Chery boss expects many Chinese carmakers to disappear

Most Chinese car manufacturers are losing money, and many will soon disappear, according to one of Chery’s most senior executives.

Zhang Guibing, executive vice president of Chery Auto and president of Chery International, made the comments at a media round table with Australian and New Zealand journalists in Wuhu, China, during the Chery Group User Summit.

Asked whether buyers could be confident the Chinese brands now on sale would still be around in five to 10 years, Zhang said the market had already changed sharply over the past decade, with many brands gone.

“Most Chinese car manufacturers are listed on the stock market, so they release financial reports. When you look at them, you will find about 90 per cent of them are losing money,” he said. “At the same time, the R&D investment for new technology is much higher than before. In the past it was mainly mechanical, but now there is so much new technology to develop. So more and more companies are losing money while the investment keeps getting higher, and you can easily forecast that many companies will disappear soon.”

Zhang did not expect development costs to settle down. “I don’t think it’s like the mobile phone, which changed very quickly from traditional to digital and then became stable. Even I can’t say what tomorrow’s car will be. So much new technology is still going into the car, and in the future it may be like your house or your office. Until now we still haven’t found a stable point. We need to keep up with the changes, and this is why Chery says we need to develop new technology.”

Why nine brands?

Chery Group now runs nine brands, a larger line-up than any carmaker has brought to Australia before. Zhang said the spread reflects how buyers have changed.

“Ten years ago, some Toyota or Volkswagen models sold about two million units a year. Today you can’t find any model selling more than one million, and even the top ten models normally sell about half a million. People are completely different from before. Even if a car is very beautiful, if too many people use it, some customers don’t want to buy it.”

Chery and Omoda & Jaecoo are the group’s two volume brands. Zhang said the others, such as iCAUR and Lepas, are aimed at smaller customer groups, with fewer dealers and more distance in price from the main brands. “For some brands we are concerned about volume. Some of them may just make a very small customer group happy.”

He said the brands would increasingly be separated by image rather than hardware. “Most products in the market are now very similar, whether they come from Chery, BYD or another brand. The big difference in the future is the brand image, the emotion. We hope people buy our products not just because of the product, but because they feel close to the brand. I think this is the most important thing.”

To support that, each Chery Group brand now has its own R&D, sales and marketing teams, and Zhang said he deliberately leaves brand decisions to them. “Most of the brand activities, I don’t participate in, because I’m not in that customer group. If I make too many decisions, sometimes they will be wrong. So I leave more power to the different brand teams to decide how to make their customers happy, because they understand the customers better.”

The group is also considering moving some brand headquarters out of Wuhu, with London under discussion for Jaecoo.

“If all the brands stay in Wuhu, they will face problems in the next step,” Zhang said. “So we want to put different brand headquarters in different countries around the world. It is difficult to say every country will like every brand. But if people in one country really like one, two or a maximum of three of our brands, I think that is very good.”

Not all nine brands are headed this way. Chery says it will introduce them one at a time, with local tuning from a planned Australian R&D centre.