May 23, 2013 07:07 PM

Great Wall Motor Hit Cruise Control in 2012


(Beijing) – The performance of leading automaker Great Wall Motor Co. Ltd. has stunned investors since early last year.

Its share price jumped 103 percent in 2012 on the Shanghai bourse, the largest increase among the publicly held carmakers in the country.

While sluggish demand last year meant most others in the industry stalled, Great Wall's sales and financial performance were a different story.

The company sold 620,000 vehicles in 2012, up 28 percent from the year before, Great Wall's financial report shows. This while domestic automakers saw an average increase of 4.3 percent.

Great Wall had operating revenue last year of 43.2 billion yuan, up 43.4 percent from 2011, company's financial report says. Its net profit was 5.68 billion yuan, a year-on-year rise of 65.7 percent.

But whether Great Wall can maintain this growth depends on Wei Jianjun, its founder and chairman. Some argue Wei exerts too much influence on company affairs, such as corporate strategy, marketing, research and development and production, but company employees describe him as the soul of Great Wall.

Early Success

Great Wall limits production to pickups, SUVs and small passenger cars. "The company wants to become the specialist in these three areas," Wei says.

The company started to produce pickups in the early 1990s. Since 1998, it has topped the domestic pickup market in terms of sales volume and market share. In 2012, the market share was 33 percent, a report by investment banking firm BOCOM International Holdings Co. Ltd. shows.

The company entered the SUV sector in 2002, when it introduced its first model, the Safe, priced at 80,000 yuan. The vehicle sold well due to the low price and an exterior design that customers liked. In 2005, Great Wall put another SUV model, the Haval, on the market for 100,000 yuan.

Then the company took aim at the upper-end SUV market. It introduced a series of models based on the Haval but with more advanced technologies. At an auto show in Shanghai in April, Great Wall set the price tag for its latest model, the Haval H8, at 150,000 yuan to 200,000 yuan. Several company sources said that they were not confident customers would embrace a Chinese-made SUV for this price.

For the upgrade, Great Wall made sure R&D and marketing efforts were complete.

"We had to make a double effort if we wanted to price it at this range," Shang Yugui, vice general manager and communications director at Great Wall, said. "So the technologies of our engines and transmissions must be the most advanced."

The sales volume for the Haval has been ranked first in the domestic SUV market for three straight years starting in 2010, the BOCOM International Holdings report shows. In 2012, the market share for the Haval was 14 percent.

Aiming at Foreign Brands

Great Wall turned to passenger cars in 2007, but its models were not popular due to prices higher than those offered by competitors. Wei said this caused him to realize it took time for customers to recognize a brand. Later, other, more modestly priced models were introduced.

The company sold 199,000 cars in 2012, and Wei linked a desire for increased market share to foreign competition.

"One of responsibilities of Chinese automakers is to vie for market share from foreign car manufacturers," Wei has said. "We must challenge them and fight for market share from them."

To this end, Wei said he wanted to set as an objective for Great Wall making high-end products with superior quality.

"We walked through a period imitating the models made by foreign auto producers," Shang said. "In the future, we will concentrate our efforts on our current segments and put the Haval in the high-end market."

Great Wall sees joint-venture auto makers as its competitors and it aims to make products of the same quality as Japanese or South Korean companies by 2014 or 2015.

Great Wall has 5,000 employees involved in R&D, and a new technology center was expected to open in 2015.

Most key parts, such as engines and transmissions, can be made by either Great Wall or its subsidiaries. This way the company can control production costs and ensure the supply of key parts, the BOCOM International Holdings report says.

Over past few years, Wei has led the company to stable growth. However, industry insiders say that the biggest barrier for Great Wall to transform from a medium-sized carmaker to one with influence in the international market was that the company was not properly paying executives and Wei had too much influence over decision-making.

A Unique Culture

All Great Wall employees have just one day off a week and new staff must endure three months of military-style training.

Wei's relatives do not take up posts at Great Wall, a company source said, and no family members are linked to parts suppliers.

Several company sources said employee welfare was not bad and salaries were higher than at other companies in Baoding, in the northern province of Hebei where the company is based. However, salaries are not competitive compared with other automakers.

This has caused the company to lose some talent. For instance, Han Zhiyu, a former technology expert and engine R&D manager at Ford Motor Co., became the director of Great Wall Motor Engine R&D Center when he returned to China. However, he left the company two years later when his contract expired.

Neither executives nor normal employees can benefit from increasing share prices because they are not allowed to buy company stock. This makes Great Wall an exception in the auto industry as some executives from rivals BYD Co. and Geely Holding Group, both listed in Hong Kong, own company stock.

"It remains a problem for Great Wall because its employees cannot hold company stock as motivation," industry analyst Zhong Shi said. "If the company has adequate cash flow and can make a profit, then the compensation packages for its employees should be improved."

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