Economic Daily: "Red Flag" Leaps to New Heights – State-owned Assets Supervision and Administration Commission of the State Council

The "Xinhongqi" concept model car showcases the unified design language of the Xinhongqi family of products. (Photo by Yang Zhongyang)

Like his four predecessors, Xu Liuping, the newly appointed chairperson of China FAW Group, immediately carried the "red flag" on his shoulders; but unlike his predecessors, this time Xu Liuping is more determined, faster and farther-sighted.

At 21:00 on January 8, China FAW Group released the New Hongqi brand strategy at the Great Hall of the People, aiming to build New Hongqi into a "new noble brand" that is "China’s first and world-famous".

Target "New Noble Brand"

Launch 17 new models of Hongqi by 2025; adhere to the concept of "global first-mover, new first"; directly cut into the new energy field, with all electrification as the driving force

"The brand concept of Xinhongqi is’Chinese-style neo-noble delicacy ‘, and the brand goal is to become’China’s first and world-famous " neo-noble brand ‘, to meet consumers’ pursuit of’better life and wonderful travel ‘in the new era, and to successfully shoulder the important task of a strong Chinese automobile industry entrusted by history." Standing on the stage of the golden hall, Xu Liuping was full of passion.

In terms of product planning, the future Xinhongqi family will create four car series: L series new noble supreme car, S series new noble coupe, H series new noble mainstream car, and Q series new noble business travel vehicle. Xu Liuping also revealed that FAW Group will launch 17 new models of Hongqi by 2025.

Corresponding to the rich product lineage are clear sales targets: New Hongqi will challenge 100,000 sales by 2020, 300,000 in 2025 and 500,000 in 2035.

In the field of research and development, FAW will adhere to the concept of "global first-mover, new first", and continuously inject strong technical vitality into Xinhongqi. Xu Liuping said that in order to control and apply the requirements of the latest global technology, FAW has established a "one four-hospital" R & D system, and formed a global R & D layout of "three countries and five places". Among them, Changchun is the global R & D headquarters of the Hongqi brand, and has newly established the Hongqi Design Institute, the New Energy R & D Institute, and the Intelligent Network R & D Institute; in Beijing, it has newly established the Forward-looking Technology Innovation Branch and the Experience Perception Measurement Research Institute; in Shanghai, it has newly established the New Energy R & D Branch; in Munich, Germany, it has newly established the Forward-looking Design Branch; and in Silicon Valley, the United States, it has newly established the Artificial Intelligence At the same time, in order to adapt to the top quality standards of New Hongqi, FAW has developed a world-leading new R & D system and development test process.

On the basis of technical support and quality assurance, Xinhongqi will directly enter the new energy field, with all electrification as the driving force, and strive to launch the first pure electric vehicle in 2018, the FME platform series of electric vehicles with a cruising range of 600 kilometers by 2020, and 15 electric models by 2025. At the same time, Xinhongqi will also take intelligent networking as the core "charm point". It is expected to launch mass-produced models that achieve L3-level autonomous driving in 2019, mass-produced models that achieve L4-level autonomous driving in 2020, and L5-level autonomous driving in 2025.

In addition, Xinhongqi will also provide users with "heart services" with the goal of "extreme", including building an "intelligent travel ecosystem" with smart cities, smart living, smart transportation, smart cars, smart travel, and smart ecology as the main line, and building a "Xinhongqi green and smart town" to create the ultimate car experience, high-quality travel experience, and beautiful life experience for consumers.

How bumpy the road to revitalization is

Due to unclear positioning, high costs, and sluggish sales, the Hongqi brand "born with a golden spoon" failed four times on the road to revitalization

"One of the major changes in this press conference is that in the future development strategy plan, the Hongqi brand did not continue to position itself as an’official car ‘, but chose to go completely to the market," said Zhang Zhiyong, an auto industry analyst.

As a symbol of the national automobile industry, the Hongqi brand carries too many emotions of people. From the first Hongqi CA72 in 1958 to the current Hongqi H7, the Hongqi brand car with the halo of the national car has not only experienced the "peak moment" of "designated by the State Council for National Day and national protocol vehicles", but also tasted the bitter fruit of the shutdown crisis.

In June 2008, FAW dispatched the backbone from the group to form a Hongqi team of more than 1,600 people, focusing on building domestic high-end cars and building a Hongqi car production factory. However, due to unclear positioning, high costs, and sluggish sales, the "born with a golden spoon" Hongqi brand failed four times on the charge road. Data show that in 2016, the Hongqi H7 sold only more than 4,800 units, and the Audi Q3, which belongs to the same price range as Hongqi, sold nearly 90,000 units that year. "Although the overall data for 2017 has not been released to the public, the sales in the first 11 months were only 3,612 units, and the annual sales will not exceed 5,000 units," an industry insider said.

