Last November, the Chinese city of Harbin hit the headlines for all the wrong reasons. The local drinking water supply was shut off for several days over fears that it had been poisoned by chemicals, leading to widespread panic among the local population, writes Mark Bursa.
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As the drama unfolded, we in the west were presented with a picture of old Communist China at its worst – unsafe chemical plants pumping effluent into rivers, and local bureaucrats fudging the reasons for the shutdown. Initially they claimed it was due to maintenance, before the real story leaked out: there was an explosion at a chemicals plant.
So it comes as something of a surprise to visit Harbin, and discover a modern, efficient city, with new skyscrapers being built in the centre and a sprawling industrial district on the outskirts. The main road into the centre is lined with modern car showrooms selling a huge variety of domestic and foreign brands. There’s hardly Mao-suited cyclist to be seen – but plenty of cars. And the tap water in the hotel tastes fine.
Harbin is also the home to one of China’s fastest-growing car makers, Harbin Hafei Automobile Industry Group. It has a lower profile than Geely or Chery, but its manufacturing plant is no less modern and efficient. And its technical pedigree is, if anything, even more impressive.
While Geely grew from a white goods manufacturer, Hafei’s parent is the Chinese National Aerospace Corporation. Demand for domestically designed aircraft has waned – so the company was urged to seek new business. “The aircraft factory belonged to the ministry, and the Government asked enterprises to look at commercial opportunities,” said Shi Ping, chief economic engineer of Hafei. “We chose the automotive industry.”
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By GlobalDataIt’s been a wise decision. In little more than a decade, Hafei has built an impressive vehicle manufacturing centre as well as an engine-making capacity that is winning it business from other Chinese automakers.
Hafei’s main production plant is housed in an anonymous, brown-coloured low-rise business unit of the sort you see all over the country. It’s dominated by the head office building, a timeless structure that could have been built any time since the 1920s. In fact it wasn’t even built in the 20th century – construction only started in 2000.
In fact the Hafei automotive business didn’t exist until March 1994. At that point, the area now occupied by the plant was agricultural land. In 1994 a plant was set up to make light commercials – microvans and pick-ups based on Suzuki designs. Car production followed from 1998, initially with licence-built Daewoo Ticos. Construction of the main car factory across the road started the same year.
Now the company occupies one million square metres. It has stamping, welding and paint shops, supporting two assembly lines. It’s more labour-intensive than a western plant, but very clean and modern.
Indeed, Hafei is the seventh-largest Chinese independent automaker, employing 6,000 people. Sales are rising fast and total installed capacity is 300,000 units a year; last year the company made 130,000 cars and minivans and 100,000 LCVs. The company is self-sufficient in terms of petrol engines; total production last year was 370,000, and the surplus over Hafei’s own needs were sold to other unspecified Chinese manufacturers.
Hafei Motor has a joint venture with Mitsubishi, building a small MPV called the Saima, a version of the Japan-market Mitsubishi Dingo. But crucially, Hafei set about developing its own vehicles. As long ago as 1996 – before Chery or Geely even existed as automakers – it hired Italy’s Pininfarina to develop it a car it could sell under its own nameplate.
That car was the Hafei Lobo, unveiled on the Pininfarina stand at the Geneva Motor Show in 2000. It is the Lobo that forms the basis of the Malaysian Naza Sutera – in a deal brokered by Britain’s IM Group, Hafei supplies component sets to Naza to build the car.
Naza has changed quite a lot – some panels, the entire interior and details such as the exterior lights – but it says a lot for the design that it is already possible to export the Naza version of the car to Europe, complete with Chinese-made Euro III-compatible engine. Around 40,000 Lobos were made last year, and that is set to grow rapidly as Naza is expecting 30,000 component sets.
Lobo has just been joined by a larger Hafei model, the Saibao, a compact three-box, four-door sedan, also designed wit the assistance of Pininfarina. “The Lobo was very successful, so we are very confident about continuing our relationship Pininfarina,” said Shi. Hafei has talked of exporting this model to Europe, though not immediately. The company does export, however, mainly to the Middle East and North Africa. Exports have grown from 10,000 units in 2004 to 20,000 last year, and there is a target of 30,000 for this year.
Shi is proud of Hafei’s R&D capability. “We have set up a national R&D centre and now we employ more than 300 engineers in the department. We can develop whole vehicles, not just engines and components.” Indeed, Hafei was a pioneer in the use of CAD/CAM in China, and it has adopted state-of-the-art processes such as simultaneous engineering and paperless vehicle design.
The company is technologically savvy in other areas too – there is a computerised ERP system for planning production, and the company’s 100 main urban dealers in China are also linked via central computer. Hafei has a further 300 smaller dealers in more remote areas, plus 1,000 aftersales providers throughout China.
So while China still suffers from the occasional industrial mishap, like Harbin’s water crisis, this vision of bureaucratic, bungling Communist China is rapidly giving way to a more modern and efficient future, with increasingly entrepreneurial businesses like Hafei at the vanguard.
Mark Bursa
