new brand would have access to a platform and technology from Volvo, and it may have better insight as a Chinese company in how to tap growth in faster-growing smaller cities, said Bill Russo, managing director of Gao Feng Advisory Co.

“The market is not asking for yet another brand, unless it brings a clear and unique proposition,” Russo said. “I assume Geely has learned a lot from its previous failed multi-brand strategy which they’re unlikely to repeat.”

Li purchased Volvo Cars from Ford Motor Co in 2010 for $1.5 billion and has rejuvenated the Swedish automaker with an $11 billion modernization and investment program. The company unveiled the XC90 in 2014, the first model wholly developed under Geely’s ownership, followed by the revamped S90 luxury sedan.

Bloomberg

Click here to read the article at China Daily

Volvo: Remaking the marque

The Financial Times, June 19, 2016

Under Geely, the carmaker is back in profit and selling well in China. But is it big enough to compete with its rivals?

There is nothing exceptional about the shiny grey chassis on display in western Sweden. Its wheels, suspension and engine are all where you would expect to find them. But it stands out because of what it represents: tangible evidence of progress in one of the most daring industrial stories of recent years.

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Known as compact modular architecture, it is a shared platform destined to underpin the small vehicles made by both Volvo Cars, the Swedish premium manufacturer, and its owner Geely, the Chinese mass-market brand. “This is a bridge between the two companies,” says Mats Fagerhag, head of the joint venture that created the platform. “Everything is nice words before you start a common project and face hard facts.”

Click here to read the full article at FT.com

Bill Russo’s quote:

“The most important thing [Geely] has done is to help Volvo become a China-centric company,” says Bill Russo, a Shanghai-based consultant. “Geely has shifted Volvo from being a marginally global company situated in Scandinavia to being a global one centred in China.”

China turns to second-hand cars to rev up consumption

The Financial Times, May 31, 2016

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As China revs up its shift to a consumption-led growth model, policymakers are trying to get more mileage out of a sputtering part of the economy: the used car market.

In most developed economies, sales of second-hand cars outnumber those of new vehicles by about two to one but the opposite is true in China, the world’s largest market for new vehicles.

“The majority of the vehicles in China are still owned by the first owner; secondary-owned vehicles are the minority,” says Bill Russo, a Shanghai-based consultant. “That is unlike any other country.”

To help stimulate the nascent market, Beijing recently introduced a policy that allows old cars from big cities to be resold in smaller ones, a move that will take full effect at the end of May. Previously, to protect local businesses, government regulations prevented cars being sold across provincial borders.

This will “open the pipeline”, according to Mr Russo. “Cars [in China] may be born in upper-tier regions but they tend to retire in lower-tier regions,” he said.

Though huge, China’s car market is in its infancy. Until 1984 it remained technically illegal for individuals to own a car and low personal wealth meant sales did not take off until the mid-2000s.

The country’s transition into a “new normal” of annual economic growth below 7 per cent following years of double-digit rises is potentially painful for carmakers accustomed to breakneck demand for new models. For used-car sales, however, newly thrifty consumers and a growing number of ageing vehicles are a promising combination.

China turns to second-hand cars to rev up consumption - FT.com Safari, Today at 11.57.42 AM

Rising supply, combined with government support and moves by manufacturers to encourage car-owners to upgrade sooner, promises to see the second-hand market grow at more than double the speed of that for new cars, according to Alex Klose, founder of JZWcars.com, a used car website.

The entrepreneur, Volvo’s former chief executive for China, set up his company in 2014 with the aim of becoming a trusted platform for a nascent market. “One thing holding people back from buying a used car is not knowing whether they can trust it,” he says.

Mr Klose is not alone in seeing the potential for second-hand cars. A flock of online platforms and technology start-ups have recently entered the sector.

“Everyone thinks that the space for growth in second-hand cars is very big — they think the sector is a very big cake,” says Li He, founder of Limiku.com, a used-car financing platform.

The government sees the used-car market as a way to boost consumption among those with lower incomes.

