The UK’s first Chinese cars are due in showrooms next year, which presents IM Group with its latest brand distribution launch opportunity – and perhaps greatest challenge.
It does though have the experience of around 30 others around the world.
So how will dealers persuade British people to buy Great Wall cars from China at a price that produces a worthwhile profit?
Paul Hegarty, managing director of IM’s Great Wall UK, believes he holds two trump cards.
One is a loyal Daihatsu franchised network starved of cars (and he also has 80 other dealers or groups expressing an interest).
The other card, he says, is that Great Wall will be the first Asian brand to arrive in the UK with cars that are immediately competitive on quality.
The weakness of sterling against the yen has made it impossible for IM to import Daihatsus profitably for its 75 dealers, though the value of sterling is improving and shipments could resume.
Daihatsu dealers have fallen back on sales of used cars and aftersales for revenue and only one or two have gone away (fewer than from IM’s UK Subaru network).
IM’s Daihatsu dealers have seen Great Wall’s supermini, once called the Phenom but rebranded the C10 in China. They have told Hegarty it could replace the Daihatsu Sirion, though Citroen might have something to say about a rival car badged C10.
“Our dealers were impressed and the vast majority are interested in a Great Wall franchise,” said Hegarty.
“Many run businesses in small towns with customers who trust their judgement to sell good cars.”
Hegarty understands retail (his first job was as a trainee salesman in the Mann Egerton group, now part of Inchcape), and he was previously operations director for IM’s Daihatsu, Subaru and Isuzu franchises.
“If potential buyers of Great Walls assume they are going to be really cheap, they’ll be mistaken, because that policy would be a mistake,” he said. “But buyers will get value for money.”
The sales and marketing strategy is still being developed, and the manufacturer and IM have not yet decided which models will be in the UK launch range at launch.
That will be “as early as we can make it” in 2011, when Hegarty will want stock in 75 outlets.
He says cost of entry to the franchise for dealers will be low. Major conurbations including London, Birmingham, Manchester and Glasgow are priorities for outlets. In principle a dealer could hold Daihatsu and Great Wall franchises, but IM wants other dealers too.
IM once sold 2,500 Sirions a year and matching that will be the initial target for Great Wall’s supermini. The distributor believes the brand is more mainstream and has more potential than Daihatsu, and that sales will grow quite quickly.
No specific sales targets can be set until the launch range is agreed (expect a compact SUV and a pick-up alongside the supermini).
Hegarty believes Great Wall can be where Kia and Hyundai are now within five to ten years. He will not discuss potential target brands but Proton looks a likely candidate.
IM’s research suggests a 50/50 split in attitude to cars from Great Wall of China, between outright rejection and a ‘tell me more’ response. Hegarty expects the open-minded will soon become the majority because many regard the country where a car is built as decreasingly important.
“People are moving towards us all the time,” he said. “Apple’s iPhone is highly regarded and appears to come from California. It was certainly designed there but is made in China. This is helping to move along acceptance of ‘made in China’ increasingly rapidly.
“Some will not want to own a Chinese car but many are coming to understand that cars can be built well anywhere. Great Wall has just opened a new plant and its oldest began production in 2006 – it launched nine models at this year’s Beijing show.
“I expect our dealers to benefit from a powerful sense of curiosity. People will want to go into showrooms to have a look at the Great Wall’s cars. Once they see the fit and finish the cars will sell.”
Hegarty will not say what length of warranty will be provided, and won’t comment on a suggestion that IM would need a minimum of five years on Great Walls. “Length of warranty is no longer a valuable launch announcement because Kia did that with its seven-year cover,” he said. “A surprising number of manufacturers are still on three years.
“At UK launch Great Wall will have a strong proposition, and achieve success through our consumer offers, quality and specifications. The whole UK car market is going to be surprised by Great Wall.”
UK launch will be a red letter day
Great Wall is an independent manufacturer with no partnerships or collaborations with others.
This year it will produce around 800,000 units, double 2007’s output.
The company’s right-hand drive cars are already in sale in South Africa and Australia, with left-hand drive units selling in Italy and Romania. In addition to the UK, IM Group will distribute Great Walls in the Republic of Ireland, Sweden, Finland, Norway, Denmark, Latvia, Lithuania, Estonia, Cyprus, Malta and Gibraltar.
The branding style of the UK’s Great Wall dealerships is underway and the main colour branding will be red. IM and Great Wall are working on a high-profile sponsorship and marketing programme for the launch.
Peter Cooke, KPMG professor and head of the centre for automotive management at the University of Buckingham, said: “The UK market is one of the toughest in the world in which to compete. The Koreans knew that if they could crack it they could do well in Europe.
“It will be the same for the Chinese, but Great Wall will have to price aggressively to succeed. The pick-up especially could do well because there will be a shortage of good used LCVs over the next few years.
“Post scrappage, Great Wall cars could also sell well if the price is right because many jobs are going to be lost in the UK.”