Analysis: Great Wall’s future in the Chinese and global automotive markets

Gasgoo.com (Shanghai) - Great Wall Motor, China’s leading SUV manufacturer, has exceeded expectations to become the country’s best performing own brand automobile manufacturer for the first half of the year. Great Wall’s progressive marketing strategy and unique product lineup have been cited as major factors behind its strong performance. The manufacturer reported year-on-year sales growth of 43.5 percent over the first half of the year, 17 percent above the industry average. Two of its key models, the Haval H6 and Haval M4, have placed in the top ten sales charts for their respective segments. Great Wall also boasts this highest net profit rate among Chinese manufacturers. In fact, its net profit rate is actually ahead of many multinational enterprises in the industry.

However, there are also those who have their doubts about Great Wall’s future in the automotive market. In order to better understand the issue, Gasgoo.com (Chinese) recently conducted a week-long survey on the manufacturer’s prospects, collecting opinions from various figures in the industry.

In the first question of the survey, participants were asked what prospects they held for Great Wall’s performance in the near future. The majority of participants, 86 percent, believe that Great Wall’s sales growth will continue to exceed the industry average for at least the next two years, with over half of those predicting the manufacturer’s strong performance to continue for at least three years. By comparison, only 14 percent believe that Great Wall’s high sales growth rates will slow down after just one year.

Great Wall is traditionally an SUV manufacturer, with SUVs still accounting for over 60 percent of its total sales volume. The manufacturer currently controls 14 percent of the Chinese SUV market, with its presence strongest in the economy and entry-level segments. However, Great Wall faces steep competition in the luxury-class SUV segment, which is dominated by various foreign brands. Whether or not Great Wall will be able to succeed in this lucrative segment has yet to be seen.

Prospects for the SUV market are general very positive. Great Wall hopes to capitalize on this growth, with General Manager Wang Fengying saying that she anticipates Great Wall will control over 20 percent of the Chinese SUV market by 2015. Board Chairman Wei Jianjun, for his part, says he hopes to see Great Wall surpass Chrysler’s Jeep to become the world’s best selling SUV brand in the next three to four years.

Great Wall also sells a variety of compacts and other small sedans, including the Florid and Cool Bear. While monthly sales of certain models, such as the C30, have been relatively high, they are still not on the same level as offerings from foreign manufacturers. Great Wall cars accounted for just 1.9 percent of all sedans sold in the country over the first half of the year.

Many industry figures have previously voiced their concerns that Great Wall might end up following the road of Korean SUV manufacturer Ssangyong, which suffered heavily as sales in the SUV market in its native country began to shrink. This topic was the focus of the survey’s second question. 18 percent of survey participants agreed with the notion that Great Wall’s lack of product variety will hurt it in the future, while 11 percent held the contradictory view that the manufacturer can only become stronger. 17 percent voiced their view that Great Wall had already succeeded in entering new segments, proving that it would not become another Ssangyong. The majority of participants, 54 percent, maintained that Great Wall’s success or failure depends on whether or not it is able to branch into new segments.

A great deal of Great Wall’s success in the SUV and pickup segments comes from the fact that the manufacturer first entered those markets when there was relatively little competition. It was not until 2008, when the manufacturer decided to try its hand at selling sedans, that it encountered steep competition. It took Great Wall two full years to introduce its first truly successful sedan model, the Voleex C30. Despite the C30’s successes, future models in the C series have not been able to perform equally as well. In order to deal with this, the manufacturer’s sedan division announced its decision to focus on selling compacts. Whether or not this decision will ultimately benefit or limit Great Wall is another matter of controversy, with many analysts mentioning that the vast majority of successful global manufacturers have full, complete product lines covering several segments.

Another issue of concern for Great Wall is the recent backlash against gas guzzling vehicles, including SUVs, in China. Several government policies aimed at limiting sales of those sorts of vehicles, including new taxes, have been introduced in just the past few years.

In order to make the most of new growth opportunities, Great Wall has announced its decision to ‘militarize’ its management team. In the third and final question of the survey, participants were asked whether or not they felt this shift in management attitude would help or hinder Great Wall. 55 percent believed the benefits would only be short-term as it would aid the manufacturer make short-term gains in sales growth, but would ultimately prevent otherwise healthy development. Another 29 percent voiced their concerns that such a management culture would not be well suited to Great Wall’s aspirations to succeed on the international stage.

By comparison, only 11 percent of respondents maintain that the shift in Great Wall’s management culture will help the manufacturer. They claim by modifying its corporate culture, Great Wall will help make its staff more efficient.