H7’s production suspension Rumor aggravates FAW Hong Qi’s unsolved trouble of “Official Car” Role

Gasgoo.com (Shanghai Dec 22) A rumor that H7 has been suspended production casts a shadow on FAW Hong Qi, which has just embraced an increasing sales volume. Although evidences from all aspects have proved that the rumor is not true, FAW’s silence on Hong Qi’s production volume aggravates the market’s concern on Hong Qi’s future. In the meantime, Hong Qi’s follow-up reform of increasing R&D investments after it builds a separate business unit makes preparation for the production adjustments. But, how to open the private car market quickly and break away from the “official car“role is still the roadblock faced by FAW.

News comes around that Hong Qi’s production volume has not been published by CPCA for a consecutive two months, with only two possibilities of delaying report by the company or nil production. Reporters have proved that no production data for Hong Qi in October and November has been published by CPCA. However, insiders have denied the rumor.

After interviewing related dealerships in Beijing, reporters found that H7 is still under reservation with an increasing benefit of market terminal price. Currently, the 2.0T model has a benefit as high as 85,000 Yuan, increasing greatly compared with the previous 40,000 Yuan. One sales person said that, “The production is not suspended, because the inventory is still increasing. We should increase price benefits in order to achieve the sales goal at the end of the year. ”

It’s worth mentioning that the 1.8T model, targeting at private consumers, has a benefit price 5,000 RMB higher than the 2.0T model, which comprises most of H7’s sales volume. Sales person expresses that H7 has a deep-rooted official car image, bringingdisadvantages in the face of luxury brands, which are dropping their prices in the market.

Despite of the 10.5b RMB R&D fees, H7’s launching has not brought considerable rewards to FAW. Statistical data shows that the total sales number of H7 is 4,500 units from January to November this year, increasing 91% compared with the same period of last year. The single month sales volume reaches 1,041 units in September, breaking the historical record. By contrast, the previous number has not exceeded 300 units. Expert believes that the soaring sales number in September is connected with the increasing proportion of purchasing official car. H7’s debut on 3 September, the 70th anniversary of anti-fascist victory broughtnationwide attention, promoting the sales volume into a peak. But the sales number went down afterwards, with 462 and 451 units respectively in October and November.

Cui Dayong, vice president of FAW Cars Sales once revealed that, “The proportion of FAW products in private vehicle market has increased from the initial 26% to 69%. We have successfully achieved the transform of market structure.”

But some analysts don’t agree with Cui. Currently Hong Qi’s annul sales volume is less than Audi’s weekly sales volume. Without the Official Car glory, Hong Qi has just faced the test from private vehicle market.

According to the plan, H7 products will firstly build up image in official vehicle market, and then gradually expand into the private vehicle market. However, the structure transform is not easy. After the building-up ofseparate Hong Qi business unit, FAW Car announced in April that the company will invest 277m to conduct the H7 technical upgrading program. The future Hong Qi products will mainly focus on Luxury Vehicles and High-Class Vehicles. Besides, SUV LS5 will open another big market.

However, the high-end position may become Hong Qi’s biggest obstacle of transforming. As its subject company, Audi’s product position is going down recently. Data shows that A6L, A4L and Q5 accounts for 70% of its total domestic sales.

Professionals believe that, Hong Qi’s too high-end position will make it lose the private vehicle market. Only practical reforms, together with the lifting of brand loyalty and reputation, will bring a reviving hope to Hong Qi.