Mr Li, a tech industry veteran, believes online platforms are helping to improve the supply chain — a job he says big distributors are failing to do.

“The vast majority [of major distributors] have a second-hand car department but in reality they don’t have standards for the whole supply chain, including pricing and evaluation,” he says.

Big carmakers are now encouraging their dealerships to stop dragging their feet, however, as they seek a new source or profit for dealers.

Over-dependence on a single stream of revenue has sparked tensions between manufacturers and dealers in the past, when distributors asked for compensation for their losses during slow sales periods.

As dealerships look to evolve their business models, there is one set of people who are watching with trepidation: the original used-car salesmen.

Dong Wei has been selling used cars from his shoebox office at Beijing’s oldest and largest “old car market” since the 1990s.

“Before they [big dealerships] didn’t bother with second-hand cars, because the profits for new cars were so high,” he says. “Now they are starting to change their model.”

Mr Dong is nervous that disruption in the sector means the glory days for small-time salesmen are over.

“Before, the market would be full of people,” he says waving a hand at the unattended rows of shiny cars roasting in the heat. “These days, people prefer to go online.”

Click here to read this article at FT.com

Chinese firms accelerate in race toward driverless future

AFP Newswires, April 23, 2016

 

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Chinese Internet giant LeECO Holdings Ltd unveils its internet electric battery driverless concept car ‘LeSEE’,  during a launch event in Beijing, on April 20, 2016

 

Beijing: Chinese manufacturers and internet giants are in hot pursuit of their US counterparts in the race to design driverless cars, but the route to market is still littered with potholes.

While Google has been working on autonomous vehicles for at least six years, with the likes of BMW, Volvo and Toyota in its wake, more recently Chinese businesses have entered the race, from internet search giant Baidu to manufacturer Changan.

Last week, ahead of the Beijing Auto Show opening on Monday, two self-driving Changan cars made a mountainous 2,000 kilometre (1,200 mile) journey from Chongqing in the southwest to the capital in the country’s first long-distance autonomous vehicle test.

Another Chinese internet giant, LeECO, is also venturing into autonomous technologies, unveiling Wednesday in Beijing an electric car that can park itself and be summoned to its owner’s location via smartphone.

And late last year Baidu tested China’s first locally designed driverless vehicle, a modified BMW, with a 30 kilometre ride through the streets of Beijing.

Despite China’s relatively late entry to the field, analysts believe the country could become a key market for driverless vehicles thanks to a more favourable regulatory and consumer environment.

The Boston Consulting Group (BCG) forecasts that global sales of driverless cars will reach 12 million by 2035, with more than a quarter sold in China.

Vehicles which automatically adjust their routes in response to real-time traffic information could solve chronic gridlock in China’s major cities, BCG’s Xavier Mosquet told AFP.

“If they believe this would ease traffic, Chinese authorities will do all they can to promote the development of this technology and then its use,” he said.

Robot taxis

Public concerns over the safety of driverless cars are far lower than elsewhere, according to a survey by Roland Berger consultants in 2015, which found 96 per cent of Chinese would consider an autonomous vehicle for almost all everyday driving, compared with 58 per cent of Americans and Germans.

In a country notorious for accidents, the promise of better safety through autonomous technologies could also be appealing.

The ultimate prize, say analysts, will be when mass transport firms such as taxi-hailing giant Uber, or its Chinese rival Didi, can deploy huge fleets of robot taxis.

“The real payoff for truly driverless technology will come when cars on the road are no longer owned by people, but are owned by fleet management services,” said Bill Russo, managing director of the consultancy firm Gao Feng.

“That’s where you want to think about taking the driver out of the equation. Mobility on demand is hugely popular here.”

In the Roland Berger survey, 51 per cent of Chinese car owners said they would prefer to use robot taxis rather than buy a new vehicle themselves, compared with 26 per cent of Americans.

With a ready market, China may soon become the top location for companies to refine driverless technology.

Swedish manufacturer Volvo, owned by China’s Geely since 2010, this month announced plans to test drive up to 100 of its vehicles on Chinese roads this year.

Changan, a partner of Ford, is set to roll out commercial autonomous vehicles for motorways from 2018, while mass production of driverless city cars is projected to begin in 2025.

‘Does the car choose?’

Baidu, meanwhile, says it will launch self-driving buses by 2018, which will operate on fixed routes in select cities in China.

Like Google, the internet giant already owns detailed road maps and has experience in electronic security, and a company spokeswoman told AFP it had had “very positive feedback” from the government.

But analysts are more cautious, predicting slow-moving autonomous vehicles will not appear in towns until at least 2020.

Production costs were still too high to make a robot taxi fleet viable, BCG’s Mosquet said.

“There are still many questions to be resolved” before fully autonomous vehicles can be put into public use, said Jeremy Carlson, a senior analyst for IHS.

He pointed to “chaotic traffic situations” on roads shared with cyclists and pedestrians, and less-than-adequate infrastructure.

Technology will be the first to see solutions, he said, but that still left regulation and issues around liability and insurance to be addressed.

For some, there are moral dilemmas as well.

“If you have someone jumping out in front of an autonomous car, does the car have to choose between killing that person, or swerving and crashing and killing the passenger?” asked Robin Zhu, senior analyst at Sanford C. Bernstein.

“If your car could choose to kill you, would you get in it?”

Read more at: http://phys.org/news/2016-04-chinese-firms-driverless-future.html#jCp

CCTV News Interview on Driverless Cars with Bill Russo

China Central Television’s China 24 Program, April 12, 2016

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On-air interview on the regulatory and infrastructural challenges associated with autonomous driving.

Lead-in story begins at 25:55 and Bill Russo comments start at 30:10

Questions discussed:

Q1:
As driverless cars getting more and more popular in China, is it really a safe and reliable way to travel around? Without drivers being in charge, the vehicles are controlled by an intelligent transportation control network. People may ask: what will happen if the network breaks down?

Q2:
From the perspectives of legal regulation and framework, to reach the ideal goal of autonomous driving in the future, what can we do about it?

View the program: China 24 04/12/2016 03:15 – CCTV News – CCTV.com English

Competing in the China Truck Market

Gao Feng Insights Report, February 2015

We are pleased to share with you a report titled: Competing in the China Truck Market.

While global brands have enjoyed success in China’s passenger vehicle market, the same cannot be said for the commercial vehicle market. This segment has been dominated by local Chinese manufacturers who have relied on sales to local buyers seeking low-priced equipment. However, we anticipate that several factors will be reshaping the market and competitive landscape in the commercial truck sector, creating a “window of opportunity” in China for participation in what has historically been a predominantly local market.

We believe that market conditions and regulatory challenges will create a need within China’s truck industry to form alliances with foreign partners to secure capabilities which are lacking in the commercial vehicle sector in China. China’s truck manufacturers will need to upgrade their technology to meet demanding new regulations, and will need to improve their service and distribution business practices as the market matures. The changing mix of products towards a higher concentration of line-haul HT, along with anticipated policy changes brought about from China’s intention to reform its State-Owned Enterprises, are driving forces which will alter the landscape of competition in the commercial truck sector.

We welcome your comments and feedback on our report or in general about our firm.  We would be glad to meet you in person to share our data and perspectives in a fuller manner.  Please let us know if you are interested in meeting and discussing directly how we can help you to operationalize these insights.

Thought leadership is core to what Gao Feng does.  We will, from time to time, share with you our latest thinking on business and management, especially as it relates to China and China’s role in the world.

In this paper, we offer our “deeply rooted in China” perspective to the analysis of the impact of each of these developments.

Best Regards,

Dr. Edward Tse
CEO, Gao Feng Advisory Company
edward.tse@gaofengadv.com

Bill Russo
Managing Director, Gao Feng Advisory Company
bill.russo@gaofengadv.com

Tel: +86 10 8557 0676 (Beijing); +852 2588 3554 (Hong Kong); +86 21 5117 5853 (Shanghai)

Gao Feng website: www.gaofengadv.com