Independent brands - Less is more, at least in this case!

The Auto Shanghai 2009 is around the corner, and we can read a lot about the car makers' plans to shine at the exhibition in late April. Quite a few new models will be launched at this occasion, and it is already a tradition to see at least one or two world premiers, given the importance that China has taken up in the world of automotive. This year it will be Porsche to showcase its Panamera for the first time. But like nowhere in the world, the auto show in Shanghai will also give evidence for how far Chinese car makers have already come - not just one or two models displayed in Detroit or Geneva.

The motto for domestic car manufacturers this year is not (only) to launch new models but whole new brands. Dongfeng is set to introduce its "Fengshen" brand, while Chery and Geely are outlining their multi-brand strategies. "Art of Innovation", slogan of this year's auto show, points to the continuing efforts of developping alternative energy vehicles, yet "innovation" in the case of Chery and Geely rather illustrates to the most basic meaning of the term: do something new.

Take Chery for instance: Marketing simultaneously three different passenger vehicle brands - Chery, Riich, and Rely - is indeed something new. I would have expected that efforts were focused on the "Chery" brand to further build its image and reputation. I would have expected a refined portfolio of models that cover the low- to upper medium segment, and offer attractive designs, top quality of workmanship and reliable technology. In particular the medium segment is considered as the backbone to establish a solid reputation as car manufacturer. Chery can take up its previous accomplishments - it does not have to deny its success with the QQ and Tiggo - and build a strong brand by adding a soul and a distinctive personality to it. This is the real challenge, and takes time and a lot of money, as every single aspect of the marketing strategy has to be matched with each other.

As I understand, the Chery brand will be further developed, but the management puts their eggs into different baskets. In addition to "Chery", a new luxury marque will be established - "Riich" - to be positioned as a high-end offer in the market. Chery says that the product features of its Riich G6 model would rival the Audi A6L. Again, I have to point at the brand power and its ability, in this case, to deliver overall recognition of status and standing. Why could FAW with its Hongqi and Besturn models in fact never challenge Audi, even within the government ranks? This does not mean that Chinese car makers would not be able to offer a premium brand, but it is probably too early at this stage, when the overall credibility as a manufacturer of passenger vehicles has to be reinforced and improved.

In addition to "Chery" and "Riich" passenger cars, MPV and SUV will be labeled as "Rely" brand. It is an interesting approach to "separate" two vehicle categories which have been derived from utility vehicles (light bus and 4x4) to enhance the passenger vehicle offering. But how many models can there be to support the sustained development of this brand? I suspect that there will be temptation to diversify into the "classical" passenger car segment at a point in time, and then direct competition with the "Chery" brand. Ask GM and Volkswagen about the challenges of multi-brand management in competing market segments!

We could have the same type of discussion about Geely and its various sub-brands: Geely, Global Hawk, Dihao and Shanghai Englon. Things are even getting more complex.

In summary, I am delighted to see a growing commitment of Chinese car manufacturers to establish their independent brands. This will ensure their success in China and ultimately in the mature oversees markets. I have my doubts with regards to the multi-brand strategy of Chery and Geely, though, and think that "less is more", at least in this case.  

About the authour: Klaus Paur, Gasgoo's  columnist, is Regional Director Automotive for North Asia at TNS China who has over 20 years of experience in marketing and market research, 13 of which have been spent specialising in the automotive industry.