Great Wall prospers as peers struggle

In the past decade several domestic Chinese carmakers have managed to post healthy sales growth, but only for a limited period. Great Wall Motor Company, China’s largest SUV maker, now appears poised to break from the pack.

In the first six months of the year, Great Wall’s sales have jumped nearly 40 percent year-on-year to 367,857 vehicles. If you don’t count the joint ventures of China’s state-owned automakers which produce vehicles for foreign brands, Great Wall is now the country’s largest domestic automaker.

In sales, Great Wall trails only Volkswagen AG, General Motors, Hyundai, Nissan, PSA Peugeot Citroen and Ford Motor Co. This is not the first time that Great Wall has posted strong sales. Since 2009, its annual volume has never grown less than 28 percent.

Great Wall is making money, too. Earnings rose 27 percent in 2011, 66 percent last year, and 72 percent in the first six months of 2013. What’s behind Great Wall’s robust sales and profit growth? It is the company’s focused product development strategy.

Chinese automakers, young as they are compared with global competitors, are prone to reckless expansion when sales are good. Five years ago, Chery Automobile Co. was by far the largest domestic automaker. Then the state-owned company developed more than 20 new models, placing a heavy burden on Chery’s engineers.

Product quality declined, sales fell and profits disappeared. In 2009, BYD overtook Chery after it aggressively expanded its dealership network. That strategy quickly backfired, causing sales and profits to tumble in the next two years.

Great Wall, by contrast, has been more realistic. Aware of its limited resources, the company focused on its core products, the Haval-brand SUV and Great Wall’s subcompact sedan. The simple approach has paid off nicely. In the first half, SUVs accounted for more than half of Great Wall’s sales. Among its three SUV models, two have achieved monthly sales of more than 10,000 units.

Monthly sales of the Great Wall C30 sedan also have exceeded 10,000 units. To be sure, with nearly all automakers in China hatching plans for or accelerating SUV launches, Great Wall is bound to face more competition in the market. But the company appears positioned and prepared to tackle the challenge.

In the past two years, the company has partnered with a slew of top-tier global parts suppliers to help develop products that are more technologically advanced and competitive. A new plant in Tianjin is coming online to ease a production bottleneck and enable it expand sales further. The bottom line: Great Wall’s growth seems assured, at least in the near future as Chinese consumers snap up SUVs.