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Chery aims to reverse slowing sales
SHANGHAI -- Chery Automobile Co. may be the chosen partner of Chrysler LLC and China's largest domestic automaker. But a legacy of outdated, poor-quality models and poor service still dogs Chery. After months of hectic growth, its sales are slowing.
Now, from better interiors to service guarantees, the Chinese automaker is taking steps to change that image. The strategy has brought some production delays. But suppliers and Chery dealers are willing to put up with some delays if it means better models.
"From 2008, we are placing special focus on overall quality development," says Chery spokesman Wang Wei.
One step Chery has taken is delaying the launch of several models by up to a year to improve quality, say Chery suppliers.
For example, the launch of a new mid-sized sedan was delayed after the model got poor reviews from foreign consultants, says an executive from a local company that supplies Chery.
"I think they want to get it right the first time," he says.
At a Chery suppliers meeting in late March, Chery presented the results of a J.D. Power and Associates study that identified specific problems, such as substandard interiors, says the executive.
A delay is not a problem for Visteon Corp, another Chery supplier.
"Even if they decide to revise their production this year, we don't think it will affect Chery's long-term growth," says a Visteon spokesperson.
Chery plans to launch up to a dozen new models in the next few years, say suppliers.
Chery needs a new look for those models, says Zhu Yang, sales manager at the Shanghai Lianhai Huxi Chery Sales Co.
The large dealership in the Shanghai suburbs has two separate showrooms. Right now, they are full of 2007 models. Zhu is in general pleased with his sales. But he would like to see some changes.
"The current models are a bit outdated, both the interior and the exterior," says Zhu.
Growth at Chery, China's largest domestic brand automaker, has slowed markedly in recent months, including double-digit declines for several models.
To be sure, Chery is still selling a lot of cars. In 2007, Chery sold 369,459 units, up 22.1 percent compared to 2006, according to Automotive Resources Asia.
Some models, such as the tiny QQ, are selling well, says Zhu. "We don't even have any in stock right now," he says.
But the robust figure hide a disturbing trend.
Sales growth slowed in the last two months of 2007, especially sales of Chery's mid-sized sedans.
And 2008 didn't start out well for Chery. Sales of several models actually fell in the first two months of 2008 compared to the same period in 2007. For example, sales of the A520 sedan fell 48.6 percent to 5,639.
"They need a better brand image, and quality support," says Yale Zhang, director of emerging markets vehicle forecasts at CSM Worldwide in Shanghai.
Zhang is optimistic about Chery's future, however. Even if domestic sales continue to be slow for some months, Chery's exports will keep growing, he says. That will help Chery fund improvements.
Chery is already China's largest exporter. Exports to developing markets such as Russia and the Middle East accounted for one-third of Chery's 2007 sales, or 119,800 units. This year, Chery aims to export no less than 180,000 units.
Chery is working on its image. One element is an increased emphasis on customer service at its dealerships. For example, when a customer brings a car in for repairs, Chery guarantees a price and time for repair estimate within 24 hours, says Zhu. Customers who must leave their car overnight get a loaner car to drive.
On the quality side, Chery is doubtless benefitting from working with Chrysler LLC. The two companies signed a memorandum of understanding in July 2007 to produce small cars for export. A steady stream of Chrysler engineers have visited Chery, checking every aspect of the operation from the production line to the distribution channels.
Chery's quality was improving even before that, says Zhu, who has worked at the dealership for six years. He now has customers who trade their first Chery in for a second Chery, something that didn't happen in the past, says Zhu.
He is optimistic about the future, with a caveat.
Says Zhu: "Chery has said they will have more modern products for 2009. If Chery comes out with good new products, then we are optimistic."
Now, from better interiors to service guarantees, the Chinese automaker is taking steps to change that image. The strategy has brought some production delays. But suppliers and Chery dealers are willing to put up with some delays if it means better models.
"From 2008, we are placing special focus on overall quality development," says Chery spokesman Wang Wei.
One step Chery has taken is delaying the launch of several models by up to a year to improve quality, say Chery suppliers.
For example, the launch of a new mid-sized sedan was delayed after the model got poor reviews from foreign consultants, says an executive from a local company that supplies Chery.
"I think they want to get it right the first time," he says.
At a Chery suppliers meeting in late March, Chery presented the results of a J.D. Power and Associates study that identified specific problems, such as substandard interiors, says the executive.
A delay is not a problem for Visteon Corp, another Chery supplier.
"Even if they decide to revise their production this year, we don't think it will affect Chery's long-term growth," says a Visteon spokesperson.
Chery plans to launch up to a dozen new models in the next few years, say suppliers.
Chery needs a new look for those models, says Zhu Yang, sales manager at the Shanghai Lianhai Huxi Chery Sales Co.
The large dealership in the Shanghai suburbs has two separate showrooms. Right now, they are full of 2007 models. Zhu is in general pleased with his sales. But he would like to see some changes.
"The current models are a bit outdated, both the interior and the exterior," says Zhu.
Growth at Chery, China's largest domestic brand automaker, has slowed markedly in recent months, including double-digit declines for several models.
To be sure, Chery is still selling a lot of cars. In 2007, Chery sold 369,459 units, up 22.1 percent compared to 2006, according to Automotive Resources Asia.
Some models, such as the tiny QQ, are selling well, says Zhu. "We don't even have any in stock right now," he says.
But the robust figure hide a disturbing trend.
Sales growth slowed in the last two months of 2007, especially sales of Chery's mid-sized sedans.
And 2008 didn't start out well for Chery. Sales of several models actually fell in the first two months of 2008 compared to the same period in 2007. For example, sales of the A520 sedan fell 48.6 percent to 5,639.
"They need a better brand image, and quality support," says Yale Zhang, director of emerging markets vehicle forecasts at CSM Worldwide in Shanghai.
Zhang is optimistic about Chery's future, however. Even if domestic sales continue to be slow for some months, Chery's exports will keep growing, he says. That will help Chery fund improvements.
Chery is already China's largest exporter. Exports to developing markets such as Russia and the Middle East accounted for one-third of Chery's 2007 sales, or 119,800 units. This year, Chery aims to export no less than 180,000 units.
Chery is working on its image. One element is an increased emphasis on customer service at its dealerships. For example, when a customer brings a car in for repairs, Chery guarantees a price and time for repair estimate within 24 hours, says Zhu. Customers who must leave their car overnight get a loaner car to drive.
On the quality side, Chery is doubtless benefitting from working with Chrysler LLC. The two companies signed a memorandum of understanding in July 2007 to produce small cars for export. A steady stream of Chrysler engineers have visited Chery, checking every aspect of the operation from the production line to the distribution channels.
Chery's quality was improving even before that, says Zhu, who has worked at the dealership for six years. He now has customers who trade their first Chery in for a second Chery, something that didn't happen in the past, says Zhu.
He is optimistic about the future, with a caveat.
Says Zhu: "Chery has said they will have more modern products for 2009. If Chery comes out with good new products, then we are optimistic."
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