Caixin
Mar 03, 2017 05:09 PM
BUSINESS & TECH

Storied Carmaker Lays Tracks for ‘Red Flag’ Revival

A Hongqi car arrives at the Hangzhou International Expo Center on Sept. 4. Hongqi once the pride of China’s automobile industry, is attempting a comeback, putting in requests in 35 cities for bidders interested in opening dealerships and after-sales service centers. Photo: IC
A Hongqi car arrives at the Hangzhou International Expo Center on Sept. 4. Hongqi once the pride of China’s automobile industry, is attempting a comeback, putting in requests in 35 cities for bidders interested in opening dealerships and after-sales service centers. Photo: IC

(Beijing) — Legendary Chinese automaker Hongqi, which has chauffeured the likes of Richard Nixon and Mao Zedong over the years, is showing the world it isn’t running on empty just yet.

Despite selling just 5,000 cars last year, the brand, whose name means “Red Flag,” has announced plans to build up a national sales and service network in an attempt to recapture some of its former glory and extend its limited appeal to the broader masses.

Hongqi is starting with relatively modest ambitions, putting out a request in 35 cities for bidders interested in opening dealerships and after-sales service centers, known in the industry as 4S. The company currently operates a limited series of showrooms, known to industry insiders as hongguan, or “red shops,” that piggybacked on facilities owned by its much larger parent, FAW Car Co. Ltd.

“This is only the first phase,” a company insider told Caixin. “Going forward, we have more plans to develop the network.”

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A Hongqi car is seen on display in Jinan city, Shandong province on Sept. 10, 2015. Photo: IC


Hongqi’s big hopes are flowing from its newest model, an updated version of its H7, which will hit China’s streets in the second half of this year. Further down the road, the company plans to roll out an SUV in 2018 to cater to a burgeoning class of Chinese weekend road warriors.

The revamped H7 has gotten decidedly mixed reviews, with some deriding its retro look and its overt focus on back-seat passengers. That focus jibes with the car’s history, as the brand was initially used to chauffeur around Chinese and foreign dignitaries in the quarter-century after its founding in 1958.

The brand is well-known to average Chinese for its history as China’s oldest domestic brand, but doesn’t carry much cache to a newer generation of car buyers, who have flocked to German luxury brands like Audi, BMW and Mercedes-Benz. Hongqi’s meager 5,000 in annual sales last year compares with more than 50,000 vehicles sold by BMW and Mercedes-Benz each in January alone, and more than 35,000 for Audi.

“In the past, they wanted to make it a high-end brand, but this brand had a hard time. Consumers don’t really understand what it represents,” said Wang Cun, vice director of the China Automobile Dealers Association. “This brand, if they want to develop, they need to identify who their audience is.”

Wang’s reference alludes to Hongqi’s own identity crisis over the years. After starting out as a maker of cars that functioned more like limousines than ordinary passenger cars for its first quarter-century, the company stopped production in the 1980s. Several attempts were made at reviving the brand before FAW started rolling out its own models about a decade ago.

Wang said Hongqi initially tried to come back by targeting the same status-conscious high government officials that propelled it to its original fame. But that already limited audience has grown slimmer still over the last three years under an austerity campaign led by President Xi Jinping that aimed at cutting conspicuous consumption among government officials.

The latest plan to build its own independent sales and service network appears to show the company wants to go mainstream and find a broader audience, Wang said.

“If you are just going after government officials, you don’t need a very big sales network,” he said. “But if you want to develop a market among private consumers, you have to start thinking about developing a sales network. Whether or not you succeed will depend on the product.”

Contact reporter Yang Ge (geyang@caixin.com)

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