"In the past, Hongqi’s development strategy was mainly to take the official vehicle route. However, with the deepening of the bus reform, the pure bus market share has become smaller and smaller. Facts have proved that this road has been difficult to navigate," Zhang Zhiyong said. "At the same time, for ordinary consumers, Hongqi products are not cost-effective enough, so it is natural that they cannot be sold."

However, Hongqi must be revitalized. On his first day in office on August 2, 2017, Xu Liuping stated in his speech: "From a national and social perspective, FAW must bear the great responsibility of the’dream of an automobile power ‘. It must face the problem, directly attack the pain points, boldly reform, and act quickly. It is necessary to invigorate the spirit, concentrate, lay down a heart, fight against the odds, and quickly make achievements on its own brand." At a summit forum attended later, Xu Liuping even proposed to make Hongqi "the first and only luxury brand in China".

The strategic adjustment of the Hongqi brand was soon put on the agenda. That month, the Hongqi brand held a product quality oath meeting. In early September 2017, the group held a "red flag in my heart" discussion summary meeting. On September 18, FAW Group announced a major adjustment of its organizational structure, and the headquarters will directly operate the Hongqi brand. At the same time, FAW Group’s strategic management department, group brand public relations department and other departments have also been adjusted. Hongqi has received the greatest support and the most direct decision-making management channels in production, research and development, quality assurance and other aspects. The system capacity has been further strengthened, and the most advantageous resources have begun to tilt towards Hongqi.

We must face three major challenges

Product power, channel construction and marketing power together constitute the key elements for the rise of the brand. For the current FAW, the most important thing is to enhance the product competitiveness of Hongqi

What does a brand rely on to rise?

"Generally speaking, the more resources a company gives to a brand, the greater the hope that the brand will rise," Zhang Zhiyong said. "This is based on the right direction and model. For FAW Group, the most important thing is to enhance the competitiveness of Hongqi’s products."

Product power is the foundation to support a brand. Zhang Zhiyong said that in recent years, the mid- to high-end car market where Hongqi is located has seen more and more competitors, the frequency of new product launches has become faster and faster, and the price war has become more and more intense. If you want to go to the market, product power is the basic skill. "In the 3% micro-growth of China’s auto market, why did Geely achieve a 63% growth in 2017, and the sales volume exceeded 1.247 million? The fundamental reason is that the product power has come up. Whether it is’Boyue ‘or’Lynk & Co’, it is difficult to find a car."

Channel construction is also awesome. "Products and channels are symbiotic, and the aroma of wine is afraid of deep alleys; without good products, no matter how good the channel is, there is no place for it." An industry insider told reporters that the current Hongqi not only has few product varieties, but also low sales, making it difficult to maintain normal channel operations. "Distributors can talk about feelings, but the ultimate factor that determines whether they can survive in the market is strength."

In addition to this, it is marketing power. At the press conference, many industry insiders expressed concerns about FAW’s marketing power. Some participants mentioned that "such a major press conference should have been a rare marketing opportunity, but it is difficult to even see the red flag exhibition car on the venue".

There are also two details worth pondering. First, according to the convention of the car conference, the organizers usually replace the original label on the mineral water bottle at the venue with the logo of the car brand to strengthen the participants’ awareness of their own brand. However, the reporter saw at the scene that the bottle was still the original "Quanyangquan" trademark. Second, it was not the conference that was swiped on the screen at Moments, but the poster "The flag is won, the auspicious time is celebrated together, and Geely congratulates China FAW Hongqi brand strategy conference". Many industry insiders said that Geely has "played" a new height of brand marketing, and Hongqi should put down its body and learn from these companies.

"This is the fifth time that Red Flag has set out, which is really exciting and worrying!" After the press conference, when walking out of the venue, Ge Banning, the author of the book "Red Flag" oral record, sighed.

Perhaps, this sentence represents the common voice of everyone. After all, with the accelerated layout of international automobile giants in China, the rapid rise of independent brands represented by Geely, Trumpchi, Changan, and Great Wall, and the crazy influx of Internet car manufacturers, the competition in the automobile market will undoubtedly become more intense. The time left for the red flag seems to be running out. (Reporter, Yang Zhongyang)

[Editor in charge: Ma Yuqian]

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