EMERGING MARKETS ANALYSIS: Changfeng Motor 'goes Borat'
By Mark Bursa | 24 January 2007
Cheetahs are leaping forward! Welcome to the world of Changfeng Motor, the latest Chinese automaker to announce plans to export to the West. Mark Bursa went to Detroit, in pursuit of the great.
The cartoon in the Detroit News said it all. Two US executives looking grim-faced at the Changfeng Motor logo. One says: "It's Chinese for Yugo."
Such is the uphill struggle that faces any Chinese automaker brave enough to show up at the annual US flagship motor show in Detroit. Changfeng was this year's sole Chinese representative on display, announcing plans to enter the US market within two years and displaying a range of production cars and odd-ball concepts.
Of course, the cartoonist's Yugo comment has extra resonance - the man who briefly brought Yugo to America twenty years ago was Malcolm Bricklin. Two years ago Bricklin announced grand plans to bring Chinese Chery cars to the US - plans that have so far come to nothing.
Indeed, Chery was absent from this year's Detroit show, as was its rival Geely, which put in an appearance last year. Both have backed away from their plans; indeed, Chery's announcement last year that it was in talks with DaimlerChrysler to build a small car - probably the Dodge Hornet - signals a significant sea-change in Chery's strategy.
Given the Changfeng approach, that's probably a wise move. Changfeng's unwittingly comical presentation demonstrates the extent to which Chinese automakers underestimate the cultural gulf between their domestic market and the West.
At Detroit, a packed media audience was treated to a "propaganda film" with a title worthy of satirical Kazakhstani 'journalist' Borat: "Developing through innovations in pursuit of the great".
The film gave details of the company's history and impressive manufacturing capabilities, which have been built since 1996, when the company switched from the defence sector to car manufacture. It's certainly a work of propaganda: uniformed workers marched toward a gleaming new factory, to the stirring, if somewhat oriental, musical accompaniment of 'Jerusalem'. Facts come thick and fast - including the news that Chairman Mao came from the same region as Changfeng - a fact bound to impress an American audience. As the film climaxed, the voiceover man barked "Dragons are taking off! Cheetahs are leaping forward!" Phew…
But never mind the hype - what about the company? And perhaps more importantly, what about its products? The Hover SUV and Wingle pick-ups shown by another Chinese manufacturer Great Wall at the Paris Show last September hinted that the Chinese were starting to build vehicles - especially SUVs - that could have considerable appeal outside China.
Like Great Wall, Changfeng is a specialist in SUVs. It's a small company by Chinese standards, similar in size to Great Wall with a capacity to build 100,000 cars a year at three plants. Changfeng's chairman Li Jianxin said the company was the largest maker of SUVs in China, though most of its range is derived from various Mitsubishi models, including Pajero/Shoguns of various generations, built under licence.
And it's clear from the products on display that Changfeng is a good way behind Great Wall in terms of product development. Changfeng builds cars based on Mitsubishi designs, though it has just started developing its own designs. Its most significant launch at Detroit was a large SUV called the Liebao CS6 - essentially a Pininfarina-rebodied Shogun with a 2.5-litre, four-cylinder VM diesel engine. It looked sturdy but basic, and that's probably not the ideal powerplant for a US-bound car...
This was unveiled along with a smart 3-litre petrol-engined pick-up called the Feibao CT5; a smaller, quirky-looking SUV called the Liebao CS7; and a neat-looking small concept pick-up, the UU CT3 - all of which looked a little on the small side for a US launch, though Li Jianxin said Changfeng owned the intellectual property of all the new cars.
Certainly the oddest car on show - perhaps the oddest car to appear at a motor show for many a year - was Changfeng's concept car, the Rhombus. This bizarre vehicle is a design study by Changfeng-sponsored Hunan University. With a diamond-shaped chassis, it has a rear-mounted 1-litre engine driving two wheels mounted on a central axle below the B-pillar. The single front and rear wheels provide steering. It looked like two Reliant Robins joined together, and some of the interior trim appeared to be made of bamboo and bath mats - or "pure biologic substance", according to the blurb.
Displaying such a risible contraption does nothing for the company, which behind the scenes is quite impressive. Changfeng Motor already exports to other emerging markets in the Middle East, Eastern Europe and Africa, and its manufacturing facilities seem to be modern and efficient.
According to a lavish corporate brochure, the group is one of the top 500 enterprises in China, with three vehicle production facilities, four components plants and two R&D facilities. It was established as a vehicle producer in October 1996, having previously been a defence maintenance facility. Since 2001, Changfeng Motor has been controlled by the Hunan provincial government, and shares have been traded on the Shanghai Stock Market since June 2004.
It currently employs 6,300 people and has an asset base of CNY6.8 billion ($875 million), but its strategic goal is to be one of the top 10 Chinese automakers by 2010. "Over the next five years, annual vehicle production capacity of Changfeng will reach 300,000 units," Li Jianxin said. All the vehicles on show - except the Rhombus - "will be introduced to the [Chinese] market this year in succession", Li added.
Changfeng's main production plant is at Yongzhou. This makes SUVs based on the Shogun/Pajero, with more recent versions sold as Mitsubishis. Older models have various names, including Liebao Qibing and Liebao Black Giant. A new plant at Changsha, opened in 2004, makes versions of the Pajero/Shogun Pinin as the Liebao Feiteng. The main R&D centre, opened in February 2002, is also located at Changsha.
Changfeng's third plant is its newest, ChangfengYangzi Motor Manufacturing, based at Yangzi in Anhui Province. This is a joint venture between Changfeng, Yangzi Automobile and Macro Link Group. It builds pick-ups, again Mitsubishi-based, branded Kylin, Fine and Flying, as well as pick-up based SUVs (similar to the Mitsubishi Challenger). It opened in March 2005 and Changfeng claims it will hit its capacity target of 100,000 vehicles a year in 2008.
Major components facilities include Changfeng Motors (Huizhou) in Guangdong province, which makes power steering units and wring harnesses in a 110sq m facility; and a 50,000sq m axle plant at Hengyang, Hunan Province, which supplies axles to all three group vehicle plants.
Changfeng executives said 2009 was the target for a US launch, though this seems ambitious, and Li did not confirm the plan, saying only that Changfeng would "diligently study the marketing experience from developed markets such as North America". Europe is on the agenda, but will come after the US, said other Changfeng executives on the Detroit Show stand.
Perhaps more importantly, he said one of the main reasons for coming to the Detroit Show was to forge links with suppliers and potential partners. "We are actively looking for collaboration opportunities with the major auto companies and suppliers in the world, many of them are right here in Detroit," Li said.
Changfeng has a long way to go - its vehicles do not meet latest emissions standards, and while it stresses that some of its vehicles have been crash-tested, EuroNCAP stars may be hard to gain. But like Great Wall it has much of the infrastructure in place, and it's buying in the expertise to develop the product range. And perhaps learning how to present itself at international motor shows.
For as long as Chinese auto makers insist on showing "propaganda films" and silly concept cars like the Rhombus, the dragons will remain grounded and the cheetahs will be rooted to the spot.